The standard home buying process follows this formula: you find the right property, you go under contract to buy it, you get approved for a mortgage loan, the lender lends you enough money to buy the home, you sign papers, and you move into your new house. Since you were not able to pay for the property outright though, who technically “owns” the home, you or your mortgage lender?

The short answer is that you do. Your name will go on the title and the deed of the house. Your home serves as collateral on the loan, but you own it for most intents and purposes. You have the power to make decisions about the property including when and how to renovate, add on, decorate, paint, change the landscaping, etc. You also have complete control over when to sell your home. You also have the full responsibility to take care of the property in terms of repairs and maintenance. 

However, since you are obligated to repay the mortgage lender for the money that actually paid for your house upfront, the lender has a legal interest in your property, which means you do not have complete ownership until the loan is paid in full. You signed several documents at closing, finalizing this financial arrangement.  

In some states, buyers sign a mortgage note or promissory note. This is a legal agreement for a borrower to pay back your lender with interest over a period of time and it spells out the rights of both parties, including penalties if the borrower defaults on the loan.

In other states, a deed of trust is used. With this document there are three parties involved: you, the borrower, are the trustor, the trustee is the company or group that holds onto the title (typically the title company), and the beneficiary is your mortgage lender. These deeds of trust make it easier for lenders to foreclose if you default as they do not require judicial proceedings. The lender ceases to be the beneficiary once you pay off the loan in full and the title company will transfer the title to you at that point.

If you do not make your mortgage payments according to your loan agreement, your lender as an interested party, can start foreclosure proceedings on your home. Unless you can come up with the money and get back on track, the bank can eventually repossess your home even though you have ownership rights.

It is important to note that even if you own your home free and clear, by either paying cash or paying off your mortgage, there are still situations where you may be liable to lose your house. If you get behind on your property taxes, the government in most states has the right to take your house and sell it in a tax sale. Liens or other legal judgments against your property could end in a similar fate. 

In a general sense, when you buy a home, mortgage or not, you own the house and have practical rights to use it, change it, and sell it the way you want. Just remember that there are always financial obligations to third parties that could affect your ownership of the home.

Call us today - we can help you finance your next home or take out some of the equity in your current home.

When you apply for a home mortgage, lenders will check your credit score, income, assets, and debt. All of this will get factored into an algorithm to figure out if you are credit-worthy enough to be granted a loan. Most of the standards used by lenders are set by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Many lenders want to resell the mortgages they make to these GSEs, so they have to play by their rules. This includes making loans under certain dollar limits and only to borrowers with credit scores above certain thresholds. Mortgages that meet all the GSE criteria are called “conforming” loans because they conform to the prescribed requirements. Thanks to their government backing, these loans often come with lower interest rates and other preferred terms.

However, there may be times when a “non-conforming” loan, or non-qualified mortgage, may fit your situation better. They may not receive government guarantees, but here are five reasons why a non-conforming mortgage could be helpful to you.

1. Flexibility
   Because it is non-conforming, this type of loan can be tailored to fit the needs of the borrower with fewer rules.
   
2. Credit Leeway
   Conforming loans require a minimum credit score of 620 for most mortgages, but there is no credit score requirement for non-conforming. Credit score will be just one factor considered as part of the entire financial picture.
   
3. More Home-type Options
   Conforming loans are not available for all types of homes. Non-conforming mortgages can cover everything, as long as the lender feels it make good fiscal sense. This could include non-warrantable condos and co-ops, multi-unit condos, timeshares, assisted living units, manufactured homes that have been moved from their original location. In fact, for many of these situations, non-conforming loans are the only option.
   
4. Alternate Ways to Prove your Income
   With conforming loans, income verification is essential, especially because it factors into the debt-to-income ratio. Both of these factors determine whether you’ll qualify for a mortgage. With a non-conforming loan, however, the lender can verify your income in a non-traditional way like bank statements, or the income verification can be waived altogether in some cases. Instead of relying on your income as a decided factor, non-conforming loans can consider your current home equity, your cash flow, and assets. This often works better for self-employed buyers and those with seasonal commissions.
   
5. Lower Down Payments
   Some government-backed loans are actually considered non-conforming, including VA, USDA, and FHA mortgages. These cater to first-time and lower-income buyers and have minimal or even no-down payment requirements. However, if you are applying for a jumbo loan, one with a loan amount above the conforming limit, you will likely be required to make a down payment of at least 10% to 15%. 

You may have to pay higher interest rates or contribute to private mortgage insurance with many of these non-conforming loans, but they might be the easiest way for you to qualify for homeownership. And if your financial picture looks more traditional down the road, you can always refinance into a lower-cost conforming mortgage.

Call us today and we can help you understand all of the options that we offer.

You finally saved up enough for a down payment and you can almost taste being a homeowner, but then you hear about closing costs. Coming up with a few extra thousand dollars sounds impossible. Before you give up on the dream of buying a home, here are a few creative ways to pay for your closing costs without waiting and saving even more.

What are Closing Costs?

Closing costs are all the fees associated with the mortgage process. For example, part of the closing costs go to the lender for their work in researching and setting up your loan. The fees also cover things like title insurance, appraisal costs, property taxes, and escrow accounts. The exact charges vary by area and by lender. They can range anywhere from 2% - 5% of the loan total. So, if you take out a loan for $250,000, you could expect to pay between $5,000 and $12,500 in closing costs.

How To Avoid Paying Out of Pocket

• Roll Closing Costs into the Loan
  One of the most common ways to save on upfront cash is to have your lender tack the closing costs on to the balance of the loan. This will increase your monthly mortgage payment a little, but it might be much easier to afford than a huge lump sum.
  One of the most common ways to save on upfront cash is to have your lender tack the closing costs on to the balance of the loan. This will increase your monthly mortgage payment a little, but it might be much easier to afford than a huge lump sum.
  
• Exchange Closing Costs for a Higher Interest Rate
  Some lenders will pay all or part of the closing costs for you if you agree to a higher interest rate (which translates to a higher monthly mortgage.) These are often called low-cost or zero-closing costs loans. 
  
• Ask the Seller to Pay
  If you have a motivated seller, you may be able to negotiate to have them pay the closing costs. They do this in the form of a closing-cost credit from the proceeds of the sale. Most loans allow sellers to give up to 6% of the sales price to buyer closing costs. Of course, in a hot sellers’ market, this is an unlikely option.
  
• Look for Work-Related Benefits
  If you are in the military, there are plenty of programs that can help with closing costs even if you’re not doing a VA loan.
  
  If you’re in a union, you might also qualify for closing cost discounts and rebates. You can contact your union representative to see if your union offers this benefit.
  
• Choose an FHA loan
  Federal Housing Administration loans are geared toward first-time home buyers and lower-income buyers. Through these mortgages, agents, sellers, and lending brokers, can all contribute to closing costs.
  
• Use Gift Money
  Many loans allow family members to gift you funds for your down payment and closing costs. If one of your loved ones is willing to subsidize your home buying costs, talk to your lender about which loans allow for that option.

With a little creativity and some legwork, it is possible to avoid paying an additional chunk of cash for closing costs and jump into the homeownership now. Call us today and we can help.