The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

How Much Can Sellers Contribute Towards Closing Costs?

Pen, calculator, glasses

One of the interesting things about purchasing a home is that the seller can actually help pay for the buyer’s closing costs.

person with keys for real estate

When purchasing a home, prospective buyers will see various expenses beyond the purchase price, including closing costs.

One way to manage these costs is through interested party contributions (IPCs), which are payments made by parties involved in the transaction, such as the seller, builder, lender, or real estate agent.

Interested party contributions can significantly ease the financial burden on buyers by covering a portion of the closing costs, which typically range from 2% to 5% of the loan amount. These costs include fees for appraisals, inspections, title insurance, and loan origination, among others.

By negotiating IPCs, buyers can reduce the immediate cash required to finalize the home purchase, making homeownership more accessible. This arrangement is particularly beneficial for first-time homebuyers or those with limited liquid assets.

However, there are limitations and regulations governing IPCs to prevent inflation of property values and ensure fair lending practices. Different loan programs, such as conventional, FHA, and VA loans, have specific caps on the amount of IPCs allowed. Here are the specifics:

Conventional

For conventional loans, the amount of IPCs allowed actually depend on the down payment amount and if the transaction is an investment property purchase.

FHA

VA

Wood roof and coins

While IPCs can alleviate some financial pressure, it is essential for buyers to consider the potential trade-offs. Accepting seller contributions might lead to a higher purchase price or less room for negotiating other favorable terms.

Buyers should carefully evaluate the overall cost-benefit scenario, ensuring that the contributions genuinely result in a net financial gain.

In Conclusion

By understanding the regulations and potential impacts on loan terms, buyers can strategically use IPCs to their advantage. 

Reach out to me for more information, as I’d be happy to strategize with you to see how to best utilize IPC’s for your next transaction!

The Lending Coach

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Don’t Wait For Lower Rates to Buy

Wristwatch parts

Don’t wait for mortgage rates to drop before making that home purchase.

Hourglass with house

So, should you wait for rates to decline before making your home purchase? The answer might surprise you.

There’s a good chance rates may be dropping in the not-too-distant future based on a slowing economy, moderating inflation and a weakening job picture.

As rates move lower, more buyers will become eligible to purchase. In fact, the National Association of Realtors states that for every 1% decline in mortgage rates, 5 million more people can be eligible to buy.

Even if a small fraction of these eligible buyers decides to move forward, it will likely pressure prices higher and shrink the number of available home choices even further.

It’s also likely the Fed will be forced to start cutting rates in the near future.

Jerome Powell

The advantage of buying ahead of a drop in rates is that you can capture the substantial benefit of appreciation, then refinance to a lower rate once they come down. However, this does come with a cost.

The added temporary interest expense along with the cost to refinance must be considered. When you weigh it against the much greater benefit of appreciation, the choice may become clear to marry the home today, while dating the rate in the interim. More on that here…

I have the tools to allow you to evaluate what the forecasted appreciation is on the home you’re looking to purchase and weigh it against the temporary interest expense to see if it makes sense for you.

Don’t hesitate to reach out…as it would be my pleasure to help!

The Lending Coach

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

How Long Does It Take to Get a Mortgage?

House with approval stamp

I’m asked regularly about mortgage related time-frames…as sometimes clients need to close their transactions quickly.

Instead of getting conditionally approved in a few days (or even 24 hours – like what was happening about 15 years ago), loans are thoroughly processed before even landing on the underwriter’s desk.

Mortgage application form

Because there are a ton of regulations and timelines lenders have been forced to work with, the average loan closing will take anywhere from 20 to 40 days, depending on many circumstances.

This means the actual loan approval might take a couple weeks, but it will generally be a firm one with few if any remaining conditions.

Interestingly, around the mid-to-late 2000s, mortgages could close really quickly. This was partially because underwriting guidelines were much more flexible (and some might say ‘non-existent’), and also because lenders were well-staffed and very competitive.

However, those days have changed, due to a myriad of factors.

The Pre-Qualification in Key

In order for a real estate agent to best help you find that right home, it’s vitally important to know how much “house” you can afford.  That’s why you should reach out to the right Mortgage Professional first, before you contact an agent and start looking at houses.

Loan approved stamp

Your chosen lender should sit down with you to assess your goals and objectives – and then help you choose the optimal loan program that best fits your needs. The first step in this process is the pre-qualification.

Home sellers and their real estate agents generally insist that home buyers submit a valid pre-qualification letter along with their initial offer for the home.

Essentially, sellers don’t consider offers from people who haven’t taken the time to determine if they can even get approved for a loan in the first place.

You can find out more on pre-qualifications here…

Why Do Mortgages Take So Long?

  • Many different parties are involved in the mortgage and/or home buying transaction
  • There are regulated timelines that must be followed
  • The home appraisal can also take up to a few weeks to be completed

Like most things in the mortgage world, it’s difficult to generalize because every loan (and every borrower) is uniquely different.  With that said, here are a few reasons why the loan process takes a bit:

Pen and calculator

So it’s best to be patient and cooperative to ensure a smooth closing!

Complex and Elaborate

The mortgage process is very involved and requires a lot of hands to touch the loan before it actually closes.

We’re talking a loan officer, an underwriter, a processor, an appraiser, a title company, escrow company, an insurance company, a funder, a closer, and possibly more.  That’s a lot of hands in the dough!

The same goes for mortgages.

Even in a best-case scenario…say you are a well-qualified borrower with a W-2 job, one bank account, and with excellent credit score with no recent activity…even refinancing a conforming loan, can still take several weeks.

Appraisals

Binoculars

Sometimes, the delay can be due to the home appraisal, which is essentially required to independently determine the value of the property in question.

Lenders will not lend if they don’t know the value of the property, so they will to order an appraisal. This process can take 5 to 10 days, depending upon the schedule of the appraiser.

This is why lenders will often want to book the appraiser early on so they can get it done and delivered to underwriting.

In Conclusion

The mortgage process isn’t the quickest, but that really can help buyers make sure the loan they are qualified for AND the property they are buying are the right fit. 

I’ve done loans in as quick as 17 days, so if you are looking for an usually quick close, let me know and I’d love to help!

The Lending Coach

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Mind Games: What Makes a Great Baseball Player

I’m linking to a very interesting article by Andrea Thompson at Live Science.  She’s analyzing Mike Stadler’s book “The Psychology of Baseball”.

While all sports involve a certain amount of psychology to strategize and plan in given situations, baseball is unique as there are so many different mental factors at play.

You can find Stadler’s book here…

And you can find Thompson’s article here… and I’d invite you to read the entire piece!

Some key takeaways…

“Baseball is impossible without psychology: impossible to play, and impossible to appreciate fully as a fan,” Stadler wrote. “Watch any game, and most of what you see is thinking.”

Here are more excerpts from the Stadler book…

Mental agility

“Most baseball players have extraordinary capabilities to coordinate physical and mental processes, including fast reaction times, focus and high visual acuity.

Studies conducted by Columbia University on Babe Ruth while he was playing showed that he could react to visual and sound cues much faster than the average person and that he had better hand-eye coordination than 98.8 percent of the population.

Eye with lens

Baseball players tend to have excellent vision, which allows them to see things like the spin on a curveball hurtling toward them at home plate, cues they can use to get a hit.

Reaction time is also critical in baseball, and the better players seem to have better reaction times. There’s some suggestion that this could simply be a matter of having more practice, “but you actually find even within really highly skilled players, the players at the higher end, the faster reaction times still tend to have higher batting averages and be slightly better hitters,” Stadler told LiveScience.”

“Most baseball players do have pretty good vision; a huge proportion of them test at better than 20/20,” Stadler said.

Baseball “Personality”

“Besides the physical process and acute mental abilities, successful baseball players also typically have certain personality traits—this is perhaps best exemplified by the diverging career paths of Darryl Strawberry and Billy Beane, Stadler said.

Hitter on deck

Both players were drafted by the Mets in 1980 (Strawberry was picked much higher than Beane)—the team even had trouble deciding which player to pick first because of their comparable athletic abilities. But while Strawberry came to be one of the best hitters in baseball, Beane couldn’t hack it in the majors (though he went on to become General Manager of the Oakland A’s).

“Beane was just sort of crushed by the pressure of the batter’s box, just didn’t have that sort of self-confidence, almost arrogance, just to know, ‘I do this well. I’m fine. So what I just struck out, I’m going to hit next time,'” Stadler said.

Strawberry displayed the exact opposite reaction: “You can look at some of Strawberry’s early interviews when he broke into the league and was struggling a little bit as player’s naturally do, but he, even then he just said, ‘I know I’m a good hitter. I’m going to hit plenty of home runs,'” Stadler said. “He just wasn’t worried about the pressure.”’

Player Variability

“When a player starts to have a spate of really bad or good games, fans can get involved in the psychology of “streaks” or “slumps”. But Stadler says that research has shown that these supposed trends are really a matter of fans not taking in the big picture.

Baseball gloves on bench

“It’s hard for the fan to take that really long view and keep in mind the player’s whole career as opposed to just the last few games’ performance,” he said.

Fans also tend to ignore how much baseball statistics can mask a players’ actual performance. A hitter may have a sub-par batting average, though he is still hitting balls really hard—they’re just hit to fielders who catch them.

In his book, Stadler mentions an interview with pitcher Greg Maddux after a streak of no-hit innings, where Maddux said he just got lucky because some guys hit balls really hard, but hit them right at a fielder.

“I think the players can kind of see that distinction in ways that, you know, because they’ve been around the game so much, that fans … might not be able to see that as the players are,” Stadler said.”

The Lending Coach

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

6 Ways to Improve Your Chances of Qualifying for a Mortgage

House cut out

It can seem like a daunting task to actually qualify for a mortgage.  But really, that’s not the case, as it absolutely can be done!

Application approval

With that said, being well-prepared can significantly improve your chances of approval.

Here are six ways to enhance your prospects:

1. Improve Your Credit Score

Your credit score is a major factor in mortgage approval. Lenders use it to gauge your reliability as a borrower. To improve your credit score:

  • Pay all bills on time, as punctuality has a significant impact on your score.
  • Reduce outstanding debt, particularly credit card balances.
  • Avoid opening new credit accounts close to your mortgage application date.
  • Check your credit report for errors and dispute any inaccuracies. A higher credit score not only increases your chances of approval but also helps you secure a better interest rate.

2. Save for a Down Payment

A substantial down payment can strengthen your mortgage application. It reduces the loan amount and demonstrates your financial responsibility.

House rope cash

If you are able, try to save 20% of the home’s purchase price to avoid private mortgage insurance (PMI) and lower your monthly payments. But even if you can’t reach 20%, a larger down payment still improves your application’s appeal by lowering the loan-to-value ratio (LTV).

Fortunately, in today’s environment, there are great low down-payment options available.  Find out more here

3. Stabilize Your Employment and Income

Lenders look for steady employment and consistent income. To enhance your mortgage approval prospects:

  • Maintain stable employment, ideally with the same employer, for at least two years.
  • Document all sources of income, including bonuses, overtime, and secondary employment.
  • Avoid making significant career shifts close to your application. A stable employment history reassures lenders of your ability to meet monthly mortgage payments.

4. Reduce Your Debt-to-Income Ratio (DTI)

Sand timer house

Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. To improve your DTI:

  • Pay down existing debts, focusing on high-interest loans and credit cards.
  • Avoid taking on new debt before and during the mortgage application process.
  • Increase your income through a side job or additional work hours, if feasible. A lower DTI indicates to lenders that you have sufficient income to manage your mortgage payments alongside other obligations.

5. Gather and Organize Financial Documentation

Lenders require extensive documentation to assess your financial health. Be prepared to provide:

  • Recent pay stubs, W-2 forms, and tax returns.
  • Bank statements for checking, savings, and investment accounts.
  • Documentation of any additional income sources, such as rental income or alimony.
  • A list of all monthly debt payments and living expenses. Organizing these documents ahead of time can streamline the application process and demonstrate your preparedness and financial responsibility.

6. Get Pre-Approved for a Mortgage

House keychain

Obtaining pre-approval from a lender shows that you are a serious buyer and gives you a clear understanding of your borrowing capacity.

To get pre-approved:

  • Submit your financial documentation for an initial review by the lender.
  • Discuss your financial situation and home-buying goals with the lender.
  • Obtain a pre-approval letter that specifies the loan amount you qualify for. Pre-approval not only boosts your credibility with sellers but also helps you stay within your budget and avoid falling in love with a home you cannot afford.

In Conclusion

Of equal importance is to have the right mortgage lender with you during this process.  I can help walk you through these steps and coach you along the way!  Do reach out to me for more…

The Lending Coach

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

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