What Home Sellers Need to Know About Mortgages

While in today’s real estate market individuals who are selling their homes may opt for the highest offer in order to finalize the sale, experts are saying that waiting it out may actually be a smarter choice.

Kris Berg, real estate broker at San Diego Castles Realty says, “One of the first things we address is how strong the buyers are financially and how confident we feel that they’re able to close.”

It is always a good idea to weigh out various factors, including how financially stable the potential purchaser is, as this will allow the seller to make an informed decision rather than ultimately wasting their time.

Cash Only Offers

While cash offers at first may seem like a win-win situation, it is important for sellers to take into consideration why they are being offered cash only. Typically, most cash offers are due to the fact that the purchaser cannot obtain financing. Another reason may be that the appraiser believes property value does not match up to the purchase price, which in turn leads to the lender rejecting the financing request. With cash, there are no lenders in the picture, and this in turn takes away both of these risks.

Additionally, sellers should be aware that just because they are being offered cash, it isn’t always guaranteed. Cash offers are popular in the “home flipping” area, and many purchasers are just looking to purchase the home at a discount, sell it off quickly, and actually only occupy the home for a short period of time, if at all. Cash buyers almost always expect a discount as well, so sellers must take this into consideration.

Prequalification Letters

Pre-qualification letters sound great at first, as they are basically letters stating that potential borrowers have pre-qualified for a home loan. However, with pre-qualifications, it is important to read between the lines in order to determine whether the pre-qualifications or “prequals” are actually credible. Many buyers are actually on the edge of not qualifying, and they in turn are characterized as “barely qualified.” This can make a big difference in the long run, so it is important for sellers to request that their agent communicate with the buyer’s loan officer to learn exactly how “qualified” the buyer actually is.

The Stigma of FHA Loans

Unfortunately, many sellers immediately reject offers from buyers who want to finance through an FHA or VA loan. While this should actually be considered a positive since all FHA loans are properly insured through the Federal Housing Administration and VA loans are backed by the Department of Veterans Affairs, the problem is that these agencies have regulations that require sellers to make repairs and correct specific home defects.

Additionally, VA loans require that the seller pay various closing expenses that are usually shared between the buyer and the seller, and the amount of these costs may be enough for the seller to reject a buyer who wishes to purchase a home with the help of a VA loan.

Closing the Deal

While there are various opinions on what a seller should accept with cash offers, FHA and VA loans, and pre-qualified buyers, in the end it is ultimately up to the seller. By weighing out the pros and cons of the situation at hand and communicating with their real estate agents, sellers can make an informed decision when it comes to the sale of their home that should prove to be beneficial for all parties involved.

Pros and Cons of Enrolling in Bi-Weekly Mortgage Payments

For anyone that is just slightly ahead in today’s economy, that is a feat in itself, and many homeowners that have found themselves in a position where they have a bit of extra money at the end of the month have opted for bi-weekly mortgage payments. This is a great way to pay your mortgage off early as well as stay on top of your finances, and there are certain lenders that are encouraging this mode of payment, going as far as contacting their clients to inform them of the bi-weekly payment option.

If you are someone that is considering making the switch to bi-weekly mortgage payments, you are definitely making a responsible choice towards your financial future, but it is important to note that your lender’s payment plan may not exactly match with what you can afford, and there are certain fees attached to this kind of arrangement. By knowing just what type of arrangement you are looking at, you can make an informed decision on whether bi-weekly payments are right for you.

Bi-Weekly Payment Pluses

There are definitely advantages to making bi-weekly mortgage payments. You will make a total of 26 payments per calendar year, which equals an entire extra mortgage payment by years’ end. You will be able to take years off of your mortgage term by doubling up on payments, and you will also be able to save on your interest charges. Additionally, making two timely payments each month will positively affect your credit score. While these are all definite pluses, you must also consider a few potential negative aspects before signing on the dotted line.

Cons to Signing Up for a Biweekly Mortgage Payment

The main downside to bi-weekly mortgage payments are the fees involved. There are often extra fees attached due to the fact that your lender will miss out on a portion of the money they would have obtained if you had stayed with the original terms of your mortgage agreement. In order to make up for the loss, there are often enrollment fees and monthly plan fees that are attached, and you also want to make sure that there are no prepayment penalties involved. If there are prepayment penalty fees, you are better off sticking to your original mortgage agreement.

Weigh Out Your Options

If you are unsure on whether or not bi-weekly mortgage payments are the right choice for you, it is always a good idea to weigh out your options and take a good look at your finances. One of the problems in agreeing to a bi-weekly plan is that unfortunately, unexpected financial emergencies can pop up, and if you default on your mortgage payments, a variety of issues can ensue.

If you are currently a step ahead with your finances, you may consider taking the money that you were considering putting toward that second payment and tucking it away in an emergency fund. This way you will still have your financial cushion, and if later on down the line you decide you want to pay your mortgage off early, you can use these funds to do so.

You may also benefit by consulting with a financial advisor or your mortgage lender in order to learn more about the bi-weekly option before making a final decision. They will advise on any fees and penalties associated with making the switch to bi-weekly payments, and you will be able to make a realistic decision on whether this is the best choice for you at the present time.

Do What’s Right For You

Ultimately, the decision on whether or not bi-weekly payments are the right option is up to you. If you feel that it would be a positive step to assist you in reaching your financial goals and that you can realistically afford it, bi-weekly payments are a great way to pay your mortgage off early and build up your credit rating. By taking the time to weigh out your options and carefully go over your budget and finances, you will be able to make a decision that will work for you.