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.

How to Get a Mortgage When You’re Self-employed

Since the real estate crisis and financial meltdown in 2008, it has been harder than ever to secure a loan. Banks have drastically changed their lending polices, making it seemingly impossible for self-employed individuals to qualify for a mortgage. However, not all hope is lost, and there are a few ways business owners can boost their chances of success.

Get Established

If you have owned your business for less than two years, trying to secure a mortgage can be a bit difficult. Long ago, borrowers could depend on loans that didn’t require bank records or income tax documents – these were known as stated-income mortgages. Now, lenders require proof of stable income before they will consider any type of loan. According to Mike Fratantoni, vice president of research and policy development for the Mortgage Bankers Association, lenders look for “a pattern that justifies the decision they’re going to make.” He goes on to add, “They want to be sure the borrower will be able to handle the payment over time. If someone is just starting a business, that’s going to be problematic.”  If your new business shares the same line of work that you have been in for many years, certain banks may only require 18 months of income and tax records. Unfortunately, you will still have to meet other loan requirements and have perfect credit to obtain the mortgage.

Get the Paperwork in Order

Today, you must document every single penny you make in order to show exactly how much income you are bringing in. This can involve a lot of paperwork; however, proper documentation along with having the paperwork filled out in advance will help increase your chances of securing a mortgage. Remember that each bank has its own requirements, so it is always best to find out what they are before applying.

Meet Face to Face

When applying for the loan, always go to a walk-in bank. Telephone and online lending programs are quick and convenient, but they lack the possibilities that a face-to-face meeting has. By meeting with the mortgage loan officer, he may be able to suggest other mortgages that you would qualify for.

Take a Tax Hit

When you drive down your taxable income with self-employment deductions, you make it harder to secure a mortgage. Even though this may be an expensive option, it can help land you a mortgage that you might not have otherwise qualified for. After securing the loan, you may be able to refile “forgotten” expenses; however, you should consult an accountant beforehand.

Increase Your Bank Account

Keeping a hefty amount in your bank account will show lenders that, even though your income levels may fluctuate throughout the years, you have enough to cover the bills during periods of low profit. Consider having at least a year’s worth of the mortgage payments in the account to help boost your prospects.

Get a Co-Signer

If you don’t have two years’ worth of records for your business, consider using a qualified co-signer to help you secure a mortgage. It is vitally important, however, that the co-signer has perfect or near-perfect credit and has their own finances in order.