17
May
By First Rate Financial Group
Mortgage

What You Need To Know About Your Home Appraisal And Your Mortgage

What You Need To Know About Your Home Appraisal And Your MortgageWhen buying a home, there are certain steps a buyer should go through before the home sale is official. First the buyer makes the offer, then the offer is accepted.

Next the buyer schedules the inspection and home appraisal. Finally, everyone is ready for closing.

It’s easy to overlook the impact of some of these steps, but when it comes to a mortgage, the home appraisal is actually quite important. Banks want to see that they are lending money for an investment that is worthwhile, so that appraisal is a crucial step to getting financing. Here is what buyers need to know about how the appraisal could affect their mortgages.

Understanding The Home Appraisal Process

The home appraisal gives a home valuation expert the chance to evaluate the home a buyer’s considering to determine its market value. Home appraisers are highly trained, state-licensed professionals that know how to evaluate homes and assign value to them.

The appraiser will use various approaches to determine the final appraised value. The appraisal typically happens after an offer on the home was approved but before the lender loans the money.

The Appraisal And Mortgage Approval

The appraisal is one factor that a mortgage lender considers when deciding whether or not to approve a final loan request. Even if a borrower had preapproval, a low appraisal could cause the mortgage to fall through.

Why is this? A lender only wants to lend enough to cover what the home’s actual value, and if the appraisal comes in lower than what the borrower is asking for, the lender can deny the loan.

If the lender does not deny the loan completely, they may refuse to lend more than the home’s value. In order to buy the home at the agreed price, the buyer may need to come up with the difference in cash at closing.

What Can Buyers Do If The Appraisal Is Low?

If an appraisal comes in low on the home someone wishes to buy, the buyer shouldn’t panic. It is possible to get a new appraisal at a higher value.

First, consider the condition of the home. Did the seller let some things fall into disrepair? If the seller fixes those items, a new appraisal may be higher.

Does the home look rundown or cluttered? This shouldn’t affect the appraisal, but it can sometimes cause the appraiser to trend lower. Sometimes, simply asking for a second opinion might get a slightly different appraised value.  That said, if the appraisal is low, make sure to evaluate the purchase price. Is it in line with current market conditions and the overall condition of the home?

If the answer to that question is no, then the offer may be too much for the home. The appraisal, in this case, gives the buyer the opportunity to reevaluate the purchase decision.

When it comes to mortgage approval, the appraisal is one of the critical steps in the process. If a buyer has shopped wisely, the home should pass with flying colors, and soon the home sale process will be over.  As always, your trusted mortgage professional is the best resource for appraisal information in your local market.

16
May
By First Rate Financial Group
Mortgage

Buying A Home With Cash Versus Low Interest Rate Mortgages

Buying A Home With Cash Versus Low Interest Rate MortgagesWhen deciding whether to buy a home with cash or to obtain a low-interest rate mortgage, there are several factors to consider. A cash offer can be very competitive in a real estate market, as it can give the buyer a significant advantage over buyers who need to obtain financing through a mortgage.

Here are additional advantages and disadvantages of both.

Advantages of buying a home with cash:

  • You own the property outright, which means no mortgage payments are necessary.
  • You may be able to negotiate a lower purchase price if you’re able to pay in cash.
  • You avoid interest charges and fees associated with a mortgage.

Disadvantages of buying a home with cash:

  • You may tie up a significant amount of your liquid assets in the property.
  • If you need cash for emergencies or investments, it may be difficult to access it if it’s all tied up in your home.
  • You may miss out on the opportunity to leverage your credit to earn a higher rate of return on your investments.

Advantages of obtaining a low-interest rate mortgage:

  • You can preserve your liquid assets for other investments or emergencies.
  • You may be able to earn a higher rate of return on your investments than the interest rate on your mortgage.
  • You can take advantage of tax benefits associated with mortgage interest deductions.

Disadvantages of obtaining a low-interest rate mortgage:

  • You will have to make regular mortgage payments, which may be a strain on your budget.
  • You may end up paying more with the interest charges over the life of the loan than if you had bought the home with cash.
  • You may be required to put down a larger down payment or pay mortgage insurance premiums.

The decision to buy a home with cash or obtain a low-interest rate mortgage depends on your personal financial situation and goals. If you have the cash available and want to own your home outright, buying with cash may be the right choice for you. However, if you prefer to preserve your liquid assets and have the ability to earn a higher rate of return on your investments, a low-interest rate mortgage may be the better option. It’s important to note, however, that a cash offer may not always be the most competitive offer in every situation. In some cases, a seller may be more interested in accepting a higher offer that is contingent on financing, rather than a lower cash offer. It depends on the specific circumstances of the sale and the preferences of the seller.

12
May
By First Rate Financial Group
Mortgage

Should You Help Your Kids Pay for Their Mortgage?

Should You Help Your Kids Pay for Their Mortgage?Whether or not to help your kids pay for their mortgage is a personal decision that depends on your financial situation, your relationship with your children, and your beliefs about financial independence.

It’s important to evaluate your own financial situation before deciding whether to help your kids pay for their mortgage. Make sure that you can afford to provide financial assistance without jeopardizing your own financial security. Your relationship with your children can also be a factor in your decision. If you have a close relationship with your children and want to help them achieve their financial goals, then providing financial assistance may be a good option.

Some parents believe that their children should be financially independent and not rely on them for financial support. If you hold this belief, you may not want to provide financial assistance to your children. If you do decide to help your kids pay for their mortgage, it’s important to set clear terms and boundaries. Will you provide a loan that needs to be repaid or a gift? How much will you provide? Will you be a co-signer on the mortgage?

When Parents Might Want to Help with a Child’s Mortgage

Below are a few situations where parents might want to consider helping their child with their mortgage:

  • First-time homebuyers: If your child is a first-time homebuyer, they may not have enough savings or credit history to qualify for a mortgage on their own. In this case, you might want to consider providing a loan or gift to help them with their down payment or closing costs.
  • Financial difficulties: If your child is experiencing financial difficulties, such as a job loss or unexpected expenses, they may struggle to make their mortgage payments. Providing financial assistance in these situations can help them avoid foreclosure and maintain their financial stability.
  • Inheritance: Some parents choose to leave an inheritance to their children that can be used towards a down payment on a home. This can be a way to help their children achieve financial independence and build wealth.
  • Family home: If your child wants to buy the family home, you may want to consider providing financial assistance to help them keep the property in the family.

Tax Repercussions

There may be tax repercussions when parents help their children with their mortgage. Here are some things to consider:

Gift tax: If you give your child more than the annual gift tax exclusion amount, you may be subject to gift tax.

Income tax: If you lend money to your child to help with their mortgage and charge them interest, you will need to report the interest income on your tax return. Your child may also be able to deduct the mortgage interest on their tax return.

Capital gains tax: If you gift your child a property that will appreciate in value, they may be subject to capital gains tax when they sell the property. However, if they inherit the property from you, they will receive a step-up in basis, which means they will only pay capital gains tax on the appreciation that occurs after they inherit the property.

The decision of whether to help your kids pay for their mortgage is a personal one that should be made after careful consideration of all the factors involved.

In any of these situations, it’s important to consider your own financial situation and to fully understand the tax implications of helping your child with their mortgage and set clear terms and boundaries for the financial assistance you provide.