General News

shopping

What You Should Know When Shopping for a Mortgage

Housing may be a necessity, but real estate is certainly an investment. In fact, it’s the investment of choice for many. In a recent survey, “Bankrate.com” discovered that 25% of the “Financial Security Index Survey” respondents answered “Real Estate” to the question: “Which would be the best way to invest money you wouldn’t need for more than 10 years?”

Investment choices

For most people, their home is the single largest investment that they’ll make –and it’s worth spending some time to make sure that investment is financed using the best loan possible.

Sadly, though, nearly half of all mortgage buyers don’t end up shopping for a mortgage first. This is unfortunate since shopping around can lead to a far better loan; savings that could add up significantly over time. For example, finding a lender that could give you even a 1% lower interest rate can easily represent a savings of thousands of dollars –per year.

Shopping for a mortgage

Sometimes, seemingly small things can make a big difference over the long haul. Here is a great article on just how interest rate can influence your buying power by Ellen Pitts

For homebuyers and investors alike, it’s important to obtain a favorable loan in order to get ahead. Much like buying a home below market value is something that savvy investors look for; the terms of the loan will also have a big impact on your investment.

To help make the process a bit easier, we’re going to walk you through the process, showing you how to shop for a mortgage.

What You Should Know: The Consumer Financial Protection Bureau

While shopping for a mortgage may sound confusing and overwhelming, the process itself is relatively straightforward.

The Consumer Financial Protection Bureau (CPFB) has simplified the entire disclosure process in order protect consumers from predatory lenders. This means that rules are in place to help protect mortgage buyers. For example, mortgage brokers (but not lenders) must charge the same percentage on every deal, meaning they can’t just increase their margin “just because.” Other rules include the Ability-to-Repay (ATR) rule that requires lenders to make a reasonable, good-faith determination that prospective borrowers have the ability to repay their loans. These rules, and more help to provide strong protections for homeowners and are designed to help prevent risky lending practices which were common before the financial crash of 07/08.

With this in mind, there’s a lot that you can do, as a buyer, to find a loan that’s favorable. Let’s take a look at some steps that you’ll want to take when shopping for a loan.

Get Pre-Qualified

It’s an all-too-common scenario. A home buyer walks into a Realtor’s office to discuss buying a home. The buyer’s excited, and has been looking at properties online, and has a list of homes that they want to see. Unfortunately, though, the buyer hasn’t talked to a lender and hasn’t been prequalified. Sadly, it turns out that they can’t afford any of the homes that they were looking at. This is unfortunate and can be extremely disheartening.

To prevent this from happening, it’s a good idea to try to pre-qualify for a loan, before you start shopping. At Springs Homes, we do pre-qualification with home buyers as the first step in the home buying process. In order to pre-qualify, you’ll want to meet with a couple of lenders. You’ll give them some basic information about your current financial situation, including your credit score, wages, and the amount of money that you have for a down payment.

The goal at this stage is to see if you qualify for a loan, and if so, what terms you qualify for: how much can you borrow, and what type of loan you’ll be eligible for –such as a conventional loan, an FHA loan –a first-time homebuyer’s loan with a low-interest rate, or a VA loan.

Before you go, you’ll want to check your credit score. This will help lenders to see where you stand and will give you an idea about whether you should move forward with the mortgage lending process, or whether it may be better to wait a few months and work to improve your credit score. If you’re worried that asking for your credit score will hurt your credit, don’t be –you’re entitled to a free credit report every year. Generally, a score that’s lower than 760 can negatively impact the loan that you qualify for, and you may be required to pay a higher interest rate or pay a fee to keep the rate down.

Once you’ve taken a look at your credit score, you’ll know whether to move forward. If you proceed with the pre-qualification, you’ll want to ask your lender for a fee worksheet. This is a breakdown of the fees that they’ll be charging you, such as an origination fee and interest rate; as well as some costs that will be out of the lender’s control, including taxes and insurance. While the lender isn’t required to give you this, their refusal should certainly be a red flag and may indicate that you’ll want to shop elsewhere or go with a company that’s more transparent about their costs.

If your credit score is a bit lackluster, there are a few things you can do to bring your rating up.

Tips for Improving Your Credit:

  • Get a credit card –and make payments on time
  • Bring any past-due accounts current
  • Pay bills on time
  • Consider consolidating any credit card debt by moving it onto a card with a low-interest rate
  • Correct credit report errors
  • Become an authorized user on someone else’s card
  • Set up accounts with automatic payments
  • Try to maintain credit card balances that are lower than 30 percent of your credit limit

Start Home Shopping

One you’re prequalified, you’ll have a much better idea about the type of properties that are within your price range. When shopping for a home, it’s generally a good idea to start out looking at properties that are on the low to mid-range of what you can afford, and then slowly raise the bar until you find a place that you’re happy with. You’ll also want to keep location in mind when searching. It’s one of the most important criteria for most people. Since it’s important to be near work, schools, and other places –it’ll be a key factor when making your decision. Plus, it’s one thing that can’t be changed unless you move again. You could always upgrade the kitchen at a later date, but location is something that’s a bit more difficult to change.

Full Loan Application

You’ve found a house, written an offer, and the offer has been accepted. Congratulations! This is an exciting stage of the home buying process.

Once you’ve reached this stage, you’ll want to send a copy of the contract to any lenders that you’re still considering after the pre-qualification process. You’ll also need to make a full loan application with any lender that you want to obtain a true estimate from.

What Is a Loan Estimate? Obtaining a Loan Estimate

The Loan Estimate form is a three-page document that lenders are required by law to give you after you apply for a loan. This form helps borrowers to understand the full cost of the mortgage, including fees and interest. It’s an easy way to compare mortgage options and can help you to discover which lender is offering the best loan.

Since October 3, 2015, the Loan Estimate has replaced the good faith estimate and the Truth in Lending Disclosure –except in the case of “Reverse Mortgages.”

The new form is set up to be simpler, and to eliminate any kind of closing table or last-minute bait and switch, thereby protecting uninitiated consumers. For an excellent detailed line by line description of the Loan Estimate Form, have a look at The Consumer Financial Protection Bureau’s website.

The Loan Estimate must be given to the borrower within three business days of loan application.

To submit an application all that is required is:

  • Your name
  • Your income
  • The property address
  • An estimate of the value of the property
  • The desired loan amount

Note: Your loan officer cannot require you to provide documents verifying this information before providing you with a Loan Estimate.

You’re not required to provide written documentation to obtain a Loan Estimate, and the only fee that can be charged is a small upfront fee for pulling your credit report, usually no more than $20.

Comparing Loan Estimates

It makes financial sense to shop around for the lowest interest rate that you qualify for –and the loan with the most favorable conditions. Fortunately, Loan Estimate forms make it easy to compare lenders.

Once you’ve obtained your Loan Estimates, you’ll want to take the time to look at what different lenders are offering. Comparing Loan Estimates is an important part of the home-buying process, and the best way to shop around for a mortgage.

The two areas that you’ll want to pay special attention to are origination fees and the interest rate. You can also look at things like prepayment penalties, what a late payment will cost you, and whether the lender intends to process your loan or sell it –if this matters to you. You’ll also want to check to see if there’s a balloon payment –a large one-time payment at the end of the loan term. Make sure you take the time to look at these different terms and conditions. The last thing you’d want is any surprises after closing.

You’ll also want to ensure that the monthly payments match your expectations and that you’ll have enough funds to pay your estimated cash to close.

If you find anything that you’re not sure about or if you have any questions, be sure to talk to the lender. They’ll be able to answer any questions you have.

Note: Make sure you compare the total dollar amounts if you’re looking at different-length terms. For example, a 15-year mortgage will have a higher interest rate, but will cost less in the long run because you’ll pay off the debt 15 years earlier.

Finally, keep in mind that while a loan is a commodity, the lender is not. An inexperienced or unprofessional lender can cost you hundreds if not thousands of dollars. For instance, missed closing dates, or neglecting to lock in an interest rate could all cost you significantly. Before you go with a lender, take the time to ensure that they’re experienced and reputable. Talk with people that you know to see if they have anyone they recommend, and research potential lenders online to see what people are saying.

Remember: the right loan can have a significant impact on your investment –so it’s worth taking some time to get this right. By shopping around, you can increase your chances of securing a lower interest rate, so do your research and find a lender that’s right for you.

Additional Resources for Shopping for a Mortgage:

Warranty-Header

Home Warranties: What Every Landlord Should Know

If you are a landlord, then you are all too familiar with the frustration that comes when you find out that the heater has gone out at your rental unit, or that there’s a leak –yet again.If you’re tired of the frustrations that come from dealing with breakdowns, and costly repairs eating into your profits, there’s a solution that you may want to consider: purchasing a home warranty for your rental.

Today, you can buy warranties for almost anything, including homes. Home warranties are particularly popular with landlords, who know all too well that if something can go wrong at a rental, it will. A good home warranty can help a landlord to save a significant amount of money if costly repairs are necessary. It can also help landlords to ensure compliance with state and federal laws.

While home warranties can be invaluable for landlords who are interested in protecting their investment, it’s important to note that not all warranties are created equal. Each warranty is unique in terms of the coverage that it offers, the exclusions, and terms and conditions.

If you’re interested in a home warranty for your rental, there are a few things that you should know before purchasing one. Here’s a brief rundown on what, exactly, a home warranty is, the benefits and disadvantages of getting one, and finally, what you can do to ensure that you choose the best option for your property.

What Is a Home Warranty?

The term ‘home warranty’ is enough to cause some confusion for those who are unfamiliar.

Traditional warranties are a type of guarantee of the quality of a product or service, usually made by the seller or manufacturer to the buyer. Home warranties, though, are not guarantees, but instead, contracts to provide repairs and replacement for home systems and appliances that break down or fail due to normal wear and tear.

Home warranties were first started in 1971 by American Home Shield. The industry has grown considerably since then, and today dozens of companies offer home warranties. A few main players include American Home Shield, Total Protect, SEARS, and First American, as well as HMS Home Warranty and Old Republic Home Protection.

Some people may also confuse home warranties with insurance, but there are some distinct differences between the two. Insurance provides coverage for specific events, such as fire, flooding, and theft; while home warranties cover the components or major appliances in a home against breakdown.

The best way to think of a home warranty is to view it as a home services contract. Home warranties are designed to provide repairs for breakdown or damage to specific home components, as well as replacement if they cannot be repaired.

Benefits and Disadvantages of Home Warranties

Home warranty plans offer a number of advantages for landlords. If something goes wrong, you won’t have to start looking for an electrician or plumber –or rush to the rental to make the repairs yourself. Instead, you can just place a call to the home warranty company, and they’ll send someone out for you. Having a home warranty will also make it easier to budget for expenses and repairs, helping you to avoid being caught out by unexpected issues. You simply budget for the premium and keep some money for the service call fees. No need to worry about forking out hundreds of dollars all at once for a new water heater when the old ones goes out.

However, home warranty plans have some disadvantages too. Just like insurance, you pay for the plan even if you don’t end up using it in the end. Most policies cost a few hundred dollars, usually somewhere between $400-$800 per year. In some cases, it may work out to be more economical to pay for issues as they arise, rather than prepay for potential repairs that may or may not be required. Additionally, most warranty companies will attempt every repair before authorizing a full replacement. Another issue with home warranties is that you run the risk of claims being denied. If the home warranty company considers the breakdown to have been caused by neglect, improper use, or a pre-existing problem, they may choose not to accept the claim. Additionally, some landlords may realize when making a claim that their warranties don’t include coverage for the item in question. Finally, there is also the issue of wait times. Sometimes repairs can be delayed during high-demand seasons.

Most home warranties usually include the following:

  • Refrigerator
  • Dishwasher
  • Built-in microwave
  • Garbage disposal
  • Stove/Oven
  • HVAC
  • Electrical system
  • Plumbing
  • Washing machine and dryer
  • Ductwork
  • Ceiling fans
  • Water heater
  • Garage door opener

While more premium warranties may also include coverage for:

  • Sump pump
  • Pool
  • Ice maker
  • Stand-alone freezer
  • Well pump
  • Lawn sprinklers
  • Plumbing fixtures
  • Lighting fixtures
  • Roof repairs
  • Septic systems
  • Water filters

Things that are not usually covered include:

  • Structural issues
  • Problems that are the result of neglected maintenance
  • Damage caused by frozen pipes
  • Outdoor repairs
  • Permit fees
  • Disposal fee for old appliances
  • Rust
  • Improper installation
  • Mismatched systems
  • Pre-existing problems
  • Anything that’s outside of normal wear and tear

As always, the list of what is and isn’t covered will vary considerably from company to company so be sure to ask for a list of things that are covered when weighing up different options.

Tips for Selecting a Home Warranty

To be sure, having a home warranty can provide you with peace of mind if things go wrong, writes Anthony Giorgianni of Consumer Reports, “But you should also realize that the providers of these plans have built-in wiggle room that can make it easier for them not to make payments. As a result, hundreds of consumers have complained to the Better Business Bureau about their plans, often because they didn’t get the payouts they expected.”

To ensure that you find the best warranty for your needs, and to help prevent disappointment when it comes time to make a claim, you’ll want to make sure you understand exactly what’s included in your home warranty, and have a clear understanding of the terms and conditions.

With this in mind let’s take a look at how you can ensure that you find a home warranty that’s a good fit for you and your rental property. As always, being informed is key to ensuring that you make the best decision possible, and will help you to choose a warranty that’s right for you.

Read the Fine Print to See What’s Covered

When considering a home warranty, it’s important to read the fine print. Each home warranty is different, with their own set of particular inclusions, exclusions, and conditions. For example, some warranties will not cover washing machine repair, even if you opt for appliance coverage. Some, that claim to cover plumbing, may not cover common parts that often go out, such as faucets, but instead will only provide coverage for the pipes that are in the walls. Before signing up for a warranty program, make sure you take the time to read the contract carefully so that you fully understand what’s covered, and what isn’t.

Check online reviews

Next, you’ll want to ensure that you’re buying from a reputable company. Before signing an agreement, have a look at the Better Business Bureau and online review sites to see what people are saying; and to find out what their rating is.

Find Out How the Warranty Company Selects their Contractors

Another important consideration is how the company selects their contractors. Are they vetted in any way? How do they ensure they are qualified? How long have their vendors been working with them? Will they be able to guarantee that the work will be completed in a timely manner? You should also ask what happens if a vendor doesn’t meet your expectations. A reputable home warranty company should allow you to request that subpar vendors not be used for future call-outs.

Find Out What the Waiting Period Is

You’ll also want to keep in mind that most home warranties also include a waiting period between the date that you sign up, and when you can actually begin to use the service. Usually, this period is anywhere between 30-90 days.

See If the Company Will Work With Property Management Companies

If you have a property manager overseeing your property or plan to enlist the services of one at some point in the future, you’ll want to check with the home warranty company to see if they work with property management companies. Some companies will allow the landlord to keep a credit card on file to cover service call fees. Others, however, require payment from the tenant when the technician arrives –something that could lead to potential problems and complications.

See What the Service Fee Is

The service fee or call out fee is the flat rate that you’ll pay out-of-pocket for repairs. Similar to a deductible on an insurance policy, most service fees range between $75 and $125 per claim. In some cases, you’ll have the option to pay a higher service fee for a lower monthly payment.

See What the Limits of Liability Are

Most home warranties have a limit on the amount of money that they will pay out in a year. In some cases, the company may assign a specific limit to each item. For instance, if they have a $400 annual limit on dryers, it will only pay up to $400 each year for the dryer to be repaired or replaced. According to Reviews.com, half of the 17 home warranty companies that were analysed cap their coverage at $500. Limits can make or break a warranty, so be sure to find out where your coverage will be capped before making your decision.

Ask About the Recall Period

Often home warranty companies will provide what’s known as a “workmanship guarantee” for any repairs performed by one of their contractors. This means that if anything goes wrong with the repair or installation during a specific amount of time after the work was done, the home warranty company will repair it at no additional charge to you.

Ensure that the Coverage Is Right for Your Property

When purchasing a home warranty policy, you’ll want to make sure that it’s the right one for the property. You can choose warranties that include various degrees of coverage, including ones that cover the rental’s major systems such as electrical and plumbing, as well as a more premium plan that extends to cover appliances. You’ll also want to consider the age of the property when making your decision. While newer properties that are less than ten years old, most of the appliances will already be covered by manufacturers’ warranties, so there may not be a need for an extensive warranty. Additionally, “Many states require the builder to repair defects in materials and workmanship for a few years – typically two to 10 years,” writes Don Vandervort, founder of Home Tips. For older properties, though, it may make more sense to purchase more extensive coverage.

If you’re on the fence about a home warranty, be sure to consider the pros and cons of coverage to see if it’s something that you could benefit from. Remember, plans vary considerably, so if you’re not happy with a quote that you received from one company, don’t be afraid to look elsewhere. It doesn’t hurt to ask for a discount as well –some companies may be willing to negotiate.

Having an emergency fund to cover unexpended costs could stand in for a warranty. But you’ll want to honestly assess whether you’re disciplined enough to set aside a certain amount of money each month for emergency repairs. For landlords who would like to have as much coverage as possible, or who may not be able to commit to putting $100 in a repairs account each month, having a home warranty may be an ideal solution. Some landlords find that warranties are especially helpful in the beginning, until they’ve had time to build up some reserves. Other long-distance landlords use warranties to reduce some of the stress and hassle of having to coordinate repairs from afar.

No matter which way you’re leaning, at the end of the day you’ll want to ensure that you make a decision that will benefit both you and your property, so have a look to see what’s out there before making your final decision.

Popular Searches

Not sure where to search for a home?  Whether you are moving here because of a change in job or to take advantage of our beautiful scenery, our experience has taught us that there are some popular searches that people generally ask us about.  If these searches don’t work for you, feel free to contact us and we can customize a search especially for your needs.

Ft. Carson Homes for Sale

Many people come to the Colorado Springs area because of an association with Ft. Carson.  We have a search that focuses on homes for sale under $400,000 near the Ft. Carson area and a search for homes for sale over $400,000 near Ft. Carson.

Broadmoor Homes

Love the Broadmoor?  So do we.  This search will return homes in the homes in the Broadmoor Area.

District 20 Schools

District 20 is one of the top school districts in our area.  We have many people search for homes that are within the District 20 (D-20) boundaries.  You can search for homes near Northgate or search for homes near Briargate.

Trees & Large Lots in Black Forest

Love trees and acreage?  Then the Black Forest area might be for you.  Black Forest offers larger lots and plenty of trees and privacy.

Popular Powers Corridor

The Powers Corridor is the ultimate in convenience.  Shopping galore, quick access to the airport and family oriented neighborhoods make this an area that many people consider.

Close to Denver

Many times, people want the small town feel but with the proximity to a large city.  The TriLakes area offers this in a big way.  On the northernmost border of El Paso County, the TriLakes area offers people the shortest commute to Denver.

Land to Build

Can’t find the exact home you are looking for?  Then maybe building a home makes sense for you.  This search will show you several areas where land is available to build your dream home.

Archives

Email Newsletter

Contact Info

Contact Us

Copyright 2017 Springs Homes ©  All Rights Reserved