David Bailey

David and Erika Bailey Mortgage Professionals

The Ultimate Guide To Hard Money Loans

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The Ultimate Guide To Hard Money LoansThere are multiple types of loans out there and one of the easiest to get is called a hard money loan. On the other hand, it is also important for people to avoid being lured in by an attractive loan offer because it might be expensive. When it comes to a hard money loan, there are a few important points that people should note. These can be an essential tool for investors.

What Is A Hard Money Loan?

As a rule of thumb, most people look at a hard money loan as a tool of last resort. This is usually employed as a short-term loan or a bridge loan. This type of loan is commonly found in real estate deals.

Even though many people refer to a hard money loan as a loan of last resort, they serve a bigger purpose than this. Lots of real estate investors take out a hard money loan as part of their financing strategy, particularly if the goal is to fix the house and flip it. There are a few ways that a hard money loan will differ from a traditional loan.

How A Hard Money Loan Is Different

It is important to compare a hard money loan to a traditional loan that people get from a lender, such as a mortgage. Some of the key differences regarding a hard money loan include:

  • They are more expensive
  • The approval process is faster
  • There is more flexibility in terms of repayment
  • The requirements for approval are much lighter

In contrast, the approval process for a mortgage takes a longer time and is harder to get. On the other hand, a mortgage typically comes with a lower interest rate when compared to a hard money loan. This is what people mean when they say a hard money loan is more expensive.

Should Investors Get A Hard Money Loan?

If the goal is to buy a house and flip it quickly, it is important to get approved for loans in a short amount of time. This is where a hard money loan can be helpful. If the loan is going to be paid off quickly with the sale of the house, then the expensive interest rate isn’t as big of a deal. This is the major advantage of a hard money loan.

A Guide To Everything Regarding Instant Pre Approved Home Loans

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A Guide To Everything Regarding Instant Pre Approved Home LoansThere are many people who set buying a home as one of their major life goals. There is a lot that comes with owning a home including a major investment opportunity, a sense of stability, and a feeling of pride; however, homes are also expensive. It can be challenging to find a home loan.

A traditional mortgage requires a thorough credit check and could take a long time to get approved. Some people might not even qualify.

On the other hand, there is also a helpful alternative called an instant pre-approved home loan. There are a few important points that everyone should keep in mind.

What Is An Instant Pre-Approved Home Loan?

A pre-approved home loan is a loan that has been offered to existing customers of a certain lender with an immediate sanction. The funds are disbursed once the property has been verified.

The point of a pre-approved home loan is to skip the lengthy procedure that is usually required for someone to obtain a home loan. The bank makes this loan offer available to customers even before they have selected the property they want to buy. A pre-approved home loan often comes with a strong offer at an affordable price. Sometimes, the pre-approved home loan is even offered at a lower interest rate when compared to the current market average.

In order to offer a pre-approved home loan, the bank will still go through the credit history, payment history, and bank statements of its customers.

There are a few major features of a pre-approved home loan that people should note. Usually, these loans are only available for a short period of time. Second, the pre-approved home loan allows borrowers to manage their funds well. They usually bank with the same lender. Finally, there is some room for negotiation when it comes to a pre-approved home loan.

Is A Pre-Approved Home Loan The Right Option?

Many people are wondering if a pre-approved home loan is the right option for them. The downside of a pre-approved home loan is that people are limited to that specific lender. Therefore, it is a solid strategy to continue to check around with other lenders to find out about their comparable rates.

Target The Lowest Borrowing Costs Possible When Applying For A Mortgage

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Target The Lowest Borrowing Costs Possible When Applying For A MortgageWhen someone is applying for a mortgage, it is important to consider the other costs that go along with taking out this type of loan. While many people focus on the down payment, the size of the loan, and the interest rate, there are other costs that might go along with taking out a mortgage.

These hidden fees are sometimes referred to as “nickels and dimes” that the lender tacks on to the loan to try to make some extra money. When compared to the size of the loan, many borrowers shrug this off because the loan is so big; however, nobody should have to pay more than they should. It is important to aim for the lowest borrowing costs possible when applying for a mortgage.

The Hidden Borrowing Costs Of A Mortgage

There are several hidden borrowing costs when it comes to a mortgage. One of the most common hidden borrowing costs is called origination fees. An origination fee is a fee that is tacked onto the mortgage for printing the papers. It is important for borrowers to ask about origination fees and try to get them waived, if possible.

A second hidden cost when it comes to a mortgage is called points. Points are interest payments due at signing. In this manner, the lender is asking for more money upfront in an effort to earn interest on that money sooner. Borrowers should keep their eyes open for points and avoid them, if possible.

Finally, some borrowers might also be asked to purchase PMI. While this isn’t a “hidden” cost, it is something that borrowers should know. This is mortgage insurance that the borrower purchases for the lender to protect the lender against the risk of default. Borrowers can often avoid this expense as long as they put enough money down; however, this down payment hurdle might be lowered if the borrower has a strong credit history and plenty of assets.

Reduce The Cost Of Taking Out A Mortgage

These are a few of the most common added costs that borrowers might face when they take out a loan. Everyone needs to keep their eyes open for these hidden costs so they don’t pay more than they should.

What Is Mortgage Insurance?

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What Is Mortgage Insurance?When it comes to putting a down payment on a house, most lenders are going to ask for 20 percent; however, some lenders will be willing to accept a smaller down payment in exchange for something else.

That something else is usually mortgage insurance. If a lender says they are asking for mortgage insurance, which is also shortened to PMI, it is important for everyone to know what this means.

An Overview Of PMI

PMI stands for private mortgage insurance and is usually required if the borrower is putting down less than 20 percent. The lender will usually go out and find private mortgage insurance before shifting the premium for the insurance policy to the borrower.

Usually, PMI is included with the rest of the mortgage payment. The lender will take the portion of the mortgage payment that makes up the PMI and shift this into an escrow account. Then, the lender will simply move this out of the escrow account to the insurance company to cover the cost of the policy. This is the most common type of mortgage insurance.

What Is The Cost Of Mortgage Insurance?

The cost of PMI is going to depend on a number of different factors. Some of the factors include:

  • The amount of the down payment
  • The person’s credit score
  • The type of mortgage the borrower takes out
  • How long the mortgage is supposed to last

In general, the larger the down payment and the higher the credit score, the lower the mortgage insurance is going to cost. It is also important for people to note that mortgage insurance is not going to last for the length of the mortgage. As a whole, most PMI policies will be phased out once the amount of equity in the home reaches 20 percent of the home’s value. Then, the PMI will usually be waived.

The Purpose Of Mortgage Insurance

Some people might be wondering why they need to purchase PMI at all. This is an insurance policy that is meant to protect the lender against the risk of the borrower defaulting. If the borrower is able to convince the lender that their risk of default is low, they might be able to avoid being asked for PMI.

Should You Buy A Home Warranty?

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Should You Buy A Home Warranty?When you buy a new house, the first thing you want to do is protect your investment. You already have property insurance. Should you also buy a home warranty?

What Is A Home Warranty?

A home warranty is not the same thing as insurance. Home warranties are service contracts. If a covered item breaks down and it is covered in the terms of the warranty, the home warranty company will pay to fix or replace that item.

What is Covered Under A Home Warranty?

Every home warranty contract is different but generally, a home warranty may cover items like major kitchen appliances, HVAC components, sump pump, in-home sauna or spa tub, and/or ceiling and exhaust fans.

Often, a homeowner can get an extended warranty contract that covers items like the washer and dryer, garage door opener, septic system and swimming pool components.

Understand The Costs

A basic home warranty costs between $350 and $500 annually, depending on what coverage you get. However, if something does break, you will also be on the hook for incidentals like service call fees or a deductible.

Know The Benefits

There are considerable benefits to having a home warranty contract in place, especially when something expensive breaks down, like a furnace. There is a lot of peace of mind knowing that you will be able to quickly get something fixed in your home.

You Might Already Be Covered

Your homeowner’s insurance policy might cover some of the same things that are covered with a home warranty. So you could be paying for duplicate coverage on some items. However, your homeowner’s insurance likely will not cover a dishwasher that needs to be replaced or a fridge that suddenly goes out.

There Are Alternatives

Finally, before you pay for a home warranty, remember that there are alternatives. For example, most HVAC companies offer financing options to buy a new furnace. Most appliance stores also offer financing on major purchases like refrigerators and dishwashers. You could save your $500 or so a year and put it in a savings account for a rainy day instead of gambling that you might have a major repair or purchase that year.

There are pros and cons to home warranty plans. Just be sure you fully understand both sides of the issue before you sign on the dotted line.

 

July 2020
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The Mortgage Outlet, NMLS # 36861 is a registered mortgage broker with the NYSDFS. All loans are arranged through third party providers. Office located at 280 West Main Street Sayville New York 11782

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