Getting a “Credit Towards Closing Fees”? What That Really Means.

Screen Shot 2015-06-29 at 10.03.06 AM

For most home shoppers, it’s pretty common to find attributes you love in more than one home. (After all, there are a lot of homes out there to choose from!) Two different properties may include different sets of features, both of which appeal to you in different ways. So you find yourself torn between which one you should choose. This is usually the time when you begin to look at the costs of each home a little more closely – because if you love them both, why not get the better value, right?

Sellers who have done their homework know this. And by that, we mean whether it’s a new builder or a resale home, their due diligence requires them to know the market of homes they are competing against in order to make a sale. That’s why they will often sweeten the deal by offering Seller Incentives which are specifically designed to make their property more appealing and financially desirable.

With this in mind, let’s look at a similar dilemma that two friends of ours are experiencing.

For example, let’s say Becky and Sam are considering two different homes that both have the same sales price. They really like home #1 a little better than #2, but the #2 seller has told them “If you buy my home, I’ll give you a 2% seller incentive.” That usually means they will apply that 2% as a credit towards your closing fees.

If Becky and Sam are buying a $250,000 home, that equates to a $5,000 “savings.” And if they take that incentive to a bank or a mortgage bank to get their new home loan and discover that the total closing costs (including prepaid taxes, insurance, etc.) come out to $10,000, that 2% will cover half of it – meaning they’ll only spend $5,000 out of their pocket instead of $10,000. It’s a deal that sounds pretty darn good to them . . .on the face of it.

What Becky and Sam don’t know, though, is that in the mortgage industry, we have a name for that: It’s called the “smoke.” Because much like ‘smoke and mirrors’ provide the illusion for magicians on stage, it’s a practice that extends far outside of the realm of entertainment. And when it comes to finances, “illusion” isn’t quite the word you want being tossed around to explain yours.

Because often, a seller will add a small caveat to that 2% incentive – that it’s only available if you use their mortgage lender. Certainly there may be good reasons to go to their lender – and they’ll be happy to explain why: They have a good relationship with them, they have a good reputation, they know their homes and their buyers – so the inference is that “If you use our lender, you’ll save money with our 2% credit, and everything will go smoothly.” (Looking for the “mirrors”? You just found them.)

Sounds really good so far, huh?

But let’s take another look at this same scenario. Say we take that same situation where these 2 homes are equal in price – and change the game a bit. Let’s say that Becky and Sam have shopped around and decided to get a mortgage loan with No Lender Fees. (That’s exactly the type of loan that Premier Mortgage Lending offers, by the way.)

Now the numbers start to do some interesting things.

Because with a “No Lender Fees” loan, Becky and Sam won’t pay anything for lender fees: no loan origination, underwriting, document preparation or processing fees – they all come to $0. That can easily equate to a substantial savings of $4-7,000 on the cost of their loan. But even if we assume the savings will only be $5,000, simply by choosing the right mortgage loan, Becky and Sam have leveled the playing field. Now – both homes will cost them the same amount for out-of-pocket closing fees, even with the’ 2% Seller Incentive.’

You know what that means? That Becky and Sam have taken back control over their purchase decision. The ‘smoke and mirrors’ have been revealed, and since they really like home #1 better than #2, they can now make a decision based on their real preference (and not on the imaginary premise that home #2 will save them money).

Finding a mortgage loan doesn’t have to be complicated. In fact, we’re on a mission to help buyers understand the differences and make better financial decisions at our new KnowBeforeYouOweNevada.com website. Check out our collection of Home Loans 101 videos – and you’ll be prepared to ask the right questions when you start home shopping, too.

Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.

Shopping For A Mortgage Loan Can Find You A Bargain, Too

Saving-for-a-Home

Shopping. It’s one of our favorite American pastimes. For ourselves, for others, for our homes. But surprisingly, many homebuyers spend more time researching the best laptop or even the perfect outfit for a special occasion – than they do searching for the best deal on their mortgage loan.

One of the misconceptions that lead to this phenomena is this: Homebuyers often don’t realize they have a choice. (Spoiler alert: They do.)

Part of the reason is that navigating the maze of purchasing real estate is confusing to begin with. It can start with a Realtor or a homebuilder, then buyers need to select options, gather financial records, pick an insurance company, and the list goes on. The buyer is very busy during the whole process, and relies on the advice they get from their agent or builder to get to the finish line. Eventually, they find themselves signing a pile of papers at the escrow company, and the next day – voila! Here’s the keys to your new home!

But if you were paying close attention to that last paragraph, you may have noticed that no one mentioned “You know, we need to shop around to find the best mortgage loan for you, too.” And the reason for that is often that a Realtor or a homebuilder has a convenient relationship with a particular lender, and buyers are led to assume that the pre-qualification letter they receive from them is a commitment FROM that lender, and TO that lender to get your mortgage loan from them.

The problem is – it’s not.

In fact, while you’re jumping through all the other hoops that have been set before you on the exciting road to owning a home, you’re missing out on one very simple way to save potentially thousands of dollars on your mortgage loan. We’re talking about money that comes out of your pocket when it’s time to sit down and sign those escrow papers. And yes, we said “thousands of dollars.”

Why would there be such a difference?

You may have heard of the Dodd-Frank Consumer Protection Act. The one that was signed into law after the financial crisis of 2008. But what you may not have heard (or remember) is that a large portion of that Act was created specifically to address consumer protections for mortgage loans. It’s legislation that has slowly entered into law over the past few years, and a very important part of it went into effect in 2014.

According to Rick Piette, owner of Premier Mortgage Lending in Las Vegas, Nevada, “One of these new rules actually places a ‘cap’ on how much a Mortgage Broker can make on your loan; and it allows that fee to be paid by the lender directly to the mortgage broker.”

What does that mean to borrowers? It means that their loan can actually cost them no money; that’s zero dollars. The broker makes his income directly from the lender in an amount that cannot be exceeded or inflated. And the final result is that the consumer is the winner in this transaction.

“In essence, the law gives the consumer control of the cost of his own mortgage,” continues Piette. “We think that’s a great thing, and as a mortgage broker, we are bound by these regulations.

What most people don’t realize, however, is that the type of lender you choose makes a huge difference. “This law doesn’t place the same restriction on banks or mortgage bankers,” Piette adds. “And that means they’re able to add costs and junk fees of their own to the actual price of your loan – and require you to pay for them out of your pocket. Ultimately, those are the costs that require you to bring extra money to the closing table.”

But once buyers understand this distinction, the “shopping” part of finding the right loan gets easier.

Simply contact a variety of lenders – and compare the numbers on their written Fees Worksheet. This is your apples-to-apples moment – where you can see clearly what it will cost to obtain your mortgage. Compare the interest rates, see if there’s a list of costly fees, add them up, and you’ve now got a very clear picture.

To illustrate what we mean, consider the difference in how Premier Mortgage Lending – a mortgage broker – works on your behalf:

1. First, as a mortgage broker, we will shop your loan among several different lenders in order to find you the best deal. This differs from how banks and mortgage banks operate, as they are ‘direct lenders’ who normally only sell their own loan products. (That’s the difference between several choices – and only 1.)

2. Second, Premier Mortgage Lending will charge you $0 for Loan Origination, Processing, Underwriting, and Doc Prep. Other lenders can include charges for these items that literally total thousands of dollars.

3. Third, by eliminating all these fees, Premier Mortgage makes it possible for you to potentially qualify for a larger loan, or leave you with extra funds after move-in so you can buy that new furniture that will look great in your new home.

4. Fourth, working with a local mortgage broker like Premier, you’ll not only get personal, face-to-face service, but because our costs and overhead are lower, we don’t need to charge our customers all those unnecessary fees. We’re paid one regulated amount by your lender at closing, much the same way your Realtor is compensated.

The bottom line is this: With very little effort, homebuyers can manage to save thousands of dollars, keeping that money in their own pocket. (Or maybe using it to buy that new laptop and the special outfit!) We just think it should be your choice to make. Don’t you?

Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.

With Home Sales On The Rise – Are You Prepared?

home-sales

It’s news you’re hearing a lot these days. Home sales are starting to heat up across the country. From the Wall Street Journal to Bloomberg – and from many other sources who track the condition of the housing market in the U.S. Home sales, prices and demand has risen sharply in the past couple of months.

If you’ve been postponing your decision to buy a home until “the time is right,” these latest statistics indicate it could be exactly that moment. With the price of homes inching upwards – along with projected interest rate increases – waiting too long can mean a difference of tens of thousands of dollars. And that is money that we know you’d rather keep in your own pocket. Whether you’re a first-time homebuyer, moving up, down, or returning to homeownership again – the answer to the following questions will help you start to determine if you’re prepared to make the leap.

Have You Chatted Up You Credit Lately?

Seems like you can’t change the TV channel anymore without hearing about all the free credit scores that are out there just for the taking. The truth is, of course, “free” is a relative term. (Some of those free credit scores may not cost you cash out of pocket, but they often make up for that by requesting you give up your privacy. Information is money these days, after all.)

The better way to get a free score – if you’re seriously in the market to buy a home – is to apply for a pre-qualification with a mortgage lender. Then be sure to ask them to give you a copy of your entire credit report. There may be errors in there that affect your credit score, and if so, now’s the time to fix them. Such corrections can save you a lot of money in interest expense not only on a mortgage loan, but for many other purchases you make. (It’s been estimated that upwards of 25% of credit reports include errors – so it’s worth checking out.)

But regardless of where you get your credit score, you need to know what that magic number is. It will help you determine if you’re eligible for a mortgage loan – and if so, what type and at what interest rate. Keep in mind though, a pre-qualification letter from a lender is not a commitment to make your loan. It simply indicates based on the information you provide, and under those circumstances, you should be able to qualify for one. Just remember that if your credit score is on your side, you’ll still want to shop around for the best and most affordable loan option.

How Much Home Can You Afford?

Just won MegaBucks? Congrats! You can buy whatever home you choose, cash on the barrel. But if you’re like most people, you’re going to need a mortgage loan. The good news is that rates are still low, which makes qualifying for a loan more affordable and budget-friendly. And it can also mean the difference between buying a home you like, and living in the neighborhood you love. (For example, at 4% interest – a mortgage loan for $250,000 costs less than $250/month more than a loan for $200,000.)

The most important thing is to determine your mortgage limits before you start shopping for a home. That way, you’re less likely to overextend your finances because you fall in love with a home that’s not right for your finances. Getting a pre-qualification letter from a mortgage lender is a start – but rates, fees and costs can vary tremendously from one lender to another and can easily swing the final answer from “denied” to “approved.”

Also, due to changes to lending regulations, you may be better off working with a mortgage broker (who can shop around for the best deal with multiple lenders) – rather than going straight to your bank (who normally offers only their own loan products). (FYI-Premier Mortgage Lending is a mortgage broker, and even better, we specialize in No Fee Loans. )

What’s Your Five-Year Plan?

It might seem like a no-brainer to own a home if the mortgage payment would be substantially less than your rent amount. But when you buy a home, you should know that you’re going to live there for at least the next five years. Why? Because the own-vs.-rent cost comparison doesn’t take into account the other costs of homeownership, such as maintenance, repairs, and mortgage-related fees. (Spoiler Alert: Premier Mortgage’s No-Fee Loans actually tip those scales in your favor.) But if your employment is secure and you’re looking to put down roots, then add this to your “+” column as a good reason to own.

Of course, the answers to these three questions are just the start. If all indicators point towards “Let’s find our new home, honey!” – there will be many more to follow. Just remember you don’t have to do it alone. Your Realtor and mortgage lender are there to help you navigate your way from “We love it!” to “We own it!” Happy home shopping!

Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.