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Mortgage Learning Center
Explore mortgage terms, definitions, and learn about varying aspects of mortgage financing and home buying.
Here you'll find answers to commonly asked questions about mortgage loans and the process. We try to think of everything, but if you don't see the answers to your questions, please feel free to email us or make suggestions.
Why eLoansUSA.com?
As a broker, we have flexible terms and a wide range of mortgage products to offer. Different lenders offer different products, terms, or underwriting philosophies.
You only make one application, and have one credit hit! If one lender says no, we can simply check with another, all without the need for completing multiple applications or credit hits.
You'll have access to multiple terms and products without the need to check with multiple lenders to find the right financial solution for you.
You'll have the ability to shop and compare. Plus, our everyday low, flat fee ensures that you get a great rate.
did you know we offer lower rates than in-house retail lenders because of the volume our wholesalers handle? This is also true with regards to our mortgage insurance (PMI) rates. Mortgage insurance companies can offer our wholesalers better PMI rates.
Mortgage Topics
Click on any tile to learn more about that topic.
Interest Rates
Interest Rates
📈Interest Rates
As a broker, we're contracted with multiple wholesale lenders. Wholesale lenders offer us wholesale rates. As their authorized third party originator, they pay our everyday low, flat fee, as a margin on top of their rates. The rate we offer you is a retail rate. By law, mortgage brokers may charge anywhere from a flat fee to 275 basis points or 2.75%, because the law considers their compensation part of the overall allowable points and fees a consumer can pay.
Every interest rate is like a stock quote, there's the rate and there's the price for that rate. A basis point is 1/100th of a percent. Let's say a broker charges 2% or 200 basis points and the wholesale rate is 5% with a price of 100.000.
A simple rate table may look something like this:By looking at this table we can see the broker would need to offer you 5.75% because the price for that rate is 102.000, thereby covering the broker's fee of 2.000% or 200 basis points. Broker shops across America have the discretion to raise or lower their compensation, thereby affecting the retail rates they offer to consumers, but remember, the law prevents them from charging more than 2.75%. Now, let's compare this to retail or direct lenders.
A direct lender, sometimes called an independent mortgage banker may be a depository bank or a non-depository institution. Most retail mortgage lenders only specialize in mortgage loans and don't offer other kinds of financing or banking services. A typical mortgage lender will obtain a warehouse line of credit. This is like a credit card. They may be approved up to 10,000,000 per month, for example. The lender can originate, underwrite, and close all their loans in-house and lend up to their maximum line of credit. At the end of the month, they will sell their loans to a larger mortgage loan servicing company, like a large bank for example. Those institutions pay them for the loans, and they turn around and pay off their line of credit. Rinse and repeat.
As a direct lender they typically have a lot of overhead. Besides their executive-level management, they are required to have loan officers, processors, underwriters, disclosure specialists, closers, funders, capital markets, secondary marketing analysts, lock desk ops, post-closing QC or auditors, compliance managers, legal council, marketing, sales managers and customer service reps, and mid-level managers to oversee all these departments. They most likely have a corporate headquarters and some may even have independent branches throughout their chosen territories. The list of expenses can go on and on.
A retail lender's profit margins are not considered part of the overall allowable points and fees a consumer can pay. This creates a "front and back end" to their interest rate pricing, meaning they can charge points on the front-end (the end consumers can see, what's disclosed to them) and make several points on the back-end (the non-disclosed pricing the consumer doesn't see). For example, let's say they're offering an interest rate of 5% and they're making 3.25% on that rate. They may also charge the consumer additional points, like .500% or 1.000% as well, thereby making a total of 3.750 - 4.250% on the loan. This is way above any broker's margin, but it passes the maximum allowable points and fees test because they only need to include their front-end points in that calculation. Any back-end points earned on their loans is considered part of their profit margins and by law does not need to be disclosed.
Without knowing what the retail lender is earning, or what kind of wholesale rates a broker may be getting, or even what the broker's compensation is, its important for consumers to shop and compare. Fortunately, you're in the right spot because eLoansUSA.com makes it easy to shop and compare!
Mortgage Process
Mortgage Process
⚙ General Mortgage Process
What are the steps involved in the mortgage application process?
Step 1: Shop interest rates.
Step 2: Fill out a complete application.
Step 3: Upload your documentation.
Step 4: E-sign your disclosures.
Step 5: Wait on further instructions from the lender. This is when the majority of the loan processing will take place. The lender may request additional items from you to further document employment, income, or assets. If you're buying, this is when you will obtain a homeowner's insurance policy.
Step 6: Once underwriting is complete we'll begin the closing process of balancing our closing costs with the settlement agent.
Step 7: Once you have been given the final number, contact your bank and coordinate the wire transfer or order the cashier's check.
Step 8: Sign the closing documents. Be flexible. Try and leave your schedule open. Typically, settlement agents are signing multiple borrowers on any given day.
How long does it take to get approved for a mortgage?
Providing that you have submitted everything the lender has asked for, initial approvals typically take about 24 hours and final approvals typically take about 24-48 hours. The entire home buying or refinancing experience usually takes between 15-45 days. Our average home purchase submission to close is just 14 days!
What documents do I need to apply for a mortgage?
The main items or "meat and potatoes" of your loan file consists of:
How long does a mortgage pre-qualification or pre-approval last?
A pre-qualification consists of an application and soft credit check. The pre-qual is good for 30 days because that's the amount of time the soft credit check is good through.
A pre-approval consists of a full application and credit check. This is good for 4 months because that's how long a full credit check is good through.
How do mortgage interest rates affect my monthly payments?
The principal and interest calculated on your loan are directly tied to your interest rate. The higher the rate, the higher the payment. That said, the amount you borrow, and the term of the loan also affect your payment.
How do I know if I'm ready to buy a house?
Once you've settled into your long-term career and don't think you'll be moving out of the area anytime soon, then it's a good time to start thinking about buying a house. Here's a general overview of what you'll need:
How much money do I need to make in order to buy a house?
As a good rule of thumb, your maximum housing payment will be about 34 - 43% of your gross monthly income, but it also has to do with how much other debt you have. Most lending products will approve a maximum housing payment, plus all other monthly payments, up to about 50% of your gross monthly income, depending on credit score and other compensating factors, and overall risk assessment.
What is a mortgage underwriter, and what role do they play in the approval process?
A mortgage underwriter makes a credit decision on your file. They are the ones who ultimately approve or deny a loan application. Their decision binds the lender to a commitment to lend, so it's a hot seat to be in. Because of this, they hold the keys to the kingdom! Think of them as the judge and jury in a courtroom. Your loan advisor acts as your advocate. Like an attorney, your loan advisor is there to make the case that you should be approved for a loan. The file your loan advisor submits is what is reviewed by the underwriter. All documentation provided should serve as evidence to what's listed on the loan application. They must make an underwriting decision soly on the application and documentation provided. The underwriter never speaks to the borrower.
What happens during a mortgage closing, and what should I expect?
So your loan has been approved and sent to the closing department. Now what? Next, the closer will reach out the escrow officer or settlement agent and begin balancing all figures. Both parties must make sure their numbers match to the penny, and all closing figures are accurate before heading to the closing table. After that, the escrow agent will reach out to you and schedule a time to sign your documents. After the lender receives all signed documents they can fund the loan, which means they have sent the money to the escrow account. You will bring your money to the escrow account as well. Once all monies are received they can close escrow, and send the information to the county for recording.
Mortgage Types
Mortgage Types
📋 Mortgage Loan Types
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM)?
A fixed rate mortgage means the interest rate is fixed for the life of the loan. It will never rise nor lower. So if it's a 30 year fixed rate mortgage, the interest rate is the same for 30 years.
Advantages: you're protected against rising interest rates, and you have a safe and predictable mortgage payment.
Disadvantages: If rates drop, you have to refinance to take advantage of lower rates, and this typically resets the term which means you're starting over on repaying the interest curve.
*Ask us about our flexible, custom loan terms to address this issue.
An adjustable rate mortgage (ARM) is typically fixed for an introductory period, then it's susceptible to market fluctuations after that point. Modern-day ARM's typically have a floor rate (the rate cannot go any lower than x) and a cap rate (the rate cannot go any higher than x). For example, a 5/1 ARM is an interest rate that is fixed for the first 5 years then adjusts every year thereafter, depending on its corresponding Index and market conditions.
Advantages: You may have a lower introductory rate and save money for several years. If rates go down, your rate automatically goes down. You don't have to refinance.
Disadvantages: If rates go up, your rate will automatically go up as well, providing you're out of the fixed introductory period.
Which type of mortgage loan is best: conventional, FHA, VA, or USDA?
A Conventional loan is best for borrowers with good credit scores. It is a type of home loan not insured or guaranteed by the government. Conventional loans are either conforming or non-conforming.Conforming mortgages are required to conform to underwriting guidelines and loan limits set by Fannie Mae or Freddie Mac, whereas Non-conforming mortgages have loan amounts higher than the loan limits set by Fannie Mae / Freddie Mac. Fannie and Freddie are two major government-sponsored entities. You can learn more about them here.
Conventional loans can offer the best interest rate and lowest fees, which can result in lower monthly payments. They are typically considered to be the most common type of loan. Conventional loans can be a great option for home buyers who can meet these requirements:
FHA loans are backed by the Federal Housing Administration (FHA) and offered by FHA-approved lenders. These loans are generally easier to qualify for than conventional loans and have smaller down payment requirements. However, you'll owe mortgage insurance premiums (MIPs) for at least 11 years-potentially as long as you have a loan balance.
VA loans are for US Military veterans or surviving spouses only, but there are two major benefits: first, there's no minimum down payment required. The veteran can finance 100% of the purchase. Second, there's no monthly mortgage insurance premium. The Feds guarantee the loan by charging an upfront fee. This fee can be financed.
USDA loans also do not have a minimum required down payment and are available to everyone. Eligible properties must be located in a USDA-zoned rural area. You can check a property's eligibility by visiting their website.
No single mortgage product is better than the other. It's more about which product fits your financial needs best.
What is mortgage insurance?
Insurance which protects lenders against loss in the event of default by the borrower. This allows lenders to make loans with lower down payments. The federal government offers MI through HUD/FHA, while private entities offer MI for conventional loans. There are different forms of mortgage insurance based on loan type. This insurance helps protect a lender if a borrower forecloses on their property. Borrowers pay for the mortgage insurance, allowing lenders to grant loans they might not have otherwise. Mortgage insurance may be required on some loans when a down payment is less than 20 percent.
When does PMI drop off?
PMI will be eliminated once the loan to value is below 80% for conventional loans, either from making payments or the property value increasing. Historically, the property value usually increases faster than you can pay down the loan, when making regular scheduled payments. When that happens you can apply to have the PMI dropped from the loan, without refinancing, by contacting your current loan servicing company.
What is a jumbo loan, and when would I need one?
A jumbo loan is needed when the loan amount exceeds the conforming loan amount for your area. Check the conforming loan limits here.
How does a reverse mortgage work, and who is eligible for it?
A Home Equity Conversion Mortgage (HECM) or "reverse mortgage" as it's more commonly called, is a type of loan that allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. It can also be used to purchase a home. Reverse Mortgage's have changed a lot over the years and many of the more controversial aspects of them have been eliminated.
Reverse Mortgages are great for individuals who are 62 years or older, have significant equity in their primary residence, are not delinquent on federal debt, and have the financial resources to cover ongoing expenses and property charges.
What is a balloon mortgage, and is it right for me?
A balloon mortgage features low monthly payments with a large final payment due at the end of the loan term. It can be useful for short-term financing but may require refinancing or a lump sum payment at maturity. This loan type is only best if you have a plan to pay it off by maturity.
Terms & Definitions
Terms & Definitions
🤓 Mortgage Terms & Definitions
What is a mortgage interest rate, and how is it calculated?
It's the rate you pay to borrow money. Basic parameters to determine Interest rate is your credit score, payment history and the current economic conditions. Mortgage interest is calculated by multiplying the principal amount of the loan by the interest rate and the loan term in years. The total interest can also be calculated using the formula: Principal loan amount x Interest rate x Loan term in years = Interest. Remember, interest is paid on a curve, so it takes an amortization calculator to break down the principal and interest cost of each payment. You can access that calculator here.
What is an escrow account, and how does it work with my mortgage?
An escrow account is created to fund your property taxes and homeowner’s insurance. When the lender includes them in your monthly payments, they will collect money at closing to fund this account. We'll cover this topic some more below.
What is loan-to-value ratio (LTV), and why is it important for mortgage approval?
The loan-to-value (LTV) ratio is calculated by dividing the mortgage balance into the property value or sales price, whichever is less.
What does “amortization” mean in relation to mortgage loans?
Amortization in relation to a mortgage loan refers to the process of gradually paying off the loan through regular, scheduled payments over a set period of time. Each payment you make is split into two parts: principal and interest.
In the early years of the mortgage, a larger portion of your payment goes toward interest, while a smaller portion is applied to the principal. Over time, as the loan balance decreases, more of each payment is applied toward the principal, and less is applied to interest. Amortization allows you to repay a mortgage with regular, consistent payments that cover both the interest and the amount borrowed.
What is the difference between the principal and interest on a mortgage?
What is debt-to-income ratio (DTI), and how does it affect my mortgage application?
The Debt-to-Income (DTI) ratio is a financial metric that compares your total monthly debt payments to your gross monthly income (before taxes and deductions). It’s used by lenders to assess your ability to manage monthly payments and repay the money you plan to borrow for a mortgage.
Two Types of DTI:
How DTI Affects Your Mortgage Application:
Why its Important:
Lenders use DTI to ensure you can comfortably afford your mortgage payments without becoming overburdened by debt. It's an essential part of the mortgage approval process and a key factor in determining how much home you can afford.
What is an origination fee, and how much should I expect to pay?
An origination fee is the fee the broker or lender charges to originate the loan for you. If the lender is not making a sufficient yield spread on a loan they may charge an origination fee. Likewise, when a wholesale lender is not offering the broker any compensation for the loan, the broker may charge an origination fee.
What are mortgage points, and how do they affect my loan and interest rate?
Points or discount points are charged when a borrower elects a below-market rate. The lender then charges the borrower the difference between what they will lose on the interest rate when they sell the loan on the secondary market. Most of the time you can select a rate that doesn't come with any additional points, although there have been cases when mortgage securities were so devalued that lenders were charging discount points regardless. So market conditions play a factor as well.
What is a mortgage refinance, and when should I consider refinancing my loan?
A mortgage refinance is the process of replacing your existing mortgage with a new one, typically with different terms. The new loan pays off the old one, and you then begin making payments on the new mortgage. People usually refinance to take advantage of lower interest rates, change the loan term, switch from an adjustable-rate to a fixed-rate mortgage (or vice versa), or to tap into home equity.
Common Reasons to Refinance:
First Time Buyers
First Time Buyers
🏡 First Time Homebuyers
How much money do I need for a down payment on a house?
Minimum required down payments vary by product type. USDA and VA loans start at zero down. If you're a first time home buyer (haven't owned property in 3 or more years) Conventional financing starts at 3% down, or 5% down for non-first time buyers. FHA financing starts at 3.5% down. Non-conforming loans have different criteria and minimum down requirements can vary.
What first-time homebuyer programs are available, and how do I qualify?
Several first-time home buyer programs can help make purchasing a home more affordable:
FHA Loans: Backed by the Federal Housing Administration, FHA loans require a down payment as low as 3.5% and have more flexible credit requirements. They're willing to take more risk than the private sector. Most down payment assistance programs are tied into FHA financing.
State and local programs: Many states offer down payment assistance, grants, or low-interest loans to help first-time homebuyers. To qualify, you’ll typically need to meet income requirements, be purchasing a primary residence, and complete homebuyer education courses. Check with local housing authorities for specific program details.
eLoansUSA.com offers the following programs:
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What is a good credit score to buy a house?
Although mortgage financing starts at just a 580 credit score, you can get more favorable terms with better credit. Interest rate pricing works on a sliding scale, so the higher the credit score, the better the interest rate.
Can I get a mortgage if I have bad credit?
A credit score of 620 or higher is typically considered good enough to qualify for a conventional mortgage, but higher scores (above 700) will help you secure better interest rates. For FHA loans, you can often qualify with a score as low as 580 (or 500 with a higher down payment). VA and USDA loans don’t have specific minimum credit score requirements, but lenders usually look for scores of 620 or higher. It’s a good idea to check your credit report and address any issues before applying for a mortgage to ensure you get the best possible terms.
What's considered "bad" credit? The lower the credit score, the higher the risk. Credit scores are based on your debt repayment patterns and habits.
It's okay if you've missed a couple of credit card payments over the years. It's even okay if you've missed a mortgage payment within the last 12 months, but any more than that and you may have to wait for that adverse credit event to season another 12 months.
Auto repossessions generally do not stop a mortgage approval, but if you're still owing payments the lender may need to add the payment to your monthly debt obligations regardless if you're actually making payments. The same is true for outstanding collections as well. You can generally have about $2,000 of outstanding non-medical related debts but anymore than that, and the lender may have to calculate monthly payments and add them to your debt obligations. This way, in case any of those past creditors choose to collect against you, the lender has properly hedged that risk. This may reduce the amount you can qualify for.
Medical-related debts no longer have any bearing on your ability to repay a mortgage.
How do I know if I should rent or buy a home?
Deciding whether to rent or buy depends on several factors, including your financial situation, lifestyle, and Deciding whether to rent or buy depends on several factors, including your financial situation, lifestyle, and long-term goals. Buying a home can be a good investment if you plan to stay in one place for a few years, as it builds equity over time. However, renting might be a better choice if you:
How do property taxes affect my mortgage payment?
Property taxes are typically included in your monthly mortgage payment through an escrow account, where your lender collects a portion of the annual tax bill each month. When property taxes increase, your monthly payment will also increase to cover the higher taxes. The amount of property tax you owe is based on the assessed value of your home and the local tax rate. It’s important to budget for potential property tax increases when buying a home.
How does home insurance impact my mortgage and monthly payment?
Homeowners insurance protects your home against damage, theft, and other risks. Most lenders require you to have insurance as a condition of your mortgage. Like property taxes, home insurance premiums are often included in your monthly mortgage payment through an escrow account. The cost of home insurance varies based on factors like the value of your home, location, and coverage limits. Higher insurance premiums will increase your monthly payment, so it’s important to shop around for the best rates.
Rates & Payments
Payments
💲 Interest Rates & Payments
What factors influence mortgage interest rates?
While it can depend on the mortgage product type, generally the following will affect the interest rate:
What is a rate lock, and when should I lock in my mortgage rate?
A rate lock agreement is a written contract between a borrower and a mortgage lender that sets a mortgage loan's interest rate and points. The agreement obligates the lender to make the loan at the specified interest rate if the borrower signs the agreement. A rate lock agreement protects the borrower from interest rate fluctuations that can occur between the time the loan is offered and the time it closes. This is because mortgage interest rates can change frequently, sometimes even hourly.
Here are some things to know about rate lock agreements:
When to lock-in your interest rate?
Locking the rate is all about timing. For purchase transactions, you want to be sure that you're passed your loan contingency date, and/or have received your appraisal before considering to lock. This is because the risk of cancellation is higher during this period. For refinance transactions, you can consider locking as soon as you have a rate that you want. Ideally, you'll want to monitor market conditions to identify the opportune moment. Lock-in too early and you risk rates going down even more. Wait to lock-in too late, and you risk rates going up. Don't worry, we'll help you with this! We monitor the loan pipeline and the market daily.
How do extra mortgage payments affect my loan balance and interest?
Paying extra on your mortgage, whether through additional monthly payments or lump sums, can:
Can I pay off my mortgage early, and are there penalties for doing so?
Yes in most cases you can pay off your loan early, provided you have made your initial six on-time payments. This is the minimum most lenders require in order to extend financing. There are no pre-payment penalties for conforming loans. Non-conforming loans or private-money loans may come with pre-payment penalties so be sure to check with us first if you're unsure.
How is my monthly mortgage payment calculated, and what does it include?
Your monthly mortgage payment is made up of four main components, often referred to as PITI:
How does a mortgage escrow account affect my monthly payment?
A mortgage escrow account affects your monthly payment by bundling certain homeownership costs—such as property taxes and homeowners insurance—into your mortgage payment. This ensures that these expenses are paid on time without requiring you to budget for them separately. Here’s how it works:
How can I get the lowest interest rate on my mortgage?
To secure the lowest interest rate on your mortgage, you can:
Equity & Refinancing
HELOC's & Refi's
📉 Home Equity & Refinancing
What Are the Pros and Cons of a Home Equity Agreement?
A Home Equity Agreement (HEA), sometimes referred to as a shared equity agreement, allows homeowners to access a portion of their home equity without taking on debt, like with a home equity loan or line of credit. Instead of borrowing money, homeowners sell a percentage of their future home equity to an investor, who gains a return when the property is sold or the agreement is settled. Here are the pros and cons of a Home Equity Agreement.
Pros of a Home Equity Agreement:
Cons of a Home Equity Agreement:
Is a Home Equity Agreement Right for You?
A Home Equity Agreement can be a good option if you need cash and prefer to avoid debt or monthly payments. However, it’s important to weigh the cost of sharing future appreciation against the benefits of upfront access to funds. Homeowners who anticipate significant property value growth might find that a traditional loan or HELOC could be more advantageous in the long run. Thankfully, eLoansUSA.com offers HELOCs and fixed Rate Second Mortgages. Contact us today to learn more!
HELOC vs. Home Equity
A home equity line of credit (HELOC) works like a credit card. The lender gives you a line of credit up to either the amount you seek, or the maximum they will lend based on your property's value, whichever is less. Typically, HELOC's offer an interest-only term for the first 10 years, with a balloon payment due in 20 years. They will qualify you based on a fully amortized payment. HELOCs often have adjustable rates as well, but not all of them.
With a HELOC approval, you have the approved maximum line of credit and the balance or drawn amount. The draw is the amount of money you actually borrow at the time of closing.
Let's say you're approved for a $50,000 line of credit, but you only borrow $25,000 at closing. This leaves you with an additional $25,000 you can draw on at a future date.
There are fees involved with closing a HELOC and some lenders charge yearly maintanence fees as well.
A Home Equity Loan or a Stand-Alone Second Mortgage is not an open line of credit. You're approved for a set amount and it's a fully amortized payment. The interest rate is typically fixed as well. Fixed rate seconds are often available in 15, 20 and 30 year terms.
What is a cash-out refinance, and how does it differ from a traditional refinance?
There are several reasons to refinance, but they fall into one of two refi-types:
With a rate/term refinance, you may be receiving a lower rate or shorter loan term, or dropping PMI. Perhaps you're looking to remove a co-borrower or co-signer from their obligation. You may not close with receiving more than $2,000 back at closing.
Divorce or Inheritance: This is where you are buying out either a departing spouse's or testator's share of the equity and removing them from the deed, such as in the case of divorce or inheritance. Be sure your divorce is complete, and to provide us with a copy of the divorce decree or in the case of inheritance, copies of the will or trust. Even though you are accessing equity and paying either the departing spouse or testator off at closing, this is considered a rate and term refinance, meaning there are no negative pricing or interest rate adjustments.
Cash Out Refinance: This is where you are refinancing in order to increase your loan balance, thereby accessing the available equity in your home. Equity is the difference between what the home appraises for and what you owe. Lenders will typically lend up to 80% of the home's value (less your current loan balance) on a cash out refinance. You will get a current market interest rate as well. Cash out refinances are more expensive than rate and terms refinance because there are negative pricing and/or interest rate adjustments which result in a higher interest rate. This is seen to offset the additional risk the lender is taking on by increasing your loan balance.
Streamline Refinance: As the name suggests, the purpose of these refinance is to lower the interest rate and/or term of the loan in less time, and with less documentation. This is only when you're refinancing from an FHA or VA loan into another FHA or VA loan. You cannot take any additional cash out on Streamlines.
When is the right time to refinance?
The right time to refinance your mortgage depends on several factors. Here are some key situations when refinancing could be beneficial:
1. Interest Rates Have Dropped
One of the most common reasons to refinance is when mortgage interest rates have decreased. If current rates are lower than when you originally took out your loan, refinancing can:
💡A general rule of thumb is to consider refinancing if the new interest rate is at least 0.5% to 1% lower than your current rate.
2. Your Credit Score Has Improved
If your credit score has increased significantly since you first took out your mortgage, you may qualify for a lower interest rate. This can make refinancing advantageous by lowering your payments or allowing you to shorten the loan term without drastically increasing your monthly payment.
3. You Want to Shorten Your Loan Term
If you’re in a position to afford higher monthly payments, refinancing from a 30-year mortgage to a shorter term mortgage, like a 15 year loan can:
4. You Want to Switch from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage
If you currently have an adjustable-rate mortgage (ARM) and are nearing the end of the fixed-rate period, refinancing to a fixed-rate mortgage can provide stability. This is particularly beneficial if you expect interest rates to rise in the near future and want to lock in a consistent monthly payment.
5. You Want to Tap Into Your Home Equity (Cash-Out Refinance)
A cash-out refinance allows you to take out a new mortgage for more than what you currently owe and pocket the difference in cash. This can be helpful for:
6. You Want to Eliminate Private Mortgage Insurance (PMI)
If you originally put down less than 20% and are paying Private Mortgage Insurance (PMI), refinancing could help you eliminate this cost once your home’s value has increased, and you have at least 20% equity. This can reduce your monthly payment.
7. Your Financial Situation Has Changed
If your income has decreased or you’re struggling with your current payments, refinancing to a longer loan term (e.g., 30 years) could lower your monthly payments and provide some financial relief. However, this means you’ll pay more interest over the life of the loan.
Break-Even Points
Refinancing comes with closing costs. To determine if refinancing is worth it, calculate the break-even point—the time it takes for your savings from lower payments to cover the cost of refinancing. If you plan to stay in your home beyond this point, refinancing can be a smart move. Always consider closing costs and calculate how long it will take to break even before making the decision to refinance.
Home Purchase
Home Buying
🏘 Home Purchase
What steps should I follow when buying a home?
When buying a home, follow these 7 key steps:
What are closing costs, and how much will I need to pay?
Closing costs are fees paid at the end of the home-buying process. They typically range from 2% to 2.5% of the home’s purchase price. Although sellers will sometimes assist buyers with these costs, it's never a guarantee. Buyers should budget for these additional expenses to avoid surprises at closing.
Closing costs are part of your overall cash due at signing. Cash due at signing consists of your minimum required down payment, all third party fees, and your escrow account. Let’s break this down:
What is the importance of a home inspection?
A home inspection is crucial because it reveals potential issues with the property that may not be visible during a walk-through. Inspectors check the structure, plumbing, electrical systems, and more. If significant problems are found, buyers can request repairs or renegotiate the price. Skipping this step could lead to costly repairs after purchase.
How does a home appraisal affect the mortgage process?
A home appraisal determines the current market value of the property. It’s essential because lenders use the appraised value to decide how much money they’ll lend. If the appraisal is lower than the agreed-upon sale price, buyers may need to renegotiate or pay the difference out of pocket.
Can I buy a house without a real estate agent?
Yes, you can buy a house without a real estate agent, but it may be challenging to navigate the process alone. A real estate agent offers expertise in pricing, negotiations, and legalities. If you choose to go without an agent, make sure you fully understand the home-buying process and have access to legal resources if needed.
Real Estate Agents
Real Estate Agents
🧑💼 Real Estate Agents
What does a real estate agent do, and why should I hire one?
A real estate agent helps buyers and sellers navigate the home buying or selling process. Agents offer valuable insights into market trends, help you find homes that fit your needs, assist with negotiations, and handle all the paperwork. They ensure that you get the best possible deal and that the transaction goes smoothly. Having a trusted agent can make the process faster and less stressful. Furthermore, purchasing property is a legal transaction and agents are among the few non-attorney professionals licensed to practice contract law. It's not a good idea to represent yourself in court, nor is it recommended to buy or sell without an agent.
How do real estate agents get paid?
Real estate agents are typically paid through commissions, which are a percentage of the home’s sale price. While the seller generally pays the commission, it isn't guaranteed. Commissions are then split between the buyer’s and seller’s agents. This commission usually ranges from 4% to 6% of the sale price.
How do I choose the right real estate agent?
When selecting a real estate agent, look for someone who:
Need a referral? Ask us! We work with dozens of agents.
What is the difference between a buyer's agent and a seller's agent?
A buyer’s agent represents the buyer’s interests during the home purchase process. They help the buyer find properties, negotiate offers, and handle paperwork.
A seller’s agent, also known as a listing agent, represents the seller and is responsible for marketing the home, hosting open houses, and negotiating with potential buyers. Both agents work to get the best deal for their respective clients.
Contracts
Contracts
📃 Real Estate Contracts
What should I look for in a real estate purchase agreement?
A purchase agreement outlines the terms of the home sale. Buyers should pay attention to the following:
What is earnest money, and how much should I offer?
Earnest money is a good faith deposit made by the buyer to show they are serious about purchasing the property. It’s typically 1% to 3% of the purchase price and is held in escrow until closing. If the deal falls through due to a contingency, the buyer usually gets their earnest money back. If the buyer backs out for other reasons, the seller may keep the deposit. As always, be sure to consult with your real estate agent.
How does the recent NAR settlement affect me?
Prior to the settlement, the seller was often expected to pay the buyer's agent's commission out of their home sale proceeds. For years, this has been the custom. We like to think about it as the home version of "paying it forward." The seller will pay your agent for bringing you (the buyer) to the table, but in the future when you sell your house, you will return the favor paying for the next buyer's agent.
What's changed? After the settlement, agents are no longer allowed to discuss the seller's offer of compensation within the MLS or anywhere in the listing. Do not assume sellers will pay your agent's commission for showing you their home. Agents should not assume the seller will pay them 3% for listing the home, or 3% as an offer of buyer's agent compensation. All buyer's agents must discuss and negotiate their fees directly with their clients and get the agreement in writing.
All in all, agent compensation and who's paying for it has always been negotiable, but the recent settlement takes the compensation fields out of the MLS and prevents agent-to-agent discussions and negotiations and forces them to discuss these things directly with their respective clients. Many sellers will continue to make various offers of compensation for the buyer's agent.
Title & Escrow
Title & Escrow
📜 Title & Escrow
What is the role of a title company in a real estate transaction?
A title company’s primary role is to ensure the property’s title is clear of any liens or legal issues. They conduct a title search, provide title insurance, and facilitate the closing process. Title companies make sure that the property can legally be transferred to the buyer and that there are no issues that could affect ownership.
What is title insurance, and do I need it?
Title insurance protects buyers and lenders from potential problems with the property’s title, such as undiscovered liens, claims, or legal disputes. There are two types of title insurance: owner’s title insurance (protects the buyer) and lender’s title insurance (protects the lender). Although it’s not always required for buyers, it’s highly recommended to avoid costly legal issues after closing. Believe it or not, title issues arise frequently.
How does a title company ensure that there are no legal issues with the property?
The title company performs a title search to review public records for any issues with the property, such as liens, unpaid taxes, or ownership disputes. They verify that the seller has the legal right to transfer ownership to the buyer. If any issues arise, the title company works to resolve them before closing.
Can I choose my own title company, or does the lender or agent pick one for me?
Yes! In most cases, buyers have the right to choose their title company. However, some lenders or real estate agents may recommend or require using a specific title company. An example would be where a home builder requires use of their in-house title company. It’s essential to compare costs and services to ensure you’re getting the best deal. The title company must be acceptable to both the buyer and the lender to complete the transaction.
What happens at the title company during closing?
At closing, the title company acts as the neutral third party to oversee the signing of documents and the transfer of funds. They ensure that all legal paperwork is completed correctly and that the deed is recorded. After closing, they distribute the funds to the appropriate parties and transfer ownership of the property to the buyer.
What does it mean to hold title to a property?
Holding title refers to the legal ownership of a property. The title outlines who has ownership rights, how the property can be transferred or sold, and what happens in the event of death or divorce. The way you hold title affects your legal rights, tax obligations, and estate planning.
What are the different ways to hold title to a property?
There are several common ways to hold title to real estate, including:
What is the right of survivorship, and how does it affect property ownership?
The right of survivorship is a legal feature of certain types of joint property ownership, such as joint tenancy or tenancy by the entirety. It means that when one co-owner dies, their ownership interest automatically transfers to the surviving owner(s). This allows the property to bypass the probate process, simplifying the transfer of ownership.
How does community property affect how a couple holds title?
In states with community property laws (e.g., Arizona, Texas), property acquired during the marriage is considered equally owned by both spouses. Both spouses must agree to any sale or transfer of the property. Upon death, the surviving spouse may inherit the other half of the property, but it may go through probate unless a right of survivorship is specified (community property with right of survivorship).
What are the benefits of holding title in a living trust?
A living trust allows you to transfer ownership of your property to the trust for the benefit of the trust’s beneficiaries (usually yourself during your lifetime, and your heirs after your death). The key benefits include:
Can I change the way I hold title after purchasing a property?
Yes, you can usually change how you hold title to your property after purchasing it. This process is known as a title transfer and involves updating the property’s deed to reflect the new ownership arrangement. This might happen after marriage, divorce, or if you want to place the property into a trust. It’s recommended to consult with a real estate attorney before making any changes to ensure it aligns with your estate and financial planning goals.
What are the tax implications of holding title in different ways?
The tax implications of how you hold title can vary depending on the type of ownership. For example:
About Us
Our Story
Hi, I'm John Caliendo, broker-owner of Family Financial, Inc. I have over 20 years of mortgage lending experience in various facets of the industry. Years ago I envisioned a platform where borrowers could apply for and process a mortgage on their own, with limited interruption and zero sales pressure. Today, eLoansUSA.com provides users that experience. In just a few clicks, users can obtain a custom mortgage rate quote, without speaking with a loan officer, apply for, and even process their own mortgage with ease.
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