5 Types of Mortgages

coins and houseBefore you purchase a home, it’s important to educate yourself on the various types of mortgages you can get so you can make the right decision when the time comes to choose yours.

CONVENTIONAL MORTGAGE A conventional mortgage is a home loan that’s not insured by the federal government. There are two types of conventional loans: conforming and non-conforming. Conforming loans are loans for amounts that fall within the maximum limits set by Fannie Mae or Freddie Mac (government agencies that back most U.S. mortgages). Loans that do not meet these guidelines are considered non-conforming. Jumbo loans are the most common type of con-conforming loans.

JUMBO MORTGAGE Jumbo mortgages are conventional loans that have non-conforming loan limits. Your credit score generally must exceed 700 and you are required to make a larger down payment. However, it allows buyers to to borrow more money to purchase a more expensive home.

GOVERNMENT-INSURED MORTGAGE The U.S. Government is not a mortgage lender, but it plays a role in helping more Americans become homeowners. There are several types of government backed mortgages including Federal Housing Administration (FHA loans) , U.S. Department of Veterans Affairs (VA loans), United States Department of Agriculture (USDA loans) and more. Government-insured loans are ideal for buyers who do not have funds for aa large down payment and can not qualify for a conventional loan.

FIXED-RATE MORTGAGE The most popular mortgage is the fixed-rate mortgage. It is ideal for homeowners who expect to stay in their home for many years. With a fixed-rate mortgage the interest rate stays the same over the the life of the loan. Fixed-rate loans are typically available in terms of 15 years, 20 years or 30 years.

ADJUSTABLE-RATE MORTGAGE This type of mortgage offers a lower interest rate and monthly payment at first, then slowly increases as time goes on. An adjustable-rate mortgage can be beneficial if you only plan to own the home for a few years.

Do you have more questions about the different types of mortgages? Give us a call, we would love to discuss the different types of mortgages of available. Chris 480-754-9077 & Cheryl 480-754-9477

Real Estate Terms Every First Time Homebuyer Should Know

chair with dog photoWhen your buying your first home, it’s a big, exciting step.  But, it can also be overwhelming to try to understand the process and all the real estate terminology thrown your way.  Buying your first home should be a great experience, and one way to make that happen is to educate yourself as to what some of the words your agent and mortgage broker will mention mean.

Adjustable Rate Mortgage

An Adjustable Rate Mortgage means that your interest rate will fluctuate throughout the life of your loan. Usually, this type of mortgage has a lower interest rate initially but can go up or down depending on different factors. Adjustable Rate Mortgages are typically meant for short term ownership.

Fixed Rate Mortgage

With a Fixed Rate Mortgage your interest rate will be locked in for the duration of the repayment period. If you plan on owning the home for longer than five years a Fixed Rate Mortgage can be your best option.

Earnest Money

Also known as a “good faith” deposit, Earnest Money is a deposit made by the potential buyer to show they are serious about buying the house. These funds are held by a neutral party and typically put towards closing costs or your down payment at the time of closing.

Contingencies

A contingency is a condition that must be meant before a contract is legal. It is meant to protect the party from liability if certain conditions are not met. One example would be when a buyer specifies that a contract is not binding until a satisfactory home inspection is completed by a reputable home inspector.

Origination Points

Origination Points compensate a lender or loan officer for evaluating, processing and approving your mortgage loan. A point is 1% of your loan amount. Origination point fees are paid at closing.

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Property Taxes: What to Expect

laptops photoAre you a first-time homebuyer or someone who hasn’t purchased a home in a long time? Do you find yourself wondering what to expect when it comes to property taxes? This is a common question that tends to come up pretty quickly when the topic of buying a home is addressed. Many first-time homebuyers are cautioned to keep their property taxes in mind when budgeting for their new home, and with good reason. Depending on where you live, your property taxes could be significant, and they could make a big difference in the overall price of your home and your monthly mortgage payment as well. Below, we’ve outlined some important information to help you learn what you can about what to expect and how to prepare for your property taxes.

How is property tax calculated?

Property taxes were created as a way to pay government employees of your town or county (such as police officers, firefighters and others) for their work. Therefore, it’s up to your local government to determine your property taxes. In order to do this, your home and the property it sits on are both assessed based on the market value of other houses that have sold recently in your area. You can also figure out an estimated property tax price by multiplying the tax rate you pay in your area by the value of your home in its assessment. You can do this yourself, and you can also ask your realtor to help you determine the property taxes on any home you’re looking into purchasing. You should have at least some idea of property taxes before you make an offer on your home.

When are property taxes paid?

When you purchase your home, you will need to pay property taxes as part of your closing costs. Depending on how you are buying your home, the way in which you make this payment may differ. For example, in some instances, you’ll need to pay these through a cashier’s check or another similar method. In other instances, you can group the payment into the same check you use to pay the rest of your closing costs. The time of year in which you close on your home will affect how much you need to pay in property taxes at the time, too; the rate will be prorated so that you only pay for the months in which you will own the home in the given year. When the next year begins, your taxes will go up to their normal annual amount.

Are you considering pre-qualifying for a mortgage loan?  Contact us or call  480.754.9477 or 480.754.9077.

Is the First Offer Always the Best Offer?

Desert Ridge home photoHave you ever sold a house before? Are you going through the process of selling your house right now? Whether you’ve been through it before or this is your first time dealing with the ups and downs of home selling, you probably fully understand the temptation to take the first offer you get on your home. You may have even heard the myth that the first offer is always the best offer you’re going to get. But how true is this? Should you wait around for a better offer to come along?

If the offer comes right away…

Then it may not be the best offer. If you get an offer on your home within 24 hours of listing it for sale with your realtor, that offer may come from someone who is trying to see how low you’re willing to go on the property.

On the other hand, it might come from a potential buyer who has been shopping around for a long time. That buyer’s agent may have shown them your home knowing it’s perfect for what they’re looking for. And if this is the case, you may get a great offer.

If you get an offer at or very near your asking price right away, chance are you probably won’t get something higher later on.

If the offer comes delayed…

Then it probably is the best offer you’re going to get. If your home is priced above the usual asking price for properties in your neighborhood, most buyers are probably passing on making any offer at all, thinking you won’t accept what they may be willing to pay.

After a while, a serious buyer may come along and put in an offer after watching the market in your area for a few weeks. If this happens, you’re probably not going to get a better offer at your current asking price, so it’s probably a good idea to go ahead and take that offer.

So IS the first offer the best offer?

Most of the time, yes. Of course, it is your choice to wait and see if you get something better, especially if the offers you’re getting are coming in significantly under your asking price.  However, you may end regretting for not taking one of those initial offers, especially if your house stays on the market for weeks and even months to come. Don’t settle for a price you know is far below the value of your home, but don’t be afraid to take that first offer, either.   A seasoned real estate agent that knows your area well and has done homework, will advise you on how to get the most dollar for your home and develop an effective marketing strategy.

We have are local area experts in Scottsdale, Fountain Hills, North Phoenix and surrounding area.  Are you looking to sell you home?  Do you know the value of your home?  Click here to get started with a free, no obligation home value estimate.

How to Choose A Neighborhood For Your Needs and Lifestyle

Rotary Club Park photoWhen you’re buying a home, you’re probably going to spend some time considering the part of town—or the part of the state—where you want to be located. It’s normal to want to consider the location of your new home, but what exactly should you be looking for? It may be challenging to figure out the factors you need to consider when looking for the perfect new place to live. Sure, you know you want to be close to work or near your family, but what else? What could help you find the neighborhood of your dreams? Check out our tips below to help you decide.

School Districts

If you have children or are planning to have children, make sure you pick a neighborhood with high rated school.  Some neighborhoods with an average school grading may suffice, but stay away from those that don’t generally perform well in your area.

Home Style

Do you want a specific architectural style in your home? Or do you not really care as long as it has the amenities you’re looking for? Think about whether or not the style factors in your decision and you may narrow down your neighborhood from there.

Up-and-Coming Communities

Communities that are still developing may be more affordable when you’re looking to buy a home. As long as you’re willing to have a little patience for a few years as the neighborhood grows, you may get a great deal on a home in an area that you like.

Walking Distance

Does walking distance matter to you? If so, an up-and-coming community probably isn’t right for you. On the other hand, if you prefer to be further away from noise and busy streets, you may do well in the suburbs or even further out and get more home for your money.

Quiet vs. night life

Once again, you’ll have to consider whether you want to live on a street that’s quiet at night or one that has lots of nearby night life to enjoy. Many times, college areas will be noisier at night as well, although they may also be generally safer than other night life areas.

Proximity to Hobbies

Do you love hiking? Boating? Going to the dog park? Hitting up the mall every weekend? No matter what your hobbies might be, make sure you choose a location that won’t leave you sitting in traffic for hours to get to them.

Neighborhood Safety

Drive around the neighborhood you’re considering in the afternoon or early evening. Do you see people outside working on their lawns or playing with their kids? If so, this is probably a safe neighborhood. If you don’t see anyone outside at all, you may want to figure out why that is.

Drive through the neighborhood at night. See if there are any streetlights in the area or if it’s just dark everywhere. Do you see people out walking their dog or taking a nighttime bike ride, or is everything closed up and quiet? This can be a good indicator of the type of neighborhood you’re looking at, too.

We are local area expert in Scottsdale, North Valley, Fountain Hills and surrounding areas.  We can help you find a home that is right for you.  Click here to learn about neighborhoods and view homes for sale or call us at 480.754.9477 / 480.754.9077

 

Mortgages: Fixed or Floating?

buying process people photoAlthough there are a lot of different variations on the types of mortgages available when you’re buying a home, they all boil down to two different kinds: fixed and floating. If you hear these terms when you’re doing your home shopping, you may start to wonder what they mean and which one is best for your needs. A firm understanding of the difference between a fixed mortgage and a floating mortgage can make a huge difference when it comes time to talk numbers with your bank, lender, or financial advisor.

Floating Mortgages:  These types of mortgages are also known as adjustable rate or variable rate mortgages. All three of these terms mean the same thing: a mortgage with an interest rate that can change over time. The benefit to choosing a mortgage like this one is that the initial rate is usually going to come in quite a lot lower than the standard market rate at the time you apply for the mortgage. However, as the years go on, the rate may fluctuate. Eventually, the rate will end up higher than the standard rate was at the time the mortgage was issued, which means you’ll be paying more than you would have in the end with a fixed rate mortgage.

This type of mortgage is really only a good choice if you absolutely can’t afford the standard market interest rate at the time of the mortgage but are certain you will be able to afford a higher rate later on down the line. You will be told up front at what time you can expect your rate to increase, but you may not always know how much it’s going to increase to ahead of time.

Fixed Rate Mortgages:  A fixed rate mortgage has an interest rate that never changes. Initially, the rate may be a little bit higher than it would be with a floating mortgage, but it will never change even if the market standards go much higher in a few years. These are usually considered the better option for most homebuyers because they are easy to understand and make it easy to budget the mortgage into the monthly and yearly household economy. There is usually some variance in the length of time that these mortgages last, and they can be anywhere from 15 years to 30 years in most situations.

If a fixed rate mortgage goes for 30 years, a good portion of that will be dedicated solely to paying off interest. This may sound bad, but for homebuyers who can fit the monthly mortgage payment into their budget without trouble, there’s not really much of a downside to it. A fixed rate mortgage is almost always the better option, but higher interest rates can make it difficult to quality for one of these mortgages.

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Mortgage Calculators


You’ve decided to purchase a home!  Congratulations! 
Now comes the difficult part of determining how much home you can actually afford.   Luckily there are several free mortgage calculators available online that will assist you with this process.  You just need a few pieces of information to plug into the calculator.

Scottsdale 2 story home photoFirst, you need to know the price of the house you’d like to purchase.  This is a great starting point for your search because you will know very quickly if the houses in this price range will work for your actual budget.  Then you will need to input the amount of your down payment.  This amount will likely depend on the type of loan you’d be obtaining as certain loans require certain percentages of down payments.  The next step will be to input the length, or term, of the mortgage you’re seeking.  This term will typically be 30 years or 15 years.  Finally, you will need to know the annual interest rate of the loan.  Most mortgage calculators will have today’s interest rates handy.

After inputting this information, the mortgage calculator will give you your monthly payment, as well as an amortization or payment schedule.  Remember that your monthly mortgage is only part of the cost of owning your home, as homeowner’s insurance, property taxes and HOA fees in some cases will also make up this cost.

Some mortgage calculators you may want to try include the following:

www.mortgagecalculator.org

www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

www.QuickenLoans.com/Calculator

We are available to answer any questions you may have about this process.  We look forward to working with you in your home search!

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Understanding Title Insurance

changes-sign photoTitle insurance.  It’s a mortgage term we’ve all heard, but what exactly is it?  Why is it necessary when purchasing a home?

Simply put, title insurance is another form of insurance for your home.  Just as flood insurance and homeowner’s insurance protects against loss from theft or fire or floods, title insurance protects the title to your home from financial hazards.  When you purchase a home, you’re not purchasing the actual land or the building, you are actually purchasing the title to the property (ie, the right to use and occupy the property).

The title to the property you intend to purchase may already be affected by claims or rights filed by others, and these claims may limit your use of the property and may even cause financial loss.   Therefore, by purchasing title insurance you are authorizing a search of public land records surrounding the property you intend to purchase.  A title agency typically will conduct this search, and will look for any evidence of issues surrounding the title.  For example, there may be a lien against the property due to the seller’s unpaid taxes, pending legal action against the property, or an unknown heir of a previous owner who claims ownership of the property.   Being aware of these issues will enable you to require these issues be addressed before you take title to the property.

Purchasing title insurance will protect against these hazards and defects that may exist in the title, and is purchased at one time, instead of annually.   While this is a quick overview of title insurance, we hope this has shed some light on a common part of a real estate transaction.  Every transaction is different, and while we are unable to give legal, tax or accounting advice, we look forward to helping you navigate your own process with ease and clarity.

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What Exactly Are Closing Costs?

buying_home_cycle photoAnyone who has ever been involved in assuming a mortgage, or even watched a few real estate shows on HGTV, is familiar with closing costs.  But what exactly are closing costs?  Here’s a quick rundown of these additional fees.

Simply put, closing costs are additional fees associated with processing the mortgage, and are not paid to the mortgage company.  Generally speaking, closing costs are assumed by the buyer of the property (VA mortgages are one exception to this rule) and are paid at the time of closing of escrow.  The bulk of closing costs is comprised of lender’s fees.  These fees include the appraisal fee, which is an independent assessment of the value of the property being purchased, as well as the credit report and any property taxes.  Lender’s fees also include mortgage and homeowner’s insurance, as well as any flood certification and pre-paid interest charges.  These fees may also include origination and discount points depending on your lender, as well as loan application and loan processing fees.

Title fees are also part of closing costs.  These fees include the title service fee, which covers the handling of title documents and funds, as well as half of the settlement and escrow fees, which cover the fees for the title search and examination.  Finally, title fees also include any title insurance.   Recording fees are another part of closing costs and include recording fees, transfer taxes and an affidavit of property value.   HOA transfer fees and HOA dues are typically also included within closing costs.

While this is a quick overview of closing costs and is by no means an exhaustive list, I hope this has shed some light on these omnipresent fees in real estate transactions.  Every transaction is different, and while I am unable to give legal, tax or accounting advice, I look forward to helping you navigate your own process with ease and clarity.

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Now You’re In Escrow

Unlocking a front door photoCongratulations!  You’ve found the perfect home to purchase, you’ve made an offer, the homeowner has accepted your offer, you’ve handed over earnest money and you’ve signed the contract.  Now you’re in escrow!  But what exactly does that mean?

According to Dictionary.com, Escrow refers to “a contract, deed, bond, or other written agreement deposited with a third person, by whom it is to be delivered to the grantee or promisee on the fulfillment of some condition.”   In other words, escrow refers to the process where the buyer and seller deposit money and the real estate contract with a neutral third-party, the title company, until the conditions are met for a real estate transaction.  Here in Arizona, the escrow process is provided by a title insurance company, generally speaking, instead of an attorney as is required in other states.  So, in Arizona, title companies handle both the title and the escrow part of a transaction.

Once escrow is “opened”, the title company begins to “vet” or research the buyer, seller and the property itself so they can issue title insurance.   So, when the real estate transaction is “in escrow”, the real estate contract, along with any earnest money, has been presented to the title company.  Also, the title company has opened a file with the names of the parties in the contract.  This real estate transaction stays in escrow until it is “out of escrow” by closing the transaction according to the contract terms.  If something goes wrong such as the buyer doesn’t qualify for the loan, the transaction will fall out of escrow.

Why is escrow necessary?  Simply put, whether you are the buyer or seller, you want the assurance that no funds or property will change hands until all of the transaction instructions have been followed.  The title company (ie, escrow holder) has the legal obligation to safeguard all funds and documents during their possession, and to convey title and/or disburse the funds only when all provisions have been met.

The escrow process can range from a few days to several months, depending on the terms of the purchase agreement.  Generally speaking, the Deed of Trust is recorded within one business day of the title company’s receipt of loan funds, signaling the “close of escrow”.  The escrow officer will verify with the local records office that the documents have been recorded and legal transfer has been made from seller to buyer.

While this is a simplified description of the escrow process, I hope this has clarified a sometimes-confusing term in a real estate transaction.  Every transaction is different, and I look forward to helping you navigate your own process with clarity and ease.

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