1. Sales need 12 to 18 Months For Closure:

The fastest you will be able to close any short sales listings is at least 14 days. Even when a cooperative bank holds your loan. The lender needs seven to ten days to grant a receipt for the short sale package. It also includes personal seller documents and related real estate items.

Here, we present the time frame for an average short sale. Especially when the loan is held by a cooperative bank. Seven to ten days for the lender to grant receipt of the complete short sale package, which entails personal seller documents and related real estate items, together with the buyer’s short-sale offer.

a. A negotiator is assigned. The BPO or appraisal needs around 30 days to 45 days.

b. Extra two to three weeks for management/review by investor and short sale approval. Every short sale is exclusive, and every set of investors is diverse. The examining bank might not own the loan, so they must follow investor guidelines. You cannot blame some short sale bank as there were unreasonable to you or you hate them for a specific time.

2. Short Sales Buyers Pay Quite Huge Amounts:

3. Short Sale Banks Won’t Agree to An Extremely Discounted Payoff:

Sellers seem amazed by the fact that prices have dropped over five years resulting in 50% or less than the OG value. Banks know declining markets.

 Moreover, banks will carry out their research about the value and sum up a conclusion. The home value is just not based on the amount of the mortgage. It’s based on the present comparable sales too.

4. Short Sale Sellers Must Be In Default before the Bank Approving A Short Sale:

Banks favor a short sale grounded on the seller’s hardship and the value of the home. Some sellers work hard to make the mortgage payments each month, yet they are not faulted.

While it is a fact that, true that sellers in default receive instant attention, a seller can also pay a mortgage payment on time every month and still be suitable for a short sale. The seller can buy another house under Fannie Mae’s criteria if they are regular on their loan.

5. Agents Get A Lower Commission: 

In the early days, the short sale commissions were not handled well by the banks, between the years 2005 to 2008.

The majority of banks now pay an old-fashioned commission to agents. On February 24, 2009, the Federal National Mortgage Association created a compensation policy. The policy allows paying of the agreed commission by the seller to the listing agent. This commission did not exceed 6%. The borrowers can qualify for Home Affordable Modification Program(HAMP) by the government. They can also apply for Home Affordable Foreclosure Alternatives (HAFA) program.

Additionally, refer experts from Elite Properties who can assist you in making the right decision. We are a cash-buying company that suggests we provide fast closings. Call us at 718-977-5462 today.

Introduction

For the majority of people, home purchasing is the biggest purchase. A detailed and attentive approach will suit you well when it comes to purchasing real estate where you’re going to devote a major portion of your time.

Once beneath contract, the classic timeline is nearly 40-50 days to close on a home. Let’s bear in mind the steps are taken up to that point—house hunting, pre-approval, and application process. Whether it’s your very first home, a renovation from a starter home to something bigger, or scaling back after several years, you shouldn’t hurry the process.

Here are the Nine Steps with an approximate number of days to complete home purchasing:

1. Look for an agent (7 days)

 The majority of us are in touch with a friend, family member, or colleague who newly purchased a home. Enquire from those trusted sources, and in nearly a week you should be in a position to contact a trustworthy agent. You’re in search of someone you like, have faith in, and who has a well-informed hold on the available inventory in your preferred community. A good agent should assist you in avoiding a bad purchase and see you through the ifs and buts of sealing the deal.

2. Acquire Mortgage Pre-Approval (8-10 days)

Loan pre-approval is needed and will let you know if you are qualified for a mortgage. You’ll need documents comprising tax returns, pay stubs, debt, and credit information, and if you’re purchasing with the other half or partner, you’ll both require these things. You can also check with several lenders to check for the ideal rates. At the time of the pre-approval process, there’s a 14-day window during which credit bureaus consider credit inquiries as a single one since you’re purchasing a home.

3. House-Hunt (80-85 days)

 Many people regard real estate as an obsession and like to look at real estate trends in several areas around the country comprising what homes are selling for, and how much home you can avail for your dollar, but when you’re truly in the market to buy, house-hunting isn’t always the most amusing.

You may be hassled, stressed to confront, or require to make the purchase well within time to relocate your family or get the kids stable before school begins. A study conducted by Insight Media established it takes nearly 81 days to surf homes prior to finding one to buy. And a major chunk of people views roughly 16 homes online before finding one they desire. The average time required to search prior to scheduling a visit? Twenty hours.

As per the study, 14% of individuals said they had to find the middle ground on some features of their dream home. And in the present seller’s market where homes in various areas of the country get many offers over the inquiring price or have a bidding war, a quarter of home buyers or more may involve an unsuccessful offer delaying their home search.

4. Get Final Approval for Mortgage to Home Purchasing

Just because you’ve gotten pre-approval for your mortgage doesn’t mean that you’re immediately locked into that loan for the home you have under contract. The lender has a few more hoops for you to jump through, such as an inspection and appraisal of the home. They’ll also want to see more current copies of your financial documents.

From this point on, the steps to buying a house will often overlap. This means you’ll have several things in the air as you move forward with the purchase.

5. Put Forth an Offer (5 days)

You’ve finally found the house and now all you are required to do is put forth an offer. Your agent will clarify everything you need to be aware of but essentially, if you and the agent agree on the price you’re proposing, you’ll want the standard 1% earnest money. And above, in a tight seller’s market, you may want to knock that up to 3-6% to show you’re playing for keeps. You could also contain a personalized letter to the owner telling them how much you love the home and why you’re interested in their house.

6. Get a Mortgage (21 days)

Your offer is accepted! Now the mortgage procedure begins. Although the lender you have chosen can lock in your interest rate, you’re about to cross more hurdles and collect more documents such as current bank statements and work stubs for the concluding mortgage documents. Lenders will also need an appraisal and inspection and go through the extensive list of final expenses and estimate yours.

This process can include anywhere from a few weeks. In this tie, you can communicate with your lender via email or phone every couple of days with a new request. You have to submit your inspection and appraisal reports to the seller. If any of them has any discrepancies, you have to renegotiate the price, and make repairs. There will be a title search to ensure the home is free and clear of liens. You’ll likely select homeowner’s insurance and offer the lender all the data. Your insurer might even need a pre-inspection prior to insuring you.  After your mortgage is pre-approval, there is still a lot of work to do. 

7. Close on the House (50 days)

On the day before closing or the day before, you should take a final stroll. Make sure all repairs are complete and there is no damage. Your lender has probably told you how you must pay closing costs. It may be to bring along a cashier’s check or how you’ll make a digital transfer of the money. You’ll also require a photo ID and a nice pen for the whole bunch of documents you’ll be signing. At last, the keys are handed over to you and congratulations are in place. You’ve bought a home.

8. Homeowners Insurance

Insurance companies usually send out an inspector to check for any risks that the property might have. This process might take a few days. In addition, the mortgage lender might require other types of insurance, such as flood insurance.

After this, the process of buying a house often overlaps with other steps.

So you’ll have multiple things going on at once.

9. Ready for Closing Funds

Your agent will let you know whether you should bring a cashier’s or certified check or transfer funds digitally to release the money. If you get wiring instructions by email, call your agent or lender to confirm one of them sent it. Use the phone number you have on record for your agent, not the one in the email.

Which step of the home purchasing process is the most lengthy?

Hunting for your dream home is probably what takes the most time. Scheduling, setting a budget, and determining what things you’ll compromise on in advance can help make the process smoother.

What facts should you take into consideration while house hunting?

While every situation is distinct, one of the key things people look for is a good site. You may desire that the property be located conveniently for work or school, or possibly you simply prefer a definite area.

Other facts many people find useful to note are curb appeal, the size and layout of the home, the number of beds and baths, and the placement of windows for natural light.

What are the few red flags to take note of when home purchasing?

Try to figure out big cracks in the driveway, foundation, or walls. The home shouldn’t feel moist inside or have a stuffy odor. Look for cracked paint on window frames. Staging furniture and baking smells may deceive you.

Bottom Line

Home Purchasing is a complicated and stressful process. The better equipped you are for each step, the better your odds are of arriving at a good home. So what are you waiting for? Gather your documents, choose a realtor and insurance provider and begin your home purchasing journey. Make sure to study real estate trends in your area. Additionally, refer experts from Elite Properties who can assist you in making the right decision. We are a cash buying company that suggests we provide fast closings. Call us at 718-977-5462 today.

Are you on your move to the home selling process? If yes, you may be enticed to go beyond updates and improvements. You may want to fetch the peak price across the table. Some improvements that add value to your home include substituting your garage door or carrying out a slight kitchen remodeling. Although, others offer hardly any opportunity to pull through the expenses when it’s a stint to sell.

So, here are

6 things you believe to enhance your home selling process, but actually, don’t.

#1 Swimming Pool

A big swimming pool may sound like a dream, but it’s a costly affair. It could be one that may not offer any monetary return. In specific cases, a pool might add value to your home, but it may not essentially make it cost-worthy. Sources state a pool can enhance your home’s value by up to 7%, but only if –

• You are living in an upmarket neighborhood where pools are the protocol
• The elegance of the pool suits the neighborhood
• You are living in a hot climate where you can make use of the pool around the year
• The pool doesn’t cover up the complete yard and you still have room for sports or gardening
• The pool is in good condition
• You can appeal to the exact buyer—for example, families with small children may be worried about security issues, but elder grownups or individuals without kids may adore the idea of a pool

Else, think of a pool as an outlay in your lifestyle, but don’t imagine it to be an investment in your home.

#2 Overbuilding for the sake of Neighborhood

At a certain point in time, you may require more room but don’t wish to undergo the trouble of moving. Possibly you want an additional bedroom for your budding family or an office back home. Certain enhancements may involuntarily make your home stretch beyond the norm for the neighborhood. A huge, affluent remodel may let the home become more enticing. For instance, opting for a second story with an additional bedroom and a full bath. It won’t enhance the resale value in case the remaining neighborhood homes have small, one-story homes.

#3 Unreliable High-End Renovations

Improvements should be constant all over the home. Stainless steel gadgets in your kitchen or imported tiles in the entryway will hardly do anything to raise the value of your home. If the bathrooms still have vinyl floors and the carpet is an old shag it won’t justify the home’s worth. Remodeling may not fetch a higher return except the rest of the home matches up to the same level. High-quality advancements usually raise the value of high-end homes, but not essentially in mid-range houses where the improvement may be uneven with the rest of the home.

#4 Unseen Improvements

Unseen improvements are expensive developments that you envision to make your house a superior place to live in. But having said that not one person else will recognize or likely take care of it. You might require a brand-new plumbing system. Yet, don’t imagine recuperating the costs when it’s time to sell. The majority of home buyers assume these systems to be in upright working condition. They will not shell out even an extra penny, simply because you recently mounted a new heater. It is a better option to consider these improvements as part and parcel of regular maintenance if you want to sell your house fast. Don’t count them as an investment in your home’s value.

#5 Wall-to-wall Floor covering

Real estate listings may suggest new carpeting all over as a selling point although homebuyers may flinch at the idea of having floor covering. Most people are moving away from carpeting as the chemicals are needed to process it. Not to state its potential for catching allergens—a grave concern for people with children.

#6 An Extended Owner’s Suite

A brand-new owner’s suite with a lavish bathroom and walk-in wardrobe can be a big USP that escalates your home’s value. But said that it does not essentially is the case if the remodel turns your prim and proper three-bedroom home into a stuffy two-bedroom home.

Bottom Line

If you’re planning for home improvement, it’s beneficial to boil down and understand if an upgrade is something that you will cherish, or if you’re just putting in the effort to increase your home’s value. If a swimming pool is something you would make use of and relish for several years, you may be capable of justifying the cost, even if you don’t recover your hard-earned money. Conversely, if you consider spending thousands of dollars just to remodel and hike your home’s sale price, you’d better rest assured that your money is well spent.

When dubious about the home selling process, equate features of equivalent homes in your neighborhood. Make sure to study real estate trends in your area. Additionally, refer experts from Elite Properties who can assist you in making the right decision. We are a cash buying company that suggests we provide fast closings. Call us at 718-977-5462 today to sell your house fast for cash.

Buying a house in foreclosure may save you a lot of money, but it’s not the only thing that these properties offer. Foreclosures can be an ideal option for investors who are looking to fix properties and sell them for better profits. Although, it’s vital to know that foreclosures come with drawbacks. If you’re considering buying a foreclosed property make sure to do thorough research. Scroll down to read our blog on ‘A Guide to Buying a House in Foreclosure.’

Types of Foreclosure Sale

There are five types of Foreclosure sales: 

1. Pre-Foreclosure

Property is in pre-foreclosure when the mortgage lender has notified the borrowers they are in default, but before the property is offered for sale at auction. If a homeowner can sell during this time, they may be able to avoid an actual foreclosure proceeding and its negative effect on their credit history and future prospects.

Pre-foreclosures are typically listed in county and city courthouse buildings. In addition, many online resources list properties that are in the pre-foreclosure phase.

2. Short Sales

A short sale happens when a lender agrees to accept less money for a property than what is still owed on its mortgage. Borrowers don’t necessarily have to be in default for a lender to agree to a short sale, but usually, the borrower does need to show some kind of financial hardship that would likely lead to default, like the loss of a job.

3. Sheriff’s Sale Auctions

A sheriff’s sale auction is held after the lender has given the borrower notice of default and a grace period to catch up on mortgage payments has passed. The purpose of the auction is to help lender recoup their losses quickly from a loan that is in default.

4. Bank-Owned Properties

If a property doesn’t sell at auction, it goes back to the bank and becomes an REO. Banks usually have a department that manages these properties. You can find these properties online on websites like Elite Properties.

5. Government-Owned Properties

If a home is purchased with a loan that is backed by the federal government, such as an FHA or VA loan, and then goes into foreclosure, the government will seize the property and hire a broker to sell it.

Buyers interested in purchasing a government-owned property must work with a registered broker. The U.S. Department of Housing and Urban Development (HUD) has a list of registered brokers on its website.

Causes for a Foreclosure

There are multiple reasons why homeowners fall into foreclosure. One of the most common reasons for foreclosure is a job loss or unemployment. Other reasons why people fall behind on mortgage payments include debts, marital issues, or illnesses. Also, homeowners during a foreclosure may fall into a low-to-moderate-income category that may cause trouble within the job.

As everything has its pros and cons, buying a foreclosure home is not left behind. Below are some pros and cons to consider when it comes to buying a foreclosed property.

Pros of Buying A Foreclosure House

1. Low Prices

The most prominent pro of buying a foreclosure home is its price. As the homes are priced below their market value they can be an easy catch for investors or buyers. Furthermore, foreclosures can offer a ton of savings. Sourced from the balance, according to the real estate data aggregator ATTOM Data Solutions the worth of a foreclosed property over the past five years has ranged from $93,000 to $166,000. 

2. Quick Closing Process

Comparatively, the average foreclosure process typically closes in 30 days as it’s a quick process. Although, till October 2020 the process took an average amount of 54 days from start to finish.

3. Investment Opportunities

A foreclosed property is a way to earn a good profit. Rehabilitating a house by doing a few adjustments can help in establishing a lot of value and gaining immediate equity. If you’re an investor who wants to flip the property for bigger returns then buying a foreclosure house is an ideal investment choice. With the right upgrades and improvements, you can gain a lot of value for an average home.

Cons of Buying A Foreclosure House

1. Multiple Repairs

As a foreclosure property requires selling as-is, this often relates to the that the property will need serious improvements. These houses need a lot of upgrades as the previous owner fails to maintain the house due to pricey repairs. Hence, if you are someone moving into a foreclosure property you will probably need to spend a lot of money on basic fixture improvements.

2. You May Not Get To View Or Inspect The House Before Buying The House

Foreclosure houses are sold on an as-is basis hence, there is hardly any chance for buyers to view the property. Additionally, you may not even get the chance to professionally inspect the property before submitting your bid. As these are some important points they can be deal breakers for many potential buyers. Also, you don’t have any access to the property before buying it. This means you can’t enter the property, and only look at the exteriors which are the windows and walls.

3. Competitive Market

Buying a foreclosure property comes with vying, there are several people looking to buy a property for cheap. The inventory can go out quickly as soon as the property is listed. Also, due to the pandemic where everything is online and people willingly avoid human interaction, the inventory goes out faster. The mortgage relief efforts during 2020 limited the amount of foreclosed homes hitting the market which created more competition.

4. It May Require a Huge Amount Of Cash

Keeping rehab costs aside, a buyer may require some upfront cash while buying a foreclosure home at an auction. Usually, at such events, buyers may have to bid in cash. Although, if you’re not bidding at such events for a foreclosure property and have good credit you may still bag financing.  

Monetary assistance for homebuyers

USDA Loan Program – 

There are two programs that the United States Department of Agriculture offers in order to help those with low or very low income who live in rural areas. The first program is called the Section 502 Direct Loan Program and the second is known as the 504. Both programs work to help these individuals obtain safe and decent homes.

The Section 502 program helps low-income or very low-income citizens pay for loans used to buy a modest residence in a rural area.

The Section 504 Single Family Repair program offers loans to very low-income people in rural areas who cannot get bank financing. Elderly people may be eligible for outright grants.

Veterans Administration Loan Program

The federal Veterans Administration has a mortgage guarantee program that is open to current service members, veterans, and surviving spouses. According to Military.com, the loans can be used to buy repossessed properties, although a bit of advance preparation is needed.

This program provides benefits that include zero down-payment loans, reduced closing costs, and a waiver of the mortgage insurance requirement to those who qualify.

Purchasing a Foreclosed Home

If you’re looking to purchase a property from a bank, it’s important to remember that you’ll need to be firm when it comes to negotiating prices. It never hurts to start low, especially if the bank has had the property for an extended period of time. In general, it’s a good idea to make an initial offer that’s at least 20% lower than the market price. However, this number could be higher depending on the location of the property, as areas with a high number of foreclosures often result in more favorable prices for buyers.

If you’re able to pay for the property and any necessary renovations completely with cash, you’re lucky. That’s why some buyers choose to team up with investors who can help finance the purchase and renovation, and in return, take a share of any profits when the home is eventually sold.

Bottom Line

When you consider buying a house in foreclosure it can result in potential savings. Although, it surely comes with a bunch of risks to deal with. Furthermore, if you think the home selling process will take a toll on your head, you may sell your house for cash. You can get in touch with Elite Properties. We are a cash buying company helping people to buy or sell houses. We buy houses as-is and offer hard cash in return. Call us today at 718-977-5462 to know more.

An open house or a walkthrough is a time when potential buyers can visit the property for a viewing. This usually occurs when a broker asks the owners or renters to vacate the property in order to keep it vacant for others to see and evaluate the space. An open house can also be seen as a way of advertising the property to attract more buyers. If you are a homeowner and considering keeping a walkthrough, keep reading about what is an open house.

How Does An Open House Work?

In real estate, trading properties is an example of a relatively illiquid market consisting of diverse products. Each property will be different from another even if they co-exist in the same neighborhood. The process starts by vacating the property post which the seller or the seller’s agent allows the buyers to enter and have a walk through the place. The house tour proceeds with the real estate agent’s assistance or the seller’s if it’s an FSBO.

The motive of a walkthrough is to offer an ample amount of time to buyers and secure their interest. They additionally get a chance to evaluate the home as well as the surrounding area. Also, it’s always a better idea to attend an open house instead of booking a brief appointment with a broker. Open houses are often set up on the weekends. Sundays in particular, the reason being the availability of maximum people. Furthermore, some owners or agents make it fun by serving coffee, drinks, or hors d’oeuvres at a walkthrough event.

Pros and Cons of Open Houses

For people who want to sell houses fast, an open house provides the opportunity to attract buyers. A good set-up event can interest more buyers leading to a profitable offer. Real estate agents often suggest that homeowners keep an open house on the first-weekend post after the property goes up for sale. As beneficial as it sounds, a walkthrough has certain pros and cons. Some sellers say open houses are too much work, sometimes even more than the house’s worth.

Here are some pros and cons of an open house that you may comprehend

Pros

• Entices curious buyers
• Alerts the real estate agents about the issues with the house through visitor feedback
• May steer to an immediate offer

Cons

• Can involve more effort in organizing than the house’s worth
• Online listings can get more potential buyers in less time
• Homeowners need to leave their homes during all open houses

As a homeowner, you must leave the property for other people to view it. This means you’ll have to make arrangements for pets and children if any that will cost you a lot. Owners also need to remove personal belongings to deter buyers from imagining themselves in the house. Additionally, it also means safeguarding your personal stuff that can be on the verge of theft.

A Broker’s Open House

Unlike the traditional open house, a broker’s open house is only meant for real estate professionals and not the public. A broker’s open house intention is to allow realtors to view the property, and solicit professional opinions and its price. It is also an opportunity for agents to spread the word about a good property and gain clients.

A broker’s open house is often kept on weekdays or midweek when the availability of agents is more. The availability of agents is usually less on weekends as they are busy with clients in walkthroughs.

Bottom Line

Walkthroughs or open houses irrespective of the term, it’s a good way to advertise and sell your house fast. Although, it can take a toll on your head with people constantly visiting your place. Furthermore, managing stays and improvements will definitely cost you hundreds of dollars. If you’re looking for a swift solution and don’t want to compromise on your home’s worth you can get in touch with Elite Properties. We are a cash buying company that offers a fair all-cash offer in any location and under any condition. Give us a call at 718-977-5462 and learn more about the home selling process.

Before calling a Real Estate Agent there are a few things you may want to consider. Having financial documents will enable you to sell your house fast. Although, selling your house relies on multiple factors like the condition of your house and your financial situation. Make sure your first impression isn’t a weak one as a poor appearance will draw potential buyers away. Hence, do these 5 things before calling a real estate agent.

Acquire Pre-Approved for a Mortgage

The first step before you contact a real estate agent is to look for available mortgage options. Several factors like price, interest rates, term, etc. decide the type of mortgage you may afford. Additionally, being pre-qualified for a mortgage is different from getting a mortgage pre-approved. As both processes involve evaluating income, assets, and debts, only pre-approval needs an official mortgage application.

Examine the Market

A pre-approved mortgage is the only component on which you can research potential houses in a specific price range. In case you’re selling the house you will need to examine the market for homes that are similar to yours. Furthermore, when you research real estate ads both online and in print, you’ll only know about the asking prices. Here, a real estate agent will tell you about how long the houses have been sitting in the market, their prices, and closing costs. Keep in mind to not fall in love with any property yet. By the time you are ready to buy that property, it might have been already sold.

Declutter The Space

All home sellers by now know how important it is to showcase the potential space in your house. Although, it is also important to declutter your house before showing it to the real estate agent as well. Preparing your home for real estate agents before walkthroughs is vital as it helps them to see the full capacity of your property. This will make your property appear more attractive to buyers.

Keep Your House Spotless

A clean and tidy house shows how much you care about and maintain it. Also, a clean home can result in a faster sale. Little things like sorting your mailbox, cleaning doormats, mowing the lawn, cleaning windows, and properly lighting our day-to-day chores. Doing them at once can work in favor of your home selling process. Furthermore, these things are highly noticeable by buyers so, it’s best to do it beforehand than do it later. Additionally, a clean bathroom is a factor that speaks a lot about the homeowner. Spotless shower cubicles, tubs, and tiles are essential bathroom etiquettes that one must follow whether you’re selling your house or not. 

Explore Potential Agents

Going with the first real estate agent that pops up on a Google search can be a bad idea. Doing thorough research and finding an agent that suits your needs is ideal. Commence the search by asking for referrals from people who recently shifted to the neighborhood. You can also bounce on several online resources for the same.

You may have to look for a real estate agent with experience and who has a large contact base. Remember, real estate agents usually charge around 7% of the closing price on the sale, so make sure to do research beforehand.

Bottom Line

You may always feel a need to hire a real estate agent for selling or buying properties. If you are someone who cannot afford to pay the heavy prices of hiring one then, you can contact Elite Properties. We buy houses in any condition and provide a no-obligation offer. We buy houses as-is which means you naturally avoid the extra costs associated with home improvements. Call us today at 917-722-1272 to know more about a fair cash offer.

Private Mortgage Insurance (PMI) is a policy that protects the lender or the lending institution if you fail to repay the loan. PMI covers a part or all of the remaining mortgage, the borrower pays for the policy while the lender benefits. Like other insurance policies, private mortgage insurance comes with an annual premium, and sometimes it also has an upfront premium too. If you want to dive in deep about knowing PMIs, then read our blog ‘Everything To Know About A Private Mortgage Insurance ‘.

What is Private Mortgage Insurance?

Private Mortgage Insurance assures the lender that the loan will be paid, having such a policy helps borrowers to qualify for a loan that they eventually wouldn’t have qualified for. This insurance is mandatory if you pay less than a 20% down payment on a purchase.

In some cases, lenders may allow you to make a down payment of less than 20% without PMI although these loans may have steeper interest rates.

1. How Does Private Mortgage Insurance Work?

Similar to other insurance policies, you pay premiums to cover any unforeseen damages due to unfortunate situations. In such instances, the insurance company is liable for paying the outstanding loan if you find yourself incapable of doing it. Lenders contemplate that it is more likely to happen if you have less of an ownership stake in the property.

2. Private Mortgage Insurance vs. Mortgage Protection Insurance

Private mortgage insurance (PMI) is different from Mortgage Protection Insurance (MPI).  Mortgage Protection Insurance won’t pay off the whole outstanding balance of your loan if you default. Although it may still make some payments if you fall victim to uncertain situations like job loss, accidents that led to disability, or any kind of serious illness.

Here are some more insights into both PMI and MPI to help you understand better –

Private Mortgage Insurance

• A PMI insures against a complete default on the loan
• It protects the lender in unforeseen circumstances
• It pays in the event of foreclosure

Mortgage Protection Insurance

• An MPI only covers a chunk or some missed mortgage payments
• An MPI protects the borrower in catastrophic events
• May pay in the event of the borrower’s death
  
  

PMI Example

Private mortgage insurance (PMI) is an additional cost that homebuyers may need to pay if they have a down payment of less than 20% of the home’s value. For instance, if you purchase a $300,000 home with a 10% down payment, you could be paying between $1,500 to $3,000 per year in PMI. 

To make it more manageable, this cost is typically divided into monthly payments, which could range from $125 to $250 per month in this example. It’s important to factor in PMI when budgeting for your monthly mortgage payments.

Factors Influencing PMI

Amount of Down Payment

When buying a home, the amount of your down payment can have a big impact on your mortgage payments and PMI (private mortgage insurance) costs. If you make a smaller down payment, your lender may see you as a higher risk and charge you more for PMI. This can also lead to higher monthly mortgage payments and a longer time before you can cancel PMI. However, even if you can’t afford a 20% down payment, putting down more money upfront can help lower your PMI costs and save you money in the long run.

Credit Score History

When applying for a loan, your credit history is an important factor that lenders consider. They will review your credit score to determine how reliable you have been in repaying borrowed money in the past. 

A higher credit score indicates that you regularly make payments above the minimum amount, borrow within your means, pay bills on time, and avoid maxing out your credit limit. This demonstrates that you are a responsible borrower and may result in lower PMI premiums. 

However, if your credit score is lower, lenders may view you as a higher risk borrower and charge higher PMI premiums. It’s important to maintain a solid credit history to increase your chances of being approved for a loan and receiving favorable terms.

Type of Loan

The type of loan you choose can impact the amount of private mortgage insurance (PMI) you’ll have to pay. 

Fixed-rate loans offer less risk because the interest rate remains the same, resulting in consistent mortgage payments. This lower risk can lead to a lower PMI rate, potentially reducing the amount you need to pay. 

On the other hand, adjustable-rate mortgages (ARMs) can bring more risk because the interest rate can fluctuate based on the market, making it harder to predict future mortgage payments. This could result in a higher PMI rate. 

However, ARMs often have lower initial interest rates, allowing you to pay more toward your principal and build equity faster, potentially reducing the amount of PMI you need to pay. 

Your lender can guide you through different loan options and help you determine how much PMI you should expect to pay.

How to Avoid Borrower Paid-PMI?

If you’re a home buyer looking to avoid paying borrower-paid PMI (BPMI), there are a few strategies you can consider. 

One option is to make a larger down payment, as PMI is typically required for loans with a down payment of less than 20%. 

Another option is to look into lender-paid PMI (LPMI), where the lender pays the PMI premium but may charge a slightly higher interest rate. 

Finally, you could consider a piggyback loan, where you take out a second loan to cover the down payment and avoid PMI altogether.

1. Make a Large Down Payment

If you’re looking to avoid paying Borrower-Paid Mortgage Insurance (BPMI) on your home, consider making a large down payment of at least 20%. This will not only help you avoid BPMI altogether, but it will also give you more equity in your home from the start. Alternatively, if you already have BPMI and have reached 20% equity in your home, you can request to have it removed. And once you reach 22% equity, BPMI is often removed automatically.

2.  Apply for FHA & USDA Loan

If you’re looking to avoid private mortgage insurance (PMI), you may want to consider taking out an FHA or USDA loan. 

However, it’s important to note that these loans come with their own form of mortgage insurance. For FHA loans, this is known as mortgage insurance premiums (MIP), and for USDA loans, it’s guarantee fees. These fees typically last for the life of the loan, unless you have an FHA loan with a down payment or equity of 10% or more, in which case you’ll only pay MIP for 11 years. Ultimately, these fees will be in place until you pay off the house, sell it, or refinance.

3. VA Loan can help you

If you’re a veteran or active-duty service member looking to buy a home, taking out a VA loan may be a great option for you. Unlike other loans, VA loans don’t require mortgage insurance. Instead, they have a one-time funding fee that can be paid at closing or added to the loan amount. 

The size of the funding fee depends on factors such as your down payment or equity and whether it’s your first or subsequent use of the loan. It can range from 1.25% to 3.3% of the loan amount. 

However, if you’re a qualified surviving spouse or receive VA disability, you may be exempt from paying the funding fee. Additionally, if you’re refinancing with a VA Streamline loan, the funding fee is always 0.5%.

4. Piggyback Loan

If you’re looking to avoid paying private mortgage insurance (PMI) on a conventional loan, a piggyback loan may be an option to consider. With this approach, you make a down payment of at least 10% and take out a second mortgage, such as a home equity loan or line of credit, to cover the remaining amount needed to reach 20% equity on your primary loan. 

If you take a second mortgage, you will have to pay it back with a higher interest rate. This is because if you can’t pay back your loans, your first mortgage will be paid first. Make sure to check if this will save you money or if it’s better to just pay the PMI.

How to Avoid Lender Paid PMI

If you’re looking to avoid lender-paid private mortgage insurance (LPMI), there are a few options available. 

One option is to pay your entire PMI upfront at closing, which won’t require a higher interest rate. However, keep in mind that with LPMI, your payments are made as a lump sum upfront, so it’s impossible to cancel it. 

Another option is to go with borrower-paid PMI (BPMI), which may be cheaper depending on the mortgage insurance rates at the time. With BPMI, you’ll pay a monthly premium until you reach at least 20% equity. While you can’t completely avoid paying for PMI with less than a 20% down payment, these options can help you save money in the long run.

The Pros and Cons of Private Mortgage Insurance

To begin with, there are both advantages and disadvantages of PMIs. Although, it can make it easier for you to qualify for a loan. PMI lowers the risk you present to the lender. A PMI gives you more buying power as it lowers the down payment that you are required to make every time. It can also act as an aid when you’re short of funds.

A primary drawback of PMI is that it increases the monthly mortgage payments and sometimes the closing costs too. Furthermore, PMI payments are no longer tax deductible. Although, you may be able to write off premiums on a loan taken out before 2017 (based on your income and the terms of the mortgage). Additionally, mortgage insurance has one more downside. It only protects the lender in case you default. It absolutely offers no protection to you (the borrower) if you lag behind in repayments.

1. Pros of PMI

• It enables you to qualify for a mortgage loan
• Allows you to make a smaller down payment
  
  

2. Cons of PMI

• It may increase the monthly payments
• Can increase the closing costs
• It provides no protection to the borrower
• The premiums are not tax-deductible

Reasons for Cancelling PMI (If you already have it)

There are several reasons why you may want to cancel your private mortgage insurance (PMI) if you already have it. 

• One reason is if you have reached 20% equity in your home, regardless of whether you made extra payments towards your principal. 
• Another reason is if you have made significant improvements to your home that have substantially increased its value. If your loan is owned by Fannie Mae, you must have 25% equity or more, while the Freddie Mac requirement is still 20%. 
• You can also request removal of your mortgage insurance based on natural increases in your property value due to market conditions. But Fannie Mae and Freddie Mac require you to have 25% equity if the request is made 2-5 years after you close on your loan. 
• After 5 years, you only need to have 20% equity. However, you must be current on your mortgage payments. For this, an appraisal must be done to verify property value for your request to be honored. 

If you have a single-unit primary property or second home and don’t request cancellation. PMI is automatically canceled when you reach 22% equity. This is based on the original loan amortization schedule, assuming you’re current on your loan payments.

Canceling PMI On A Multi-Unit Property

The rules for canceling PMI on a property with many units are different. It depends on if you live there or if it’s an investment. For Fannie Mae loans, you can ask to cancel PMI when you have 30% equity. For Freddie Mac, you need 35% equity.

If you have a property with many units or an investment property with Freddie Mac, you need to ask to cancel the mortgage insurance. It won’t cancel by itself. But with Fannie Mae, the mortgage insurance cancels by itself halfway through the loan term.

Is There A Need to Pay for Private Mortgage Insurance?

A PMI typically costs around 0.5% -1% of your loan value on an annual basis. Although, it is subject to vary. The lender will look at your PMI premiums in detail on your initial loan estimate inclusively of the final closing disclosure form. Here, you choose to pay the premium upfront while closing or as a part of your monthly payments.  

Bottom Line

Now that you know everything about private mortgage insurance you may pick and choose wisely. If you think you’re running out of time and can’t make outstanding mortgage payments. It’s probably time to sell your house fast for cash. Elite Properties can help you sell your house as we are a cash buying company and we assure to make the home selling process easy for you. For further information call us at 718-977-5462 and we will guide you through the selling process.

After a lot of house hunting, you’ve finally found the home of your dreams. A house with the right amount of rooms and a beautiful front yard so, what do you do next? How do you turn yourself into a homeowner from being a potential buyer? It’s simple, you apply for a mortgage to finance the purchase of your new home. As simple as it sounds there’s a lot that goes into applying for a mortgage and one of them is the mortgage underwriting process. If you’re a potential buyer, here’s a Step By Step Detail On Mortgage Underwriting Process.

What is Underwriting?

Underwriting is a critical step in the mortgage approval process where a qualified individual, known as an underwriter, assesses your financial information and determines whether you meet the lender’s requirements for a loan. This process involves a comprehensive review of your creditworthiness, income stability, debt obligations, and the property’s value. The underwriter’s role is to minimize the lender’s risk and ensure that you can repay the loan.

What Is Mortgage Underwriting Process?

An underwriting process merely determines whether a buyer is able to pay back the loan to the lender. It is a process due to the lender, assessing the risk of lending money. The lender here will assess and verify your income, debts, assets, etc. towards the decisive approval for your loan.

What Goes Into Mortgage Underwriting

A mortgage underwriter’s responsibility is to assess the overall risk of the potential buyer, and whether he/she would be able to repay the mortgage. The underwriter evaluates the factors which help the lender comprehend a buyer’s financial condition that including –

• Buyer’s credit score
• Buyer’s credit report
• Property intended to be bought by the buyer

Additionally, the underwriter also aids the lender in determining if the buyer may or may not see a forthcoming loan approval. The motive of this process is to ensure the buyer doesn’t end up closing a mortgage that they can’t afford. An underwriter further will investigate the buyer’s credit history, order an appraisal, verify the income and employment, analyze the Debt-To-Income Ratio, and lastly, verify your payments and savings. 

Here’s what an underwriter does:

A mortgage underwriter is a crucial player in the loan approval process. They are responsible for assessing the risk associated with lending to a borrower and determining if the loan meets the lender’s guidelines. Here are some key responsibilities of a mortgage underwriter:

1. Review Your Credit History: This includes a thorough examination of your credit report, credit score, and payment history.

2. Analyze Your Finances: Lenders typically adhere to federal financing guidelines. For example, Fannie Mae guidelines require borrowers to have a maximum loan-to-value (LTV) ratio of 97 percent, a credit score of 640 or higher, and a maximum debt-to-income (DTI) ratio of 36 percent. The lender might also incorporate its own criteria. Additionally, they’ll consider specific aspects of your financial situation. If it’s an income-producing property, they might assess whether you plan to occupy the property alongside tenants and take into account your financial reserves, such as investments, assets, and savings.

3. Conduct a Property Appraisal: The approval of your loan is influenced, in part, by the relationship between the amount you’re borrowing and the value of the home you’re purchasing (used as collateral). As a result, the underwriter will request a property appraisal to ensure that the asking price aligns with recent sales of comparable homes in your area.

4. Render the Approval Decision: Once all the necessary reports and paperwork are gathered, the underwriter makes the critical decision to approve or deny your application.

Common Factors That Can Impact Mortgage Underwriting

Mortgage underwriting is a complex process that takes into account various factors to assess your eligibility for a loan. Let’s explore some of the common factors that can impact mortgage underwriting.

1. Credit Score: Your credit score plays a significant role in mortgage underwriting. Lenders use this three-digit number to evaluate your creditworthiness and predict your ability to repay the loan. A higher credit score indicates a lower risk for the lender, making it easier for you to secure a favorable loan.
2. Income: Underwriters carefully evaluate your income to determine if you have the financial capacity to make regular mortgage payments. They will assess your employment history, stability, and the consistency of your income. Generally, a higher income level makes you a more attractive borrower.
3. Debt-to-Income Ratio: Your debt-to-income (DTI) ratio is another crucial factor in mortgage underwriting. It measures the proportion of your monthly debt payments to your monthly income. Lenders prefer a lower DTI ratio, as it indicates that you have enough disposable income to comfortably handle mortgage payments.
4. Employment History: Underwriters consider your employment history to gauge the stability of your income. They typically look for a steady employment track record, preferably with the same employer or within the same industry. Frequent job changes or gaps in employment can raise concerns for lenders.
5. Property Value: When underwriting a mortgage, the value of the property you’re purchasing or refinancing is also assessed. Lenders want to ensure that the property’s appraised value aligns with the loan amount. A lower loan-to-value ratio (LTV) is generally preferred, as it reduces the lender’s risk.

Understanding these common factors can help you prepare better for the mortgage underwriting process.

What Information Do Underwriters Look at?

Mortgage underwriters analyze a range of documents and information to assess your eligibility for a loan. Here are some of the key items they review:

1. Credit Report: Underwriters obtain your credit report from the three major credit bureaus – Experian, Equifax, and TransUnion. They scrutinize your credit history, including your payment history, outstanding debts, and credit utilization. A clean credit report with a history of timely payments enhances your chances of approval.
2. Income Documentation: Underwriters review your income documentation, such as pay stubs, tax returns, and W-2 forms. They verify the stability of your income source and calculate your debt-to-income ratio. Self-employed individuals may need to provide additional documentation, such as profit and loss statements or business tax returns.
3. Bank Statements: Underwriters analyze your bank statements to assess your financial health and verify your assets. They look for consistent deposits, large cash transactions, and any red flags that could indicate undisclosed debts or financial instability.
4. Employment Verification: Underwriters verify your employment history and income by contacting your employer directly. They may request additional documentation, such as employment verification letters or recent pay stubs, to confirm your income details.
5. Appraisal Report: Underwriters review the appraisal report to ensure the property’s value aligns with the loan amount. They assess the property’s condition and location to determine its marketability and potential risks.

By understanding the information underwriters evaluate, you can gather the necessary documents and ensure that your financial records are in order. Now, let’s explore the step-by-step process of mortgage underwriting.

Types of Underwriting Categories

There are three main types of underwriting process. Those are: loans, insurance, and securities.

Loan Underwriting

All loans, in some capacity, undergo the process of underwriting. This involves the evaluation of an applicant’s credit history, financial records, collateral value, and other factors that vary based on the loan’s size and purpose. The appraisal duration can range from a few minutes to several weeks, depending on whether human intervention is necessary.

The most common form of loan underwriting that involves human underwriters is for mortgages. This is the type of underwriting that most individuals encounter. The underwriter assesses an individual’s income, liabilities (debt), savings, credit history, credit score, and more, considering their unique financial circumstances. Mortgage underwriting typically has a “turn time” of a week or less.

Refinancing often takes longer, as buyers facing deadlines receive preferential treatment. The loan applications can be approved, denied, or suspended. The most receive “approval with conditions,” requiring clarification or additional documentation.

Insurance Underwriting

In insurance underwriting, the focus is on the potential policyholder – the individual seeking health or life insurance. The medical underwriting for health insurance was used to determine pricing and coverage decisions. These are based on health status, often considering pre-existing conditions. However, since 2014, under the Affordable Care Act, insurers are no longer allowed to deny coverage or impose limitations based on pre-existing conditions.

Life insurance underwriting aims to evaluate the risk of insuring a potential policyholder based on factors such as age, health, lifestyle, occupation, family medical history, hobbies, and other criteria determined by the underwriter. The outcome of life insurance underwriting can lead to approval, along with various coverage options, prices, exclusions, and conditions, or outright rejection.

Securities Underwriting

Securities underwriting, which evaluates the risk and appropriate pricing of specific securities. That are related to Initial Public Offerings (IPOs), is typically conducted on behalf of a potential investor, often an investment bank. Following the underwriting process, the investment bank may purchase (underwrite) securities issued by the company attempting the IPO and then sell those securities in the market.

Underwriting ensures that the company’s IPO will raise the necessary capital and provides the underwriters with a premium or profit for their services. Investors benefit from the vetting process that underwriting provides, enabling informed investment decisions.

This type of underwriting can encompass individual stocks and debt securities, including government, corporate, or municipal bonds. Underwriters or their employers purchase these securities to resell them for a profit, either to investors or dealers (who sell them to other buyers). When multiple underwriters is involved, it is referred to as an underwriting syndicate.

What Is Automated Underwriting Vs Manual Underwriting

A mortgage underwriter has two options to assess the loan application. The first is to do it manually and the other through software. The one with software is known as automated underwriting. An automated underwriting process is much easier and faster than the manual one as a computer evaluates it. Although, it has some limitations that are non-negotiable like inconsistent income, poor credit score, etc. That may be a deal-breaker for borrowers. Hence, in such circumstances, manual underwriting is an easy option. Furthermore, in some situations, lenders combine automated and manual underwriting to avoid the complications of the loan application.

Mortgage Underwriting Process Steps

As explained above in brief, an underwriter evaluates your finances and forwards them to the lender. Although, there are more aspects that need to be analyzed while proceeding with the underwriting process. Some of the aspects are given below.

1. Income

While assessing a buyer’s income the underwriter requires a set of documents as proof to determine if he/she can cover the monthly mortgage payments. As a buyer, you’ll need to submit documents like –

• W-2 (of last 2 years)
• Bank Statements (2 most recent ones)
• Pay stubs (2 most recent ones)

Furthermore, if the buyer is self-employed or has a share in a business. There are some additional documents that need to be submitted. Such as –

• Profit And Loss Sheets
• Balance Sheets
• Personal And Business Tax Returns
• K-1s

Adding to the above, the underwriter will verify if the buyer’s income is as mentioned in the payslips (or any other format where the income details are provided). Also, the underwriter will verify your employment status with the employer as well. 

2. Assets

Your assets help you qualify for a mortgage. As they can sold for hard cash if you fail to satisfy the outstanding loan amount. An underwriter will go through your savings accounts, stocks, and property if any. As the closing amount ranges from anywhere from 3%-6% lenders use assets to make sure the buyer makes monthly payments post-paying closing costs.

3. Credit

It is one of the most important aspects of mortgage approval, is assessing your credit score. An underwriter will evaluate your credit score to understand how well you have managed to repay your past loans. Assessing your credit score helps the underwriter to predict your capacity to repay the loan. 

4. Collateral

The underwriter needs to understand the worth of the house you’re interested in buying. The motive for seeing the collateral risk is to avoid putting the buyer’s money in a house that is not worth it. Hence, as a part of the closing process, the lender will order an appraisal.

Potential Underwriting Consequences

There can be only three possible consequences of the underwriter’s evaluation as given below.

1. Conditional / Contingent Approval

You can submit documents to satisfy the underwriter’s questions. Although, you’ll be clear to close while the documents go through the assessment. One of the most common requests includes verification/proving large amounts of deposit in the buyer’s bank. In such situations, a gift /donation letter from the donor is vital to prove it’s not a loan.

2. Suspension

This means there are significant questions in your file for which a loan officer will work with you closely to resolve the underwriter’s questions.

3. Denial

If the buyers got the loan pre-approved and review of their finances thoroughly, their loan will still be ultimately declined.

How Long Does Underwriting Take To Complete?

The underwriting process takes up to 5-8 days. Although, there are dependencies like your financial condition, loan type, missing paperwork, etc. that may prolong the whole process. Additionally, a point to remember, underwriting is a mere part of the process. A complete closing can take up to 40-50 days in total.

Tips for Smooth Mortgage Underwriting Process

1. Organize Your Documents

The key to a streamlined mortgage underwriting process is to have all your financial documents ready before applying for a loan. Keep the following document ready when you apply:

• Employment details from the past two years (for self-employed individuals, include business records and tax returns)
• W-2s from the last two years
• Pay stubs covering 30 to 60 days before application
• Comprehensive account information, including checking, savings, CDs, money market accounts, investment accounts, and retirement accounts
• Additional income details, such as alimony, child support, annuities, bonuses, commissions, dividends, interest, overtime payments, pensions, or Social Security payments
• A gift letter if you’ve received funds from friends or relatives for your down payment

2. Enhance Your Credit Profile

A lower credit score can make mortgage approval challenging and result in a higher interest rate. Improve your creditworthiness by taking the following steps:

• Pay down existing debts
• Avoid applying for new loans during this period
• Aim for a favorable debt-to-income (DTI) ratio (ideally 36% or less)
• Review your credit report for errors and dispute inaccuracies

3. Consider a Larger Down Payment

The underwriter also evaluates your loan-to-value (LTV) ratio, which compares your loan principal to the property’s value. A higher LTV ratio puts the lender at more risk if you default on the mortgage. You can improve this ratio by making a substantial down payment upfront. Borrowing less through a larger down payment increases your chances of qualification. Don’t hesitate to explore down payment assistance programs or seek support from family and friends.

By following these steps, you’ll pave the way for a smoother mortgage underwriting process. Also, well-prepared and maximizing your chances of loan approval.

Takeaways

A pro tip to speed up the process is to keep the documents in place, maintain a good credit score and always put a larger down payment. This way it’ll make the mortgage underwriting process a smooth sail. Furthermore, if you are in a hurry to move out and don’t have time for a traditional home-selling process then sell your house to Elite Properties. We buy houses as-is which means no hassles of legal documentation. We close a deal in less than 7 days and offer you hard cash. Call us today at 718-977-5462 and sell your house fast for cash.

What Are the Steps in the Mortgage Underwriting Process

Mortgage underwriting involves several stages that culminate in the lender’s decision to approve or deny your loan application. These steps are

1. The process begins with completing a loan application and submitting it to the lender.
2. Once your application is received, the underwriter performs an initial review to ensure all necessary documents and information are included.
3. Underwriters analyze your credit report, income documentation, and other financial records to assess your creditworthiness.
4. Underwriters review the appraisal report to ensure the property’s value supports the loan amount.
5. Underwriters may issue a list of conditions or additional documentation required for loan approval.
6. Once all conditions are satisfied, the underwriter grants final approval for the loan.

What are the factors that impact the duration of mortgage underwriting?

Several factors can impact the duration of mortgage underwriting, those are

1. Application Accuracy
2. Lender’s Workload
3. Complexity of the Loan
4. Third-Party Involvement

How Long Does Mortgage Underwriting Take?

On average, the underwriting process takes approximately 30 to 45 days from the time of application submission. However, it’s important to note that this timeframe is just an estimate, and the actual duration may differ.

FAQ

What Are the Steps in the Mortgage Underwriting Process

Mortgage underwriting involves several stages that culminate in the lender’s decision to approve or deny your loan application. These steps are

1. The process begins with completing a loan application and submitting it to the lender.
2. Once your application is received, the underwriter performs an initial review to ensure all necessary documents and information are included.
3. Underwriters analyze your credit report, income documentation, and other financial records to assess your creditworthiness.
4. Underwriters review the appraisal report to ensure the property’s value supports the loan amount.
5. Underwriters may issue a list of conditions or additional documentation required for loan approval.
6. Once all conditions are satisfied, the underwriter grants final approval for the loan.

What are the factors that impact the duration of mortgage underwriting?

Several factors can impact the duration of mortgage underwriting, those are

1. Application Accuracy
2. Lender’s Workload
3. Complexity of the Loan
4. Third-Party Involvement

How Long Does Mortgage Underwriting Take?

On average, the underwriting process takes approximately 30 to 45 days from the time of application submission. However, it’s important to note that this timeframe is just an estimate, and the actual duration may differ.