What is a mortgage? | SURE Sales Group Ep. 6
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What is a mortgage? | SURE Sales Group Ep. 6


Here’s a few things you don’t know about getting a mortgage on your house. I thought it make sense to explain some of the key concepts of financing when you’re buying a home. What is a mortgage? A mortgage is the instrument that lending institutions use to give people the money they need to buy a house. I know you understand that, everyone understands that. We all know what a mortgage is; but there’s three components of it. There’s the deed of trust, in Maryland at least. You have a deed of trust, a
promissory note and a grant deed. I’m not going to cover those things because they only come into play if you’re foreclosing on your house or having a hard time repaying. Because the bank needs to make sure they
protect their investment in you, the borrower
and the home as the collateral. Speaking of collateral, the top down way to think about buying anything if you’re going to use leverage, meaning you’re going to borrow someone else’s money and lever up. There is the old saying, the 5 C’s of lending. Now this the same if you’re buying a car,
a house, a boat, whatever. There’s 5 C’s: The first one is ‘Character’. What they mean by character is, your credit score. “Does this guy pay his bills?” “Does this guy
or girl consistently pay on time?” How’s their character? Two is ‘Capacity’. “Do they earn enough to actually
have the capacity to pay the loan back?” Capacity comes in the form as
DTI, which is debt-to-income. They want to see how much debt do you
have, versus your income. “Do you have
the capacity to pay the loan back?” Third is capital. In Real Estate world, it’s capital How much money do you have in the bank? How much reserves do you have? How much assets do you have? Typically in the mortgage world,
the capital is the down payment. We’ll give you the loan, but how much skin are you putting into the game? How much capital are you putting in the game? And that determines your LTV,
your loan-to-value. We’ll cover that. Fourth is the collateral, which is,
what are you getting the loan for? In this case, a house. They really want to know about the collaterals, in case they have to take it back and you can’t repay. And finally the conditions, we’ll give you the loan based on these conditions. Coming over there, there is a few different programs for getting a home mortgage. Now all of the loan programs are based off of the LTV, meaning the loan-to-value. How much money do you need to buy what you’re looking to buy? So, loan-to-value is, if you are doing 5% down, if you’re putting 5% down payment, you have a 95% loan-to-value. If you’re putting 20% down you have a 80% loan-to-value. Does that make sense? If you are putting 10% down,
you have a 90% loan-to-value. So all of the conditions of a loan are based off,
how much capital you’re bringing to the table. Now everyone thinks, in terms of
mortgages, as a 30 year fixed note. For some reason, that’s the bread and butter.
That’s what everyone goes with, 30 years. But there’s a ton of programs, and they
base the programs off just about anything. How much income you have, what your credit score is, what your occupation is. Are you a veteran? There’s a lot of different programs, and you
qualify for a lot more than you think. Heres one
I talked to a lender about the other day. Get this; If you live in Baltimore City, and you have good
credit and you make less than $87,000 a year.
You can do one percent down. 1% 99% loan-to-value That means you can buy a
$300,000 house, for 3,000 bucks. And your payment would probably still be less than
what you’re paying for in rent. For 3,000 bucks. Now, you have to have good credit; You have to
have this income. There’s some checks and
balances there but, all kinds of programs. So you have a 30 year term. There is other very
popular option, is a 15 year term where you
pay the loan off in 15 years, instead of 30. Your payment goes way up, but every month you make that payment, you’re paying a ton more off your house. So if you can afford to do a 15 year, it’s a lot better for you long term. You pay a lot less interest. You pay your house off free and clear in 15 years, instead of 30. There is also ARM loans ARM stands for Adjustable Rate Mortgages. Your interest rate is fixed for a certain period of time, and then after that period expires, the interest rate can go up. These are also very safe, they’re very smart.
I personally have done ARM loans, and it makes sense based on your time frame
for how long you plan on owning the property. Five year ARM; Seven year ARM. Meaning,
you’ll get a discounted rate for the first five
years, and at your sixth it can go up. A small piece at a time, and it’s
all very regulated and very safe. So when you get a pre-approval, this is what
the lenders are going to talk about, if they’re good. Let’s check your credit.
I want to know what your income is. What do you plan on using for a down
payment, what type of house are you looking
for? And what options would you like to see? It’s key to discuss these mortgage options with someone who has a multitude of mortgage products. Some banks only have a couple of products, and
that’s what they’re going to try to jam you up with. So our clients, one of the services we provide
here at the SURE Group, is to help people get
the best possible loan for their situation. So that involves asking a lot of questions,
and really analyzing what a buyers
goals are before jumping in to say, “Hey, here’s a 30 year fixed loan. Do you like the monthly payment? Do you like the down payment? Do that.” Well, why don’t we analyze the situation.
Many different types of analysis, if you own homes
for 5 years, if you do a 15 year, if you do a 7 year ARM: What’s the best for you, in your situation,
with your income, with your credit, with your
time frame, with the type of house you’re buying? So again, there is a lot that goes into this, and
if you have questions, a good real estate agent is going to not only help you to find the
right house; negotiate on your behalf. They’re
going to help you get the best mortgage loan. Because at the end of the day, what you
really care about are 2 things. If I buy this house, how much money comes
out of my pocket? and how much money
do I have to pay every month? Let’s be honest, that’s all you really care
about. How much do I have to part with?
What do I have to repay every month? Those 2 numbers come from the 5 C’s.
There’s little angles to tweak, based
on again, your income, your credit, your Character, Capacity, Capital, Collateral & Conditions. If you have any questions about mortgages, we
have several partners who are literally the best in the country, at some of the biggest banks. I have the #1 guy are Wells Fargo on speed dial.
I have one of the top guys at SunTrust. I have 2 or 3 mortgage brokers who can
shop any bank, for any product. We kind of have the same culture and goals, which is, how do we help our clients get what they want, with the best service, with the best response time,
with the overall best experience. So that when they’re talking to their
friends, family and co-workers about, “Oh my God, getting a loan is so hard. I can’t believe
how difficult that was.” Anything of that nature, they’re going to say, “You know what,
my guy was pretty good. Here’s his card.” That’s our business in a nutshell. We want to kick ass for clients And we look forward to answering your questions Thanks Oh, by the way, interest rates. I know what you’re thinking, he didn’t even talk about interest rates
and he’s talking about mortgages. They’re going up; They’re still historically low. They’ve
went up over a point in the last 6 months. If you’re looking to buy a house, give me a call. Reach out. I will put you in touch with the lender
who I know is right for you in your situation after
asking some very basic questions, and we can analyze the current market based on
what you are paying in rent; what your goals are, and make sure you get the loan that’s right for you. Thanks

One Comment

  • SURE Sales Group

    Andrew Undem presents

    SURE Group Show Ep. 6 – What is a mortgage?

    Watch more SURE Group Show episodes below!

    https://www.youtube.com/watch?v=EqnKaE-46AQ&list=PLJvopzE87VSHIUzLejXgcXKMYRpCbnXeu

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    Check out our blog post, which breaks down what a mortgage loan truly is, and how important it is to find the right one for you

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