Which Is Better: Higher Mortgage Or Paying Closing Costs?

Today we are going to discuss whether it is better to pay the closing costs in cash upfront or to take out a higher home loan. The difference could cost you thousands.

It’s very common for sellers to be asked to pay closing costs by the buyers, so keep this in mind. Let’s say you want to buy a home that’s listed at $100,000 and have made an offer of $97,000. If you want the seller to cover those closing costs, which could be up to $3,000 or more, you may need to come up on your offer a little bit. When it comes to your mortgage, a difference of $3,000 isn’t that big. It’s a few dollars a month on your payment. However, that $3,000 in closing costs is cash that comes immediately out of your pocket.

I’m not saying you have to pay full price just to get your closing costs covered, but if you are going to have a trade off of a few thousand on your mortgage or a few thousand more in cash in your pocket, it’s smarter for you as a buyer to keep that cash in your bank account than it will be to come up a few thousand on your mortgage. If you can have those closing costs set aside for a rainy day, you’ll be happy to have it when something inevitably goes wrong in your home.

If you have any more questions for us, or are thinking about buying yourself, give us a call or send us an email. We look forward to hearing from you!

The Four Stages Of Negotiations When Buying Or Selling A Home

Whether you're buying or selling a home, you're going to have to go through the negotiation process. Today I will be outlining the four major stages of negotiations. Ideally this will prepare you for anything that may come your way.

1. Getting the offer accepted: You have agreed on price, terms, and conditions. You have signed the contract and put it into escrow.

2. Appraisals: The bank needs to verify that the money they're lending you is the right amount. This is why they come out and determine a value for the home. If they don't think the home is worth what you are paying for it, your loan could fall through. Appraisals can be made tougher in an appreciating market. (Click here for my blog on appraisals.)

3. Home inspection: This is where big hurdles can come out in the purchasing process. The buyer pays for an inspection to ensure the home is in good condition. This process requires the most negotiations because buyers want everything repaired and sellers want a lot of things left alone. Usually, a seller will fix things that have to do with the safety of the buyer, but it can be difficult to get things moving along towards an agreement.

4. Closing: This is the final part of the process, and you have to be extremely careful with your finances at this point in time. If you go out and buy new furnishings for your home, you could upset your debt to income ratio and your loan could fall through at the last second. Just wait until you have the keys in your hands to transfer money or purchase expensive items.

Hopefully this can help guide you through your real estate negotiations without too much trouble. It can be a difficult process to navigate without a real estate agent, so please don't hesitate to contact me if you need assistance with this. I have plenty of real estate agents I can refer you to! skatz@vandykmortgage.com or 770-824-9777

I look forward to speaking with you!

What Appraisals Are And How They Work

Today we are excited to talk to you all about appraisals. We’ll go over what they are, how they work, and how they affect the purchase of your home.

Every time you write a contract, there will be a clause in there saying that a home has to appraise in order for the sale to go through. These aren’t required with every type of financing, but definitely are for FHA and VA loans.

If the home doesn’t appraise out to at least the value it was purchased for, you have the option to void the contract and/or negotiate the price down. An important thing to remember about appraisals is that they are one person’s opinion on the value.

There is math and there are formulas involved in coming up with an appraised value, but there is some art to it as well. By using comparable homes, an appraiser will determine whether your house is priced fairly. If a new house sells the next day and it’s a more comparable home to yours than another one was, your home will then probably appraise a little differently.

Even though you’ve had a home inspection, the appraisers have a responsibility to look for certain things and areas where improvements can be made. Sometimes you might get a conditional appraisal that says your home will appraise for x amount if you fix a certain problem.

Hopefully this has been helpful to you. The appraisal typically takes about 48 hours to come back after it has been completed, and we (the lender) will let you know when it comes in.

If you have any questions for us about appraisals, feel free to give us a call or send us an email. We can’t wait to hear from you!

The Difference Between Pre-Qualification and Pre-Approval

Today, we’ll talk about the difference between getting pre-qualified and pre-approved for a mortgage. There’s a clear difference.

For pre-qualification, a buyer contacts a lender with financial information and the lender bases their decision off these numbers. This model relies heavily on information provided by the buyer directly. No pay stubs, W-2s, credit score report, or similar paperwork are involved for the lender to make this decision. While the buyer may still be honest with the lender, it’s not official.

For pre-approval, documentation is required to make a decision. This is what you really want. A buyer created a relationship with a lender by giving them required paperwork. There’s documentation attached to the information they provide. The lender has the opportunity to discuss a buyer’s work history and any debt to understand the loan. The lender then determines whether or not a buyer could afford a certain mortgage.

There’s a vast difference between the two processes! You’ll want a pre-approval letter over a pre-qualification as a buyer, however, both are helpful. If you’re not submitting paperwork, you are not pre-approved, but instead, only pre-qualified.

If you have any questions about this topic, or if you need mortgage assistance of any kind, please don't hesitate to reach out to us! 770-824-9777