Show Notes

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Set the table

Between people leaving city centers or refinancing because interest rates are low, mortgage companies are busy. People are buying homes. So you need to know about mortgages.

 

Segment 1: The process

• Ask around for a relator rec. Most people will need a relator. The paperwork alone is a pain and there are many pitfalls. 

• Look for a home. Much easier today because can look online—but beware the talent, or lack thereof—of real estate photographers. Err on the side of seeing the home.

• Find a home. Seek a lender, often at rec of banker, relator, or friends. Apply. (That is a long process.) Usually want at least pre-qualificaton before offer so you know what you can afford for both cash down and mortgage payment.

• Make an offer to the seller. They accept or make a counter offer. You accept or make a counter. Other bidders may get involved. For second homes, or others, some may offer all cash, which sellers like because there is no financing approval or drawing up of paperwork

• Once have an agreement, Option starts the next day. Usually 10-14 days for buyer to get house inspected and appraised. Fees at this stage: earnest money to seller and option payment to escrow. Explain. 

• Can cancel contract at end of option period. After that, only if serious defects or changes found or buyer unable to secure financing. (This is why sellers like cash offers. This uncertainty is gone.)

• Rest of time until closing is usually bank stuff, title searches, and paperwork.

• Typical time for the whole process: 30 plus days from the time of application; longer right now. 

 

 

Segment 2: What are mortgages and how can I get one?

• Few have cash to pay for a large item like a home. So they borrow a portion for a home, using the home itself as collateral. The mortgage is the loan banks give for that portion. 

• Over the next 10-30 years, you pay back principle, the amount you owe divided over the months of the term, plus interest that the bank charges. 

• Lots of factors go into interest, mostly the type of mortgage, the term or length of the mortgage, and your credit score.

  • Credit scores include: income, debt ratio, how reliably you pay, how often you open credit accounts, how much you carry each month

  • Mortgages come in term or adjustable rate, conforming, non-conforming, rural, balloon, bridge. 

• Pay your mortgage each month until end of term.

• Mostly interest upfront. Flips to primarily principle later. Can pay additional principle each month. 

• Default on your mortgage and the lender can move to foreclose and sell the property to satisfy the rest of the debt. Bankruptcy protections can kick in here. Also why foreclosures sales can present good deals. 

• Right now, 30 days to approval. Usually more like 15. 

 

Segment 3: Inspections and other due diligence 

• Full home inspection. Sellers have to make accommodations for buyer and inspector to access home. Roof, foundation, plumbing, electrical, hvac, and if necessary, septic, pool, spa, other structures, sprinkler, wells

• Ask for Sellers Disclosures, notification seller has to fill out regarding any known issues and basic equipment.

• Ask for HOA or POA agreements. These can limit what you may do with the property. [Elderly relative dwelling example]