Mortgage Lenders Blog and Resources

May 2022 — Best Company recently announced the seven mortgage lenders that earned the Customers Love Us Award in 2022. About this award The Customers Love Us Award is presented to companies that have 50+ 5-star reviews on BestCompany.com. Companies did not apply for this award. Qualification is based on the number of 5-star reviews that a company has received from past or present clients. Award recipients The following companies have received the 2022 Customers Love Us Award. Companies are not listed in a particular order. {%company-card vertical="mortgages" company="better-com"%} Founded in 2016, Better.com is a direct online mortgage lender offering a variety of loan types and a streamlined mortgage process that can get you to closing quickly. {%company-card vertical="mortgages" company="innovative-mortgage-alliance"%} Innovative Mortgage Alliance, founded in 2009 in Salt Lake City, Utah, specializes in residential financing and refinancing in 17 states. With a team of qualified loan originators, the lender offers a simplified loan process. {%company-card vertical="mortgages" company="amerisave"%} AmeriSave Mortgage is a direct mortgage lender that has funded over $115 billion in home loans and financed over 664,000 homes. A variety of loan types are available to finance or refinance a home purchase. {%company-card vertical="mortgages" company="new-american-funding"%} New American Funding, founded in 2002, is a well-known mortgage lender, offering a variety of loan types. The lender provides daily updated mortgage rates on its website.  {%company-card vertical="mortgages" company="quicken-loans"%} Quicken Loans (Rocket Mortgage) is the largest mortgage lender in the United States. It was founded in 1985 in Detroit and offers a variety of loan types and tools to make the mortgage process simple and convenient. {%company-card vertical="mortgages" company="acopia-home-loans"%} Acopia Home Loans services mortgages in 20 states. Founded in 2007, it is headquarterd in Goodlettsville, Tennessee. {%company-card vertical="mortgages" company="nbkc-bank"%} NBKC Bank is a full-service bank that is a Fannie Mae and Freddie Mac approved lender. The lender is part of the Costco Mortgage Program, offering homebuyers discounts on lender fees. A note on this award The Customers Love Us Award is based on the number of 5-star reviews that a company has received from customers. Mortgage experts recommend reading reviews while researching mortgage lenders. Customer reviews will provide you with greater insight on the customer service that a company provides, which can be more important to consider than rates and fees that are typically similar across mortgage lenders. Based on reviews, we would recommend each of the mortgage lenders outlined above.

One of the more daunting parts of buying a home, besides ensuring that you can afford the investment in the first place, is making sense of all the terms and jargon that accompany the process. To help you feel more confident in the homebuying process, we’ve compiled a list of 50 must-know mortgage terms.   A  |  B  |  C  |  D  |  E  |  F  |  H  |  J  |  L  |  M  |  N  |  O  |  P  |  R  |  S  |  T  |  U  |  V   Adjustable rate mortgage (ARM) An adjustable rate mortgage (ARM) is a mortgage loan type in which your interest rate will change based on overall market rates. Thus, your monthly payments will fluctuate throughout the life of your mortgage loan. The initial interest rate and monthly payment will be lower with an ARM, but both are subject to increase substantially. Amortization Amortization is the process of paying down your home loan by making regular monthly payments, reducing your debt over time. To amortize your mortgage, you will typically need to ensure that your payments cover both interest and principal. Annual percentage rate (APR) The annual percentage rate (APR) is the annual rate charged for borrowing money, versus a monthly fee/interest rate. Because your APR takes various costs and fees into account, it is typically larger than your interest rate. Appraisal A home appraisal provides the estimated value of a real estate property. Assets Assets are valuable items, resources, or property that you own and that have a cash value. Some examples of assets include checking and savings accounts, stocks and bonds, and 401(k) and IRA accounts. Your lender will verify your assets when you apply for a mortgage. Lenders assess your assets to ensure that you have enough money in savings and investments to cover your mortgage payments in the case of a financial hardship or emergency.     Balloon loan A balloon loan means that you will have one larger, one-time payment at the end of your loan term. This payment can be much higher than your usual payments, and if you’re unable to pay it, you may need to refinance your mortgage. Or, in some cases, you may face foreclosure.     Closing Closing is the last step in the homebuying process. At closing, the deed will be delivered and signed, closing costs will be paid, and you will be given the keys to your new home. Closing costs Closing costs cover the expenses associated with the homebuying process and transaction. Closing costs may vary by location and lender but typically include the loan origination fee, insurance fees, and attorney fees. Conforming loan A conforming loan is a type of home loan that is below a set dollar amount and that meets specific Fannie Mae and Freddie Mac funding criteria. Conforming loans are typically underwritten and funded by lenders and then sold to investors, such as Fannie Mae or Freddie Mac. Construction loan A construction loan is a short-term loan that is used to cover home renovation, construction, or rehabilitation projects. Contract of sale A contract of sale is a written agreement between a buyer and seller, conveying the title and that certain conditions have been met and payments have been made. Conventional mortgage A conventional mortgage is any type of home loan that isn’t insured by a government agency/entity. Co-signer/co-borrower A co-signer or co-borrower is someone who signs your loan and agrees to take responsibility for paying back the loan with you. If you have a low credit score or are experiencing difficulty in securing financing to purchase a home, a creditworthy co-signer or co-borrower can increase your chances of qualification, as well as help you secure better rates and terms.     Debt-to-income (DTI) ratio Your debt-to-income ratio is a percentage representing all your monthly debt payments divided by your monthly gross income. Loan underwriters will verify your DTI ratio to see how much income you have to cover mortgage payments after other debt payments are made each month. Deed A deed is a document proving that you own your home and have a title to the property. Discount points Discount points are an optional cost you can pay at closing to “buy” a lower interest rate. Typically, one discount point is equal to one percent of your loan and you will be required to pay points in cash at closing, thus increasing your upfront costs but reducing your monthly interest payment amount. Down payment A down payment is a portion of the sales price of a home that is paid at closing. A traditional down payment is 20 percent, but in most cases, a lower down payment can be made.     Earnest money deposit An earnest money deposit is a deposit a homebuyer pays to confirm a signed contract agreement to buy a house. The house seller or another third party (e.g. a real estate agent) holds the money until closing. When you close on a home sale, the earnest money can be applied to your down payment or closing costs. If the contract is terminated before closing for an acceptable reason, the money will be returned to the buyer. Equity Equity is how much money you have paid into your house — how much your home is currently worth minus the amount of remaining mortgage. Escrow Escrow covers property-related expenses like homeowners insurance or property tax. Typically, your mortgage lender will set up an escrow account for you, and a portion of your monthly payment will go into your account, covering additional property expenses.     Fannie Mae The Federal National Mortgage Association (Fannie Mae) is a U.S. government-sponsored agency that provides mortgage options to low- and moderate-income homebuyers. To increase affordable lending, Fannie Mae purchases and backs mortgages from lending institutions. FHA loan An FHA loan is a government-insured mortgage backed by the Federal Housing Administration. FHA loans are a great option for first-time homebuyers because they typically have lower down payment and minimum credit score requirements, making it easier to qualify for financing. Many private lenders offer this loan type. Fixed rate mortgage A fixed rate mortgage is a type of loan that has a set interest rate at the time of mortgage purchase that will never change throughout the life of the loan. Foreclosure If you fail to make your monthly mortgage payments, one possible consequence is foreclosure, through which your lender or servicer takes back your property. If the foreclosure process is initiated, your lender or servicer is generally required to send you notification. Some foreclosure proceedings involve a court process, but not all. Freddie Mac The Federal Home Loan Mortgage Corporation (Freddie Mac) is a U.S. government-sponsored agency under the direction of the Federal Housing Finance Agency (FHFA). Freddie Mac purchases mortgage loans from lenders and servicers to promote affordable lending practices.     Home equity line of credit (HELOC) A home equity line of credit (HELOC) allows you to borrow money against your home equity. A HELOC is a line of credit, meaning that you withdraw funds as needed, not all at once, and you will typically have an adjustable interest rate. There will be a determined “draw period” for your HELOC, which will allow you to draw funds during a set period of time — once the period ends, you will no longer be able to withdraw funds. You will be required to make minimum payments throughout the draw period, and you may be required to pay your complete balance when the draw period ends. Home equity loan A home equity loan allows you to borrow money against your home equity. You will receive funds as a lump sum, and you will typically have a fixed interest rate. Home inspection A home inspection is typically part of the homebuying process. It is important to order a home inspection to ensure that the home’s structure and systems are in good repair. Homeowners insurance Homeowners insurance is a form of insurance that can cover losses or damages to your home. It typically covers four types of damage: interior damage, exterior damage, loss or damage of personal belongings, and injury that may occur on your property. Homeowners insurance shouldn’t be confused with a home warranty or mortgage insurance.     Jumbo loan A jumbo loan is a type of home loan that exceeds the limits set by Fannie Mae and Freddie Mac. These loans have higher credit score requirements and are typically reserved for the purchase of luxury properties.     Loan-to-value (LTV) ratio The loan-to-value (LTV) ratio compares your mortgage amount to the value of your property. Lenders may consider your LTV ratio to determine whether or not they will lend to you, as well as whether or not they’ll require you to pay private mortgage insurance (PMI). The higher your down payment on a property, the lower your LTV ratio will be.     Mortgage  A mortgage is a specific type of loan used for a property or home purchase. Mortgages are commonly offered by private lenders, brokers, banks, and credit unions. You will be required to make monthly payments on your mortgage payment, including interest, for the set term of your loan.     Non-conforming loan A non-conforming loan is a mortgage loan that doesn’t meet the Fannie Mae and Freddie Mac guidelines, thus disqualifying it from being sold to either government-sponsored enterprise. These types of loans typically have higher interest rates.     Origination fee An origination fee is a fee charged by a mortgage lender to cover the cost of processing a loan.     Pre-approval Pre-approval is a preliminary assessment of whether or not a lender will lend to a specific borrower. If you, as a borrower, are approved, you will typically receive a pre-approval letter, which can be used as a confirmation of financing when placing an offer on a house. Pre-qualification Pre-qualification is not the same as pre-approval. Pre-qualification simply gives you an idea of how much you would qualify for for a loan, but is not binding in any way. Principal The principal is the amount that you have to pay back on your mortgage. Your monthly payments will include a portion of the principal, ensuring that you pay back your borrowed amount in full. Private mortgage insurance (PMI) Private mortgage insurance (PMI) is a type of insurance for your lender if you make a down payment under 20 percent. Once you’ve accumulated a certain amount of equity in your home, you should be able to cancel your PMI. Property tax Property tax is typically charged at a local level based upon the value of your property. Property taxes are typically collected through your monthly mortgage payment and will be added to your escrow account. If you don’t have an escrow account, you will be responsible for paying the property taxes directly.     Real estate agent A real estate agent is a licensed real estate professional who represents either a buyer or seller in a real estate transaction. You typically don’t pay a real estate agent directly — they are typically compensated through a percentage of the property’s purchase price. Refinance Refinancing refers to the process in which you replace your loan with another to secure better rates and terms. Reverse mortgage A reverse mortgage is reserved for homeowners who are 62 years of age or older, and allows them to access their home equity. Reverse mortgages are different from home equity loans or home equity lines of credit (HELOCs) because instead of the homeowner making payments to a lender, the lender will release funds to the homeowner. The money you receive, as well as interest, will increase the balance of your loan each month.     Settlement Settlement is the final stage in a real estate transaction when the ownership of the property is transferred from seller to buyer. Short sale A short sale refers to a home being sold for less than what remains on the existing mortgage. It is an alternative to foreclosure, but because the home is being sold, you will be required to leave.     Term The term of your mortgage is the set amount of time that you will be making monthly payments to completely pay off your loan. Typical mortgage loan terms range from 15 to 30 years. Title A title is the physical document that states that you own your home or property. The title will also show past property owners, as well as a description of the property.     Underwriting Underwriting is part of the mortgage process in which you, as a borrower, are assessed as an acceptable risk by your lender. An underwriter will analyze your documentation, credit history, and financial history, after which a lending decision will be made. There are typically fees associated with the underwriting process that you will pay as part of your closing costs. USDA loan A USDA loan is a government-insured loan backed by the U.S. Department of Agriculture (USDA). This mortgage program is reserved for eligible rural properties that are outlined and approved by the Rural Housing Service. Typically, USDA loans have a 0 percent down payment and favorable rates.     VA loan A VA loan is a government-insured loan backed by the U.S. Department of Veteran Affairs (VA). This mortgage program is reserved for U.S. military service members, veterans, and eligible spouses, and helps them buy homes. The VA guarantees a portion of the loan, reducing the risk of loss for a lender, and this loan type typically has a zero down payment with favorable rates. Variable interest rate A variable interest rate refers to a rate that will fluctuate throughout the life of your mortgage loan. You will typically have a lower starting rate, but it is very likely that your rate will rise as the market experiences various ebbs and flows.

Guest Post by G. Brian Davis Want to start investing in real estate, but don’t have tens of thousands of dollars for a down payment?  You have more options than you realize. From directly buying properties to buying shares in real estate funds, try these tactics to diversify your portfolio to include more real estate.  1. House hack House hacking involves finding ways to generate income from your home, to offset your housing costs. In the classic house hacking model, you buy a duplex to live in one side and rent out the other. Traditional mortgage lenders also allow triplexes or fourplexes.  And if low-end units come to mind when you think of multifamily properties, think again. You can house hack with extremely high-end multifamily properties.  If you don’t like the idea of sharing a wall with someone else, you can also house hack single-family homes. I’ve house hacked with housemates, and I have a friend who’s house hacked by renting out a suite in her apartment as a vacation rental. My business partner has house hacked by hosting a foreign exchange student whose monthly stipend covered most of her mortgage payment. She’s also rented out storage space in her garage to help cover her mortgage. Other homeowners add an ADU to house hack.  When you house hack, you take out a conventional owner-occupied mortgage, which means a low down payment. For example, programs like Fannie Mae’s HomeReady and Freddie Mac’s Home Possible allow a 3 percent down payment, and FHA loans allow 3.5 percent down. Some specialty loan programs such as VA loans and USDA loans allow 0 percent down. You must live in the home for at least one year, but then you can move out and keep the property as a rental if you so choose. House hacking makes for a cheap and easy way to start your real estate portfolio. 2. Use a credit line for the down payment While most conventional mortgage programs don’t allow you to borrow the down payment, portfolio lenders and hard money lenders do typically allow it. If you have equity in your home or an investment property, you can open a home equity line of credit (HELOC) against it and pull out money for a down payment. The tactic works particularly well for buying fixer-uppers to flip or refinance using the BRRRR strategy. You can then pay off your HELOC balance in full just a few months after drawing on it. Also check out all-in-one first lien HELOCs as an option for pulling out money for a down payment.  3. Fractional ownership in rental properties Alternatively, several companies nowadays let you buy fractional ownership in rental properties.  For example, Real Wealth offers both group investments and rental fund syndications. You can also check out Arrived Homes and Roofstock One, which both offer fractional ownership.  Arrived Homes is available to non-accredited investors, and lets you invest with as little as $100.  4. Crowdfunded loans Some hard money lenders and other sources of alternative financing allow you to invest money toward specific loans on their books.  My favorite of these is Groundfloor, which lets you put as little as $10 toward any given loan. They allow non-accredited investors to participate.  Accredited investors can also try PeerStreet, which works similarly.  I particularly love that these offer one of the few ways to invest in real estate short-term. Assuming the borrower repays on schedule, you get your investment back with interest in just 3 to 18 months.  5. Private REITs As another type of real estate crowdfunding investment, you can invest in private funds that own properties or debts secured by real estate.  Unlike their publicly-traded counterparts, you buy shares in private real estate investment trusts (REITs) directly from the company that owns the assets. That makes share prices far less volatile, but it also makes shares harder to sell. Most crowdfunded REITs impose penalties if you sell shares back to them within the first five years.      Some private REITs allow non-accredited investors to buy shares. For example, Fundrise lets you invest with as little as $10.  Before investing, make sure you understand how crowdfunding works, and do your homework on the best crowdfunding companies. 6. Publicly-traded REITs Want more liquidity, to sell shares at a moment’s notice? You can buy shares through your regular brokerage account, or through your IRA. Even better, you can sell your shares at any time to other investors on the open market.  But that liquidity comes at a cost. Public REIT share prices are far more volatile than private REITs, which adds to the risk.  As for how much you need to invest, you can buy a single share at its going price, often as little as $10 to $20. Some brokerage platforms allow you to buy fractional shares as well, letting you invest in any company for whatever you have available in your account.  To get started, research the best REITs for beginner investors.  7. Real estate stocks If you like investing in real estate through your brokerage account, you can also look beyond REITs to industries related to real estate. For example, you can buy shares in homebuilder stocks, or in funds that own many different homebuilder companies.  Likewise, you can buy shares in home improvement retailers such as Home Depot or Lowes. Or you can buy shares in real estate tech platforms like Zillow. For that matter, hotel chains own massive amounts of real estate, tying them to the industry as well.  Get creative as you research real estate stocks and companies with strong ties to the real estate sector.  Final thoughts You don’t need thousands of dollars to invest in real estate. Depending on how you invest, you can get started with as little as $10.  If you like real estate crowdfunding investments, start with Fundrise and Groundfloor as easy and affordable options. If you prefer publicly traded stocks, check out beginner REITs and funds that own homebuilder stocks.  And if you want to buy properties directly, consider house hacking to buy your first real estate investment.  Whatever you do, don’t fall prey to analysis paralysis. Just get started, and keep learning a bit more about real estate investing every day.  G. Brian Davis is a real estate investor and founder at SparkRental.com, which helps middle-class people replace their day job with rental income. The company offers a wealth of free courses and tools, along with online landlord software that’s (mostly) free for landlords. He spends 10 months out of the year traveling overseas with his family and has an insatiable appetite for reading, hiking, and perfectly paired wine and food.

A home uses a lot of energy, which impacts the environment as well as your wallet.  The average monthly utility bill for a home in the United States is close to $400, with approximately $115 of that bill accounting for the cost of energy use (heating, cooling, lighting, etc.). And household energy accounts for 20 percent of greenhouse gas emissions in the United States. What if there was a way to offset both spending hundreds of dollars on utilities each month and contributing to greenhouse gas emissions? Table of Contents: Why you should buy an energy efficient home or invest in energy efficient upgrades Energy efficiency upgrades Options Priority upgrades Energy efficiency financing options How to qualify for energy efficiency financing Question and answer with an energy efficiency expert Why you should buy an energy efficient home or invest in energy efficiency upgrades An energy efficient home can save you 25 percent on utility bills, amounting to over $2,200 in annual savings. These savings can make up for the higher price tag of an energy efficient home and help relieve financial stress while paying down a mortgage. If you currently have a home, investing in home energy efficiency upgrades could save you hundreds of dollars each month. Not to mention that making energy improvements will raise the value of your home, bringing in extra cash if you decide to sell in the future.   Additionally, an energy efficient home purchase, or investment in upgrades, has a positive impact on the environment — reducing electricity and fuel use that contributes to a large percentage of greenhouse gas emissions in the United States. Greenhouse gases are a leading cause in climate change and making even the smallest of energy use adjustments in your home can benefit the environment. Energy efficiency upgrades Focus on where you’re using the most energy in your home and the cost-effective fixes available to you. Home energy use More than half of the energy consumption in your home comes from heating and air conditioning — combined, heating and cooling account for approximately 51 percent of energy use. Beyond heating and cooling, water heating accounts for nearly 20 percent of energy use with lighting, refrigeration, appliances, and TV and media products accounting for the remainder of energy used in a home. It is worth noting that while heating and cooling are combined in the graph above, heating actually accounts for approximately 46 percent of home energy use on its own. Home energy upgrade options There are many energy efficiency upgrades you could make to your home. If you want to do them all, more power to you, but you don’t need to do everything at once. Insulation Insulation is key to reducing heat loss in your home and is a recommended home energy upgrade.  Insulation makes the biggest difference when installed in the attic, basement, or crawl space — any spaces where there are likely to be more air leaks. And insulating these spaces can save you up to 15 percent on your heating and cooling costs. There are different types of insulation available: Blanket batts and rolls Spray foam insulation Blown-in insulation Foam board or rigid foam panels Reflective or radiant barrier If you’re looking for a DIY insulation option, blanket batting or rolls is an easy installation that is also cheaper than other insulation types. Another popular option is spray foam insulation, which would need to be installed by a professional. There are two types of spray foam: open cell and closed cell foam. Closed cell foam has a higher insulation value, but will be more expensive than its open cell counterpart. Insulation costs will be entirely dependent on the type of insulation you choose, but you may want to budget between $1,500 and $3,500. Solar panels Solar panels have become a popular clean energy option over the last decade. Purchase and installation has become more affordable, making it easier to save money on your utility bills, while also reducing your carbon footprint. Additional incentives for installing solar panels include a U.S. federal tax credit of 30 percent, as well as state-specific tax credits and rebates. To know exactly which tax credits and incentives are available in your area, you can speak with your solar provider. While solar panels are designed to generate energy from direct sunlight, they can still be a viable option for those who live in cooler climates — photovoltaic solar panels are an all-climate option. The cost of solar panel purchase and installation ranges from $17,000 to $24,000. New doors and windows Old windows and doors can account for a significant portion of your heating bill through heat loss. It can be costly to replace windows and doors, and if you’d prefer to invest in a more cost-conscious option you could insulate windows and doors instead. Replacing doors could cost you $900 to $2,600. Replacing windows can cost anywhere from $400 to $900. Smart fixtures The fixtures in your home, such as your thermostat, lights, and power outlets, can use a lot of energy. But, you can purchase light switches, outlets, and thermostats that can help you control your energy use instead of eating it up. Smart thermostats, in particular, are a recommended fixture that can control how much heat and air you use in your home. A smart thermostat can cost anywhere from $100 to $500, while installation can cost anywhere from $200 to $500. This may seem like a steep cost, but it could save you hundreds of dollars each year. Not to mention the positive impact it can have on the environment — according to Energy Star, 13 billion pounds of greenhouse gas emissions (equivalent to emissions of 1.2 million motor vehicles) could be offset each year if everyone used a smart thermostat.  New water heater The second highest cost on your utility bill, after heating and cooling, is water heating. Replacing a water heater can cost anywhere from $500 to $1,800, but could save you upwards of $100 a year on your utility bill. Furnace filters It is recommended to replace your furnace filter every three months, or at least once a year, depending on the size of your furnace. It is important to replace the filter regularly because an old, dirty filter will require your furnace to work much harder, using up much more energy that it would otherwise. Priority energy upgrades As seen above, there are many energy efficiency upgrades that you can make in your home, and that doesn’t mean that you need to do all of them.  If you’re unsure where to start in completing energy efficiency upgrades, it is best to start with smaller, simple fixes, allowing you to prepare for larger upgrades down the road. Energy efficiency financing options In most cases you can finance energy efficiency upgrades or a home purchase through your mortgage, but it is important to work closely with your lender. Beyond a mortgage, there are various options available to finance an energy efficient home purchase or energy upgrades: Energy Efficient Mortgage (EEM) An Energy Efficient Mortgage (EEM) can be used to purchase or refinance an energy efficient home, like an ENERGY STAR certified home, or to finance energy efficient improvements to your current home. EEMs are backed by either private lenders or federal mortgage programs through the Federal Housing Administration (FHA) and Veteran Affairs (VA). Department of Energy’s (DOE) Weatherization Assistance Program The U.S. Department of Energy (DOE) Weatherization Assistance Program (WAP) is intended to cover the costs of energy efficiency improvements for low-income households. Each state has specific weatherization services and WAP programs that can connect you with local weatherization organizations. Fannie Mae HomeStyle Energy Mortgage With a Fannie Mae HomeStyle Energy Mortgage you can borrow money to purchase or refinance an energy efficient home, reduce utility costs by financing energy efficiency upgrades, and/or finance natural disaster damage prevention improvements to your home. For weatherization upgrades you can finance up to $3,500 without acquiring a home energy report, and borrowers may also qualify for a $500 Loan Level Price Adjustment (LLPA) credit. Freddie Mac GreenCHOICE mortgage (home purchase or refinance) Finance an energy efficient home purchase or energy efficiency upgrades with a Freddie Mac GreenCHOICE mortgage. In most cases you must have an energy report to apply for financing, but for basic upgrades less than or equal to $6,500 an energy report isn’t required. GreenEnergy Money GreenEnergy Money (GEM) is an organization that offers financial solutions for new energy efficient home builds and retrofit projects. GEM partners with mortgage and financial companies, as well as builders and developers, allowing affordable energy reductions to be made in communities across the country. Property Assessed Clean Energy Programs (PACE) Property Assessed Clean Energy (PACE) programs exist for both commercial and residential properties. PACE programs offer solutions to cover the upfront costs of energy and energy improvements. PACE financing is tied to a property, not individuals. On-bill financing (OBF) & On-bill repayment (OBR) With on-bill financing (OBF) or on-bill repayment (OBR), a private lender or utility provider arranges financing to fund energy efficiency or renewable energy improvements. These loaned funds are added and repaid through existing utility bill payments. OBF and OBR are typically low-to-no interest rate financing options, but are not available in all regions or states. How to qualify for energy efficiency financing In most cases, qualifying for an energy efficiency mortgage or other financing services requires a home energy rating. Your home is rated on a scale from 0 to 150 with a lower score indicating a more energy efficient home.  To get a home energy rating you will need to schedule a home energy assessment with a certified home energy rater. The energy rater will inspect multiple features in your home such as insulation, windows and doors, heating and cooling systems, and potential air leakage. After this inspection, you will be given an energy rating and energy report. The report will include energy efficiency improvement suggestions and estimated costs, as well as potential annual savings. To qualify for financing if you are purchasing an energy efficient home, your home energy report must indicate that the home is energy efficient.  To qualify for financing for home energy efficiency upgrades, your home energy report must indicate that the upgrades will make the home more energy efficient and that these improvements are cost-effective. Bonus: Question and answer with an energy efficiency expert We asked Anna DeSimone, an energy efficiency expert and author of “Live in a Home that Pays You Back  A Complete Guide to Net Zero and Energy-Efficient Homes,” some common questions that homeowners might have when approaching the topic of energy efficiency. 1. What are common financing options for purchasing an energy efficient home or financing energy efficiency upgrades? Are there certain options that you would recommend? Homebuyers looking to complete energy improvement are able to finance a good portion of the improvement costs with their mortgages. The amount of costs can be as much as 20 percent over the purchase price. Mortgage lenders who are authorized to originate loans to Fannie Mae, Freddie Mac, FHA or VA can offer such programs.  Lenders generally require an energy assessment, along with an estimate from a licensed contractor. If you’re planning to purchase or lease solar photovoltaic panels, they would ask for copies of the agreements. For smaller projects (less than $5,000) energy assessments are not required.  2. What are the priority energy efficiency improvements homeowners should make? Most energy consultants recommend that homebuyers upgrade the heating, ventilation, and air conditioning (HVAC) system — since a good operational system helps deliver the maximum efficiency.  Upgraded HVAC will improve indoor air quality, and today’s technologies have systems that capture biological pollutants and other toxins that result in cleaner air and a healthier environment for your family and pets.  Other key energy measures include adding extra insulation, air sealing, and installing energy-efficient doors and windows. Small changes can make a difference — such as programmable thermostats and LED lighting.  3. What if you don't own your home? What energy efficiency improvements could you make? People who are renting a single-family home could “lease” solar photovoltaic panels. However, renewable energy systems require upgraded electrical systems which may not be feasible.  Renters of condos, townhouses, and apartments can reduce their energy by installing window treatments (shades or curtains) that help keep the warm air inside in the winter, and reduce the heat of the sun in the summer. Other changes can include buying Energy Star appliances, LED lighting, and programmable thermostats.  4. When buying a house, how do you know it's energy efficient? What should you be looking out for? Most homebuyers order a professional home inspection which assesses the entire structure of the home, HVAC, and its operational systems. To determine whether or not the home is energy-efficient, homebuyers can also order a home energy assessment from a professional rating company.  The home energy rater will assign a relative performance score such as the well-known HERS Energy Score from the Residential Energy Services Network (RESNET). You can learn about the HERS Index, Energy Score, and locate a HERS energy rater on the RESNET website.  The U.S. Department of Energy offers a program called Home Energy Score, and provides detailed explanations about the testing process and assessor locator by zip code.  5. Should energy efficiency upgrades be a priority for homeowners? Energy efficient upgrades are best completed in an efficient manner.  An outdated HVAC system, or insufficient electrical panel can become a home’s “weakest link” when you’re attempting to reduce energy. If you are considering a solar photovoltaic system (or other type of renewable energy system such as geothermal, wind, or power) keep in mind that such systems are far more effective on homes that are well-insulated and with sound operational HVAC systems.  The results of your home inspection report — coupled with an energy assessment — can be the basis for developing a strategic plan. Many important priorities in a home need to be met for your family’s health and safety, and each of these priorities can be implemented in accordance with your household needs, budget, and environmental goals.   

Guest Post by Grant McDonald According to a Gallup poll released in 2020, the majority of Americans believe real estate is the best long-term investment option among a variety of investment possibilities. Real estate takes the top spot on the list of favored long-term investments with 35%, followed by equities (21%), gold (16%), and savings accounts (17%). At 8%, bonds are the least favored long-term investment. If you know how to do it correctly, flipping houses may be a profitable real estate investment option. But, of course, securing funding for a flip is critical since you can't perform repairs and flips without money, right? Hard money loans are a terrific strategy for real estate investors to generate money and create wealth quickly. If you're thinking about using hard money loans for your next fix and flip, here's what you should know. Why hard money loans are a good option  A hard money loan, also known as a fix and flip loan, can help a beginner flipper working on one flip and a seasoned rehabber working on several flips simultaneously to succeed. Many other types of property investment projects can be financed using hard money loans. “There are obviously a lot of expenditures associated with flipping a house for the resale market: borrowers must take into account the purchase price of the property, the cost of renovations, and the possibility of unexpected expenses,” says Joshua Blackburn of Evolving Home. Using hard money to scale your investment properties is a particularly effective strategy, as it allows you to take on projects progressively with little money down. Hard money loans also reduce the amount of money a flipper has to invest in a home during the renovation process directly. What to do before applying for a hard money loan If you want to get your hard money fix and flip loan approved quickly, it’s important to be prepared.  That involves knowing your private lender, how much money they typically lend, the interest rate they charge, and any other conditions they may impose. You'll also need a workable budget, as well as a complete accounting of your cash on hand and alternative financing choices. After you've nailed down these elements, you'll be prepared to look at property leads with new eyes and a strategy in mind. In addition, look for homes that are priced just around your lender's average hard money loan amount, ensuring that you're bringing them bargains that they can actually accept.  When you've discovered a home that meets your criteria, you'll need to do the following: Perform a property appraisal Performing a property appraisal can include some of the following steps: Calculate the cost of renovations. Calculate the item's worth after it has been repaired (ARV). Before financing charges, calculate your estimated profit margin from the sale of the renovated property. Prepare a deal information packet with all of the information mentioned above for possible lenders (if necessary). Calculate how much a hard money loan will cost. After financing charges, calculate your estimated profit margin from the sale. When you're getting ready to apply for a hard money loan, you don’t want to mess up the property appraisal. “Lenders are not likely to lend you the money if you're willing to pay the asking price for an inflated property since the asset they'll be receiving as collateral isn't likely to be worth as much as you need it to be,” says Isaac Zisckind, Senior Partner and Real Estate Lawyer, Diamond & Diamond Lawyers.  If you're good at spotting undervalued homes, on the other hand, you might be able to acquire better interest rates from hard money lenders because your prospects of generating a profit are higher. Last but not least, if you're going to a foreclosure auction to look for homes, you'll need to be prepared to move quickly and have a strong idea of how much money you can really acquire when bidding. So, before applying for a hard money fix and flip loan, always prepare ahead and plan attentively. Create a budget Your hard money fix and flip loan will most likely be the focus of your financing strategy, and it will have a significant impact on whether the project succeeds or fails. If you want to consistently generate a profit, you must thoroughly understand all potential costs. It'll also help you understand how much time you have to renovate and resell your home. After you've closed your first successful hard-money sale, the entire preparation process will become second nature to you. It is strongly recommended to create a budget and deal evaluation spreadsheet in the months leading up to your first deal to keep track of your estimated expenditures and margins. Everything becomes much clearer when you can view all of the facts on one page. How to apply for a hard money loan Now that you've completed the preparation phase, it's time to move on to the application procedure. Thankfully, applying for a hard money loan is a lot easier than locating profitable homes and determining whether or not they're worth remodeling. The application process typically includes the following steps: Place a contract on a property. Consult a loan officer. Fill out the application for a loan. Wait for the application to be reviewed by the underwriter and loan officer. Obtain a property appraisal from a third party (if necessary). Please provide any supporting paperwork for the property or your company (if necessary). In any case, you should be prepared to show the lender proof of income. While you may not need to explain your valuation or the predicted costs and profits all of the time, your lender will almost certainly be doing their own calculations for every aspect of the transaction — except for how much profit you'll make after it's all said and done, of course. You might even ask to compare notes if you're working with a hard money lender with whom you have a good working connection. How to get pre-qualified for a hard money loan It's critical to have a hard money fix and flip loan lender who moves at your pace, especially if you plan on performing a number of deals at once. Getting pre-qualified by a lender can help you cut down on wasted time and increase your transaction flow significantly. However, the requirements for becoming pre-qualified vary greatly from lender to lender, and getting your foot in the door with the major national lenders can be difficult. Pros and cons of hard money loans There are several compelling reasons to seek a hard money loan rather than a traditional bank loan, but also several reasons not to.  Pros The following are the pros that hard money loans provide to real estate investors: Flexible terms — Because private financiers provide hard money loans, investors may have more flexibility in negotiating loan terms. During the underwriting process, users may be able to modify the repayment plan to their needs and have certain fees, like the origination fee, decreased or removed. Convenience — Applying for a mortgage takes time, especially with the new mortgage lending standards imposed as the Dodd-Frank Act. Clearing a loan might take months, putting investors at the chance of losing out on a specific investment estate. A hard money loan can provide funds in as little as a few weeks. This is critical if you're sponsoring a big development venture and can't afford to miss the deadline. Collateral — With a hard money loan, the asset itself is typically used as collateral. Lenders may, however, give investors some freedom in this area. Some lenders, for example, may allow you to use personal property to protect the loan, like a retirement account or a unit you own. Cons Hard money loans aren't always the best option for funding. There are two major disadvantages to consider: Cost — Although hard money loans are easy, they come at a cost to investors. The rate of interest might be up to ten percentage points more than a traditional loan. Investors will likely pay more in service charges, loan service fees, and closing charges. Shorter repayment period — The goal of a hard money loan is for an investor to be able to get a property ready to sell as soon as feasible. As a result, compared to regular mortgage loans, these loans have substantially shorter repayment schedules. It's critical to have a clear understanding of when the property will become lucrative when picking a hard money lender to assure that you'll be able to repay the loan on time. The bottom line Aside from going via institutional lenders, hard money is a faster way to secure a real estate loan. Private people or investors that have hired hard money loan organizations to manage their investment portfolios provide funds for hard money loans. A hard money loan is an excellent option when banks have turned down a loan application or when speed is of the essence. By thoroughly knowing your lender's terms and costs, you can protect yourself from all of the problems we've discussed. Prepare a solid exit strategy and ensure that you can make timely payments in order to establish a long-term connection with a lender. Grant McDonald has more than three decades of experience in the real estate industry and more than a decade in the real estate finance space. He is currently Vice President - Corporate Development at 14th Street Capital - America’s premier hard money lenders for real estate investors. 

After hours spent researching and comparing mortgage options, you’ve finally closed on your loan with your chosen mortgage company. But after a few months, you receive notice that your loan has been sold. At first, this news may seem like a reason to worry, but it really isn’t.  The truth is that mortgage companies buy and sell loans all the time. It’s a common practice in the industry that makes it possible for companies to offer home loans in the first place. But let’s answer some big questions that you might have: Why did my lender sell my loan?What does it mean for me that my loan has been sold?Which mortgage companies don't sell loans? For answers to other questions you may have, jump down to the FAQ section. Why did my lender sell my loan? Before you can understand why your mortgage lender sold your loan, let’s take a look at some of the key players in the mortgage industry: Mortgage lender — Your mortgage lender is who lent you the money to purchase your home and who typically works with you directly on anything related to your mortgage. Loan servicer — Your loan servicer handles your mortgage after closing on your home loan. You make your payments to your loan servicer, typically facilitated by your lender. Investor — Investors purchase mortgages from lenders. After a mortgage is sold to an investor, a lender may retain servicing rights, which means that you’ll continue making payments to the same company even though they don’t technically own the loan anymore. While each of these entities are involved in helping you purchase a home, it is important to remember that they don’t view your mortgage loan the same way that you do.  For you, your mortgage is a big personal investment, perhaps a step closer to achieving important life goals. For mortgage lenders — banks or other financial institutions — your mortgage loan is solely a financial asset. search Lenders typically sell loans for two reasons: Free up capital to offer mortgage loans to other homebuyers Generate cash while retaining servicing rights to a loan When you get a mortgage you will be required to pay interest on your loan. Interest will be combined with your principal loan amount into a monthly payment — payments that you will be making for the next 15 to 30 years depending on your loan term. While the lender will make money from these payments each month, it typically isn’t enough money to support further lending opportunities to other homebuyers at the same time, which is the case for many brokers and small lenders. Lenders would quickly max out how many people they could lend to if they had to wait three decades to get all their money back, so they sell loans to free up cash and continue offering mortgages to other homebuyers. In addition to interest, lenders also charge various fees, but selling loans is a much faster way to make more money and replenish funds to lend to others. It’s important to understand that your loan broker/bank/lender doesn’t make money by lending money. They’re in the business of wholesaling loans and collecting a fee for their efforts. Your “lender” makes money on origination fees and the incentives they are paid by larger lenders. Let’s use a simple example. Suppose your local bank has $1,000,000 to lend. How many home loans can they make with a limited amount of cash? Maybe three or four home loans. However, what if they could sell your loan, replenish their money and receive a few thousand dollars for their efforts?  — Robert Taylor, The Real Estate Solutions Guy In most cases, your lender will sell your loan to a large mortgage company like Fannie Mae or Freddie Mac, two U.S. government-sponsored entities that buy loans from banks and lenders. Loans are also frequently sold between private mortgage lenders and banks. Whether your loan is sold to Fannie Mae, Freddie Mac, or another private mortgage lender, you don’t get to choose to whom your loan is sold. For the most part, who your loan is sold to won’t make a difference, but for some borrowers this can be cause for frustration if their loan is sold to a company or lender that they aren’t familiar with. When you get a mortgage loan, there is a high chance that it will be sold, creating a cycle that has a significant impact on the availability of mortgages to other homebuyers and the economy as a whole. What does it mean for me that my loan has been sold? When your mortgage is sold, not much should change on your end. If your mortgage has been sold, resist the need to obsess. The loan's terms, such as the interest rate, monthly payment, and remaining debt, will remain constant.The primary responsibility you should prioritize is data management. Keep an eye out for reminders regarding the need to update your payment details. You may need to reroute an ACH withdrawal or mail a check to a new address. And you will not be penalized if you recently made a payment to the former owner of the mortgage. There is a 60-day grace period following the sale of service rights. — Jennifer Harder, CEO and Founder of Jennifer Harder Mortgage Brokers Your loan rate and term will remain the same. The only change you may need to worry about is if your loan servicing has been transferred. search If your mortgage loan is sold, two payment scenarios may occur: You continue making payments to your original lender You begin making payments to your new loan servicer If you neglect to confirm where you’re making payments moving forward, you run the risk of sending payments to the wrong place and then incurring late payments. If your payment circumstances change, requiring you to either mail payments to a new address or set up an online account elsewhere to make direct payments, your lender will alert you and provide direction on how to proceed. In addition, your new loan servicer is also required to notify you within 30 days of the service transfer. When you receive notice that your mortgage has been sold, the most important thing you can do is check — and double check — the information provided. When you receive notice that your loan has been transferred, double check the loan details, such as the loan number, to make sure it’s not a scammer trying to dupe you into sending them money. You can (and should) call your previous lender as well, to confirm the loan transfer. Beyond that, just start making your monthly payment to the new lender each month. — Brian Davis, Founder of SparkRental It's important to remember that when your loan is sold to a different lender, your interest rate and loan terms always stay the same. The only thing that can actually change is when and where to send your monthly payments, which is why the first thing you should do after receiving the ownership transfer notice is to read it very carefully; make sure that all your personal information and loan terms are correct. You should also look for the date from which your new lender will take over as well as the new billing information so that you can set everything up for your next payment. Overall, there's nothing major or negative that you should worry about when having your loan sold, just make sure all the information is correct and you can continue paying your mortgage as normally do. — Chris McGuire, Owner of Real Estate Exam Ninja search When you receive notice from your new loan servicer, look out for the following details: Name, address, and phone number of the new loan servicer Loan details (loan type, loan number, etc.) Date of loan sale Date of when the new loan servicer takes possession of the loan New loan billing information Contact information for the party who can resolve loan disputes and receive legal notices Your contact information — make sure it is all correct If you take the time to carefully read your mortgage transfer notice, and contact your previous and new lenders, your payment transition should be smooth, and you will continue making your mortgage payments as before. Which mortgage companies don’t sell loans? Most mortgage companies buy and sell loans — there is no guarantee, no matter your lender, that your loan won’t be sold. However, some lenders strive to service all loans that they underwrite and process. We analyzed the more than 4,600 mortgage company reviews on BestCompany.com and took a deep dive into 114 reviews mentioning a customer’s loan being sold or bought. From this analysis we learned that two companies stand out from the rest for being more likely to fully service your loan without selling. Quicken Loans On BestCompany.com, 3 percent* of customers mentioned in their review that they chose/like Quicken Loans because the company doesn’t sell loans: Quicken Loans, via Rocket Mortgage, states that it is proud to service the majority of loans that it originates. However, there is no guarantee that your loan will not be sold if you choose this lender. *Taken from a sample of 114 customer reviews on BestCompany.com. New American Funding In mortgage company reviews left on BestCompany.com, 3 percent* of customers mentioned that they chose/like New American Funding because the company doesn’t sell loans: While New American Funding can’t guarantee that it won’t sell your loan, the company strives to service the majority of loans that it originates. *Taken from a sample of 114 customer reviews on BestCompany.com. Additional company review insights From our customer review analysis, we also discovered the following insights about the customer experience when a loan is sold: 31% of customers don’t like their new loan servicer — due to a variety of reasons including, but not limited to, poor customer service and difficulty in making payments. 19% of customers are happy with their new loan servicer. 10% of customers mention that their loan was sold almost immediately after closing, which was often unexpected. 10% of customer reviews are for the mortgage company, Better.com. 3% of customers mention that they didn’t receive notice that their loan was sold. Fifty percent of reviews remark on whether or not a customer likes their new loan servicer after their loan was sold. Although you can’t necessarily control who your loan will be sold to, there are some things you can do to help prevent your loan being sold to a servicer that you don’t like or trust: Take time to research mortgage companies and ask about their servicer/investor networks. While companies aren’t obligated to disclose this information, it never hurts to ask. Better.com, for example, states on its website that it has a robust network of banks, government-sponsored entities, and publicly traded companies. In addition to this, Better.com states that it collects third-party reviews on the service their partners provide to ensure a quality experience for customers. Carefully read your mortgage agreement. Mortgage companies are required to disclose whether or not they’ll sell your loan in your mortgage agreement. While this may not provide you with specific information on your lender’s servicer/investor network, it gives you an opportunity to approach the subject with your lender. One of the most important things you can do to secure a more enjoyable mortgage experience, whether or not your loan is sold, is to do your research and ask your mortgage lender as many questions as you can before signing on the dotted line and closing on a loan. The bottom line It is very likely that your mortgage loan will be sold at least once during your mortgage term. But, there's no reason to worry. If your loan is sold, carefully read the notice sent to you by your lender and make sure you understand where you will be making payments. And if you have further concerns, speak to your original lender and new servicer to make sure that you’re all on the same page. Frequently asked questions How quickly will my loan be sold after closing?What do I do if I don't like my new loan servicer?What if I don't receive notice that my loan has been sold?Can my new loan servicer charge me additional fees?How many times can my loan be sold?Can I do anything to prevent my loan from being sold?Can I choose who my loan who is sold to?Are there mortgage companies that don't sell loans? How quickly will my loan be sold after closing? Your loan can be sold at any time — immediately after closing to 10 years after the fact.  From customer reviews on BestCompany.com, many customers mention that their loan was sold much faster than they anticipated. It is worth preparing yourself for this reality, especially if you are borrowing from a small broker or lender. What do I do if I don’t like my new loan servicer? You don’t have any control over who your loan is sold to, which can be problematic if your loan is sold to a servicer that you don’t like or trust for any reason.  If you don’t like your new servicer, there is the option to refinance with a different lender, which will change the rate and term of your original loan. Refinancing is a good idea if you can secure a lower interest rate and/or more favorable loan term, helping you save money on your mortgage overall. If you won’t be able to secure more favorable loan terms, it might not be worth refinancing just to get out from under your loan servicer. What if I don’t receive notice that my loan has been sold? Mortgage companies are required to give you notice if your mortgage loan is sold. In addition, your new loan owner is required to notify you within 30 days of the service transfer. Ensure that your contact information — mailing address, email address, and phone number — are correct before closing on a loan to make sure that the company can reach you for any reason. If you don’t receive any notice or you have any questions about the mortgage selling process, speak with your original mortgage lender and new servicer. You also have a 60-day grace period when your loan is sold in case you send payments to your old lender instead of the new one, allowing time to take care of any discrepancies in the loan transfer process. Can my new loan servicer charge me additional fees? In most cases, no, you will not be charged any fees when your loan is sold.  How many times can my loan be sold? There isn’t necessarily a limit to how many times your loan can be sold. In many cases, homeowners don’t experience their mortgage being sold more than once or twice. Can I do anything to prevent my loan from being sold? The short answer is no, there isn’t anything you can do to prevent your loan from being sold. Can I choose who my loan is sold to? Mortgage companies have specific servicer/investor networks from which they buy and sell loans, and you don’t get to choose which company your loan is sold to. Are there mortgage companies that don’t sell loans? There aren’t any companies that never sell loans. However, some companies strive to service a majority of the loans they originate, such as Quicken Loans or New American Funding. However, even these companies sell loans, so there is no guarantee that your loan won’t be sold  

In 2019, first-time homebuyers made up 33 percent of all homebuyers in the United States. That's an average of 1.5 million Americans. Millennial-aged consumers make up the largest demographic of first-time homebuyers and they're facing a different housing market than their parents, as well as increased student debt, making it more difficult to buy a house. However, that doesn’t mean that millennials, or anyone else for that matter, can’t or shouldn’t buy a house. Instead, it is important to ask the right questions: How much money do I need to buy a house? Should I pay off debt before buying a house? How do I get a mortgage? Click on the links above to find the answers to these questions. While these three questions obviously aren't exhaustive, they do offer a solid foundation and place to start in the home buying journey.  To get an inside look at the first-time home buying process, we touched base with Rebecca Hunter, CEO at The Loaded Pig, who purchased her first home back in the summer of 2019.  From her experience, Hunter recommends asking the right questions about potential mortgage lenders; in particular, how you would be communicating with your lender: “I guess the main pain point that could have been avoided was that we picked an online lender so that we didn't have to deal with a person in an office or on the phone, but we ended up having to talk on the phone multiple times a day during the entire closing period. So asking, what is your main way to communicate during the closing process? Since your company is an online lender, does that mean that we will only communicate online?” Many of the top mortgage lenders today are online, making it easier to apply for and manage your home loan. But, if problems arise or you have questions, it is important to know how you’ll most easily be able to communicate with your lender. Once you have chosen a lender, or at least whittled down your list to your top two or three, there are some more important questions that you can ask about each lenders’ expertise and experience, which could potentially save you from stress later down the road. “The huge issue that our lender brought to our attention exactly one week from closing was that they miscalculated the taxes and we had to pay off a $10,000 auto loan in order to close on the house,” Hunter describes. “This seemed like a lack of experience, so some questions I might have asked are: How experienced are your underwriters? How many years has this lender been in business? What percentage of loans that are approved actually close on time?” Beyond figuring out how a mortgage and down payments work, when it comes to buying your first house, it can be hard to know what questions you should be asking, especially once you start looking at homes. Asking the right questions and taking time to do your research may seem like a long and painstaking process, but it can help ensure that you really do find the right house for you. Questions to ask when buying a house: How Much Money Do I Need to Buy a House? Should I Pay Off Debt Before Buying a House? How Do I Get a Mortgage?  

Buying a house is a large investment, and it can be daunting, especially if you have existing debt that you are paying off; credit cards, auto loan, student loan(s), etc. So you may be asking yourself, should I pay off debt before buying a house? You would think that the answer to this question would be a simple yes, since having less debt is better when taking on a new debt, right? In reality, the answer is a little more nuanced. While paying down, or completely paying off debts can be helpful in freeing up some extra cash that can be put towards a down payment, closing costs, and subsequent monthly mortgage payments, it is important to understand the relationship between debt and the mortgage process.   Jason Gelios; REALTOR®/Author Industry Expert     Having some debt can be good: It's always better to have less debt when applying for a mortgage, however not having any debt can also backfire because lenders like to see some responsibility managing debt. Sometimes I meet with first-time homebuyers who may need to establish debt to qualify for a mortgage. On the other hand I have seen some home buyers have to pay down or pay off debt to be approved for a mortgage that will fit within their budget by getting them the more attractive rate.   A helpful place to start is understanding what mortgage underwriters are looking for. Underwriting is a crucial part of the mortgage process, and is ultimately the deciding factor in whether or not you’ll be approved for a home loan by a lender. Generally, underwriting occurs behind the scenes while home appraisal is taking place. An underwriter will carefully assess your finances to give the lender an idea of how much of a risk you are, resulting in an approval decision. Underwriters often look at the following: Credit history — Your credit report will be pulled and the underwriter will carefully review your current credit score, as well as your credit history, including things like payments and your overall use of credit. Income — You will be asked to provide proof of employment and income. Savings — The underwriter will take a look at your savings to ensure that you have enough money in addition to your income. Having strong savings is important in the case of an emergency or if you need some extra cash to make a down payment on a home. Home appraisal — An appraiser will inspect the property that you wish to buy and place a value on the property. This process is generally required in the home purchasing process. Assets — Your assets can be sold in case of loan default to make mortgage payments. Since the down payment and closing costs can be a substantial amount of money, underwriters will often look at this information to ensure that you can make your monthly mortgage payments. Debt-to-income (DTI) ratio — Your DTI is how much credit you use in relation to your income, and it is presented as a percentage. This ratio allows an underwriter to see how much debt you currently have and if you have enough cash flow to take on another large debt, in this case a mortgage. So how does your debt affect these and other important mortgage process factors? Let’s take a closer look. Debt and your credit score No debt is equal to a better credit score, right? Well, no actually. A higher credit score requires some responsibly managed debt, meaning that you always make payments on time. Your credit score is calculated based on your debts and how you manage them. If you don’t have any debt, you won’t have a credit history, and lenders won’t be able to verify how you manage borrowed money. However, lowering debt, instead of eliminating it, could be a helpful practice, particularly to help meet the costs of buying a house and to continue making your mortgage payments. But you should be careful in how you go about lowering debt, because doing too much too soon could have an adverse affect on your credit score. When you pay off a loan, or any other type of debt, your credit score will temporarily drop; the same occurs if you close credit card accounts. While it may not always be wise to maintain debts for the sole purpose of achieving a high credit score, it is important to understand the timing of paying off debt in relation to applying for a mortgage.  Therefore, a good rule of thumb may be to not pay off debts or close credit card accounts immediately before applying for a mortgage. Underwriters, who are scrutinizing your credit, generally don’t like to see credit changes immediately before funding a home loan, and so it could be in your best interest to hold off on paying down your debts and/or closing credit card accounts. And, a healthy credit score is required if you want a lower interest rate. But, how do you know whether or not it’s a good idea to pay off your debts or not? “People looking to purchase a home for the first time should meet with a mortgage professional who will look at their credit and income to see if it makes sense for them to pay down or pay off debt to get approved for a better loan,” says Gelios. “If a first-time homebuyer can get approved for a higher amount they want or need while getting a better rate if they pay off debt and increase their credit scores, then that is the route they should go.” Debt-to-income ratio As was mentioned earlier, your DTI ratio is how much credit you use in relation to your income, and is typically presented as a percentage. This ratio is the second largest factor, after making on-time debt payments, that makes up your credit score. “Most lenders like to see an applicant's Debt-to-Income ratio at or below 43 percent when applying for a home loan. This is the monthly debt obligation divided by the gross monthly income.” says Gelios. “For example, if an applicant has $1,000 (Monthly Debt) and $2,000 in Gross Monthly Income, their DTI would be 50 percent. So at this point an applicant would need to pay down or pay off debt to bring that percentage down.” This ratio is particularly important to underwriters because it is common that individuals with too much debt (or a high DTI ratio) are more likely to default on their loan. Thus, if you have too much debt, you may need to pay it down before applying for a mortgage. You may be thinking that it would be best to just eliminate debt entirely and not worry about this ratio, but remember that some debt is good and is important for maintaining a healthy credit score. Debt and your savings What do you do when you have some extra income? Would it be better to pay down your debts or put that money aside in savings? While it can be helpful to consider the cost of interest on your debts, or simply splitting your income in half to cover all your bases, one important consideration is whether or not you already have an emergency fund or not. An emergency fund is exactly what it sounds like: savings put aside for an emergency.  Especially when buying a house, it is important to have some money set aside for unexpected circumstances from roof repair after a storm, to medical expenses that you wouldn’t be able to easily cover while also making mortgage payments, or even to unexpected job loss. In general, it is always advisable to be prepared and have some extra money in the bank. In most cases, experts advise having three to six months worth of expenses in an emergency fund. While this can vary depending on your circumstances, as well as the debts that you are paying off, setting aside whatever you can is a good idea. In the end, the decision to pay off debt or save money is a personal decision and will depend on your circumstances. The bottom line Should I pay off debt before buying a house? Whether you have existing student loan debt or credit card debt, it is generally a good idea to pay debt down before buying a house. But there are three things to keep in mind that can help you determine the best ways to pay down and/or manage your debts: Having some debt is good. Making drastic changes to your debt (paying it down drastically, paying it off, or closing credit card accounts) can impact your credit score. Underwriters don’t like to see a lot of changes before funding a loan. Building or fortifying your emergency fund is always a good idea. You never know what might come up. If in doubt, talking to a mortgage professional or loan officer can be a helpful way to more accurately assess how to approach your debts before buying the house of your dreams. Choose a Mortgage Lender Once you've got your debts and finances in order, it's time to choose the best mortgage lender for your needs. Compare Expert contributor: Jason Gelios is an award-winning, top producing REALTOR® and author.

Guest Post by G. Brian Davis One of the huge advantages of rental properties over stock trading or other paper assets through an investment brokerage is the ability to predict returns accurately. With stocks, you buy and hope the price goes up. With rental properties, you know the precise cash flow you can expect each year. Before you invest, however, make sure you understand exactly how to forecast rental cash flow. Cash flow and cash-on-cash return Far too many novice real estate investors think their cash flow equals “rent minus the mortgage payment.” It's a good way to lose your shirt in real estate. In fact, non-mortgage expenses generally add up to around half the monthly rent. Most of these expenses don’t hit you every month, so novice investors ignore them. But they add up, when averaged over time — rental investors refer to this as the “50% Rule.” To calculate the monthly cash flow of a rental property, you need to first add up all expenses, many of which must be calculated as a long-term average. Subtract the total average monthly expenses from the market rent to calculate the average monthly cash flow.  Note that cash flow is not the same as your cash-on-cash return for a property. To calculate cash-on-return, divide your annual net cash flow by the total cash you personally invested to acquire the property. That includes both your down payment and closing costs, plus any renovations you paid for out of pocket.  For example, if you paid $30,000 in closing costs and the down payment, and the property nets you $3,000 per year in cash flow, then it’s earning you a 10 percent cash-on-cash return.  Use a free rental cash flow calculator to run the numbers quickly for both monthly cash flow and cash-on-cash return for any given property. But remember, your results will only be as accurate as your expense estimates. Forecasting rental property expenses To accurately forecast cash flow on a property before buying, you need to get the expense estimates right.  Here’s how to forecast every expense accurately — before shelling out money for a rental property or even an ADU. Mortgage payment Being able to leverage other people’s money to build your own portfolio of income-generating assets is one of the great advantages of investing in rental properties.  Real estate investors can borrow a mortgage, typically at 70 to 80 percent LTV (loan-to-value ratio). While they don’t have as many options as homeowners, they can borrow from a conventional mortgage lender, take out a rental property loan from a portfolio lender (many of whom are crowdfunded in today’s world), or even borrow money from friends and family once they’ve established a track record of success. As a final thought, the monthly mortgage payment is the only expense that will stay fixed even as your rents rise. The other payments below typically go up over time, as your rents and property values rise. Vacancy rate No rental property is occupied every single day of every year, forever. You will have vacancies as a landlord, as you make repairs, advertise the unit for rent, screen tenants, and sign new leases.  So, you need to learn the vacancy rate for the neighborhood, to estimate how long you can expect future vacancies to last for your unit. It’s a question you should ask your Realtor, as you run the cash flow numbers before making an offer. Which means you need a knowledgeable real estate agent, intimately familiar with the neighborhood and accustomed to working with investors. Repairs and maintenance Real estate is, well, real. Buildings are physical assets, unlike stocks or bonds, and they need ongoing repairs and maintenance.  These costs vary based on many factors: the age and size of the building, how well the tenants treat it, and even its geography, as home maintenance costs vary across the United States.  As a general rule, maintenance and repair costs typically fall between 10 to 15 percent of the rent, when averaged over time.  Property management costs It takes time and effort to manage a rental property. You can incur those labor costs yourself, or you can outsource them to someone else, but either way they’re still labor costs.  Most property managers charge 7 to 10 percent of the rent collected, plus one month’s rent for each vacancy filled. Some nickel and dime you for other fees as well.  Set aside at least 10 percent of the rent for total property management costs, even if you plan to manage the property yourself in the beginning. It’s a labor cost for you, and eventually you’ll likely outsource it to a pro when you get sick of tenants calling you to complain that a light bulb went out. Insurance At the very least, property owners need landlords insurance.  Landlords insurance works similarly to homeowners insurance, although it doesn’t cover the belongings inside the home. It only covers the building itself. Like homeowners insurance, your lender will require it, if you finance your rental property.  You can optionally also purchase rent default insurance. These policies kick in if the tenant stops paying the rent: the insurance pays you the rent until you replace the tenant with someone more responsible.  Property taxes The government always gets their due. Landlords pay property taxes, just like homeowners do.  But when you calculate cash flow, don’t use the current property tax bill. Instead, calculate the updated property tax bill based on the purchase price. The current assessment may be significantly lower than the purchase price, and the local government will bump up the assessment after you record the change in ownership and sales price.  Of course, landlords and homeowners alike should be prepared to appeal property tax assessments if they feel they’re too high. Which they often are, as local governments want to squeeze every tax dollar they can by estimating property values on the high side and putting the onus on property owners to contest them.  Utilities Most landlords don’t include utilities like water, gas and electric in the rent, and require tenants to pay for their own utility bills.  But that doesn’t mean landlords never get stuck with utility bills. Landlords pay for utilities while the property is vacant of course, and also sometimes get slapped with delinquent tenants’ utility bills. After all, it’s much easier for utility companies to collect from landlords than tenants, since they can simply attach a lien to the property. Accounting, travel, legal, and miscellaneous expenses Then there are all the other expenses that landlords incur. Their tax preparation gets more complicated, which means higher accounting bills.  They frequently have to visit their properties, which means gas and travel expenses. They incur legal expenses from evictions to lease agreement costs. It all adds up, typically to an extra 2 to 4 percent of the rent.  Sample cash flow calculation Laura Landlord is thinking about buying a property for $100,000, that rents for $1,200. She gets preapproved for a loan of $80,000 at 5 percent interest for 30 years. After doing her due diligence, she forecasts the monthly expenses as follows: Mortgage Payment — $429 Vacancy Rate — $72 (6%) Repairs & Maintenance — $144 (12% of the rent) Property Management Costs — $144 (12% of the rent) Insurance — $50 Property Taxes — $150 Utilities — $20 Accounting, Travel, Legal, Misc. — $24 Total Expenses — $1,033 Laura’s average monthly cash flow is therefore $167 per month ($2,004 per year). If she paid $5,000 in closing costs in addition to the $20,000 down payment, then her cash-on-cash return would be 8 percent ($2,004/$25,000 = 8%).  Final thoughts In this example above, as often happens in real life, her non-mortgage expenses totaled around half the rent (in this case $604 per month). Laura won’t get hit with vacancy expenses or repairs every month, but when they occasionally hit, they’ll be expensive. Over the long term, they’ll average out to equal these monthly costs.  Don’t ignore these expenses simply because they don’t hit you every month. Account for them before buying, and you’ll be able to accurately forecast your cash flow and returns for every rental property you buy.  Which means you’ll never make a bad investment again.  G. Brian Davis is a real estate investor and founder at SparkRental.com, which helps middle-class people replace their day job with rental income. They offer a wealth of free courses and tools, along with online landlord software that’s (mostly) free for landlords. He spends 10 months out of the year traveling overseas with his family and has an insatiable appetite for reading, hiking, and perfectly paired wine and food.

Guest Post by Baruch Mann (Silvermann) When you've fallen in love with a prospective home that checks off your "must haves" — the extras from your wishlist, the neighborhood you really love, the garage space you've dreamed about — it is time to move on to the next steps. While you’ll get more important details about the property, it must pass the inspection process. Additionally, since you’ve fallen in love with the property, others may feel the same way, so you’ll want to move on with the process as quickly as possible. If the property is attractive, there may be a lot of  competition from other buyers.  So, is it possible to deal with both tasks — passing a home inspection and beating out competing buyers — simultaneously? Can you learn if it’s the right location for your specific needs? Can you win a bidding war? How do you deal with the inspection process? And what about your finances? Figure out the final details Now that you’ve found the home that you’re interested in, use these strategies to figure out a bit more about the home and your new location:  Ask the right questions — You can obtain lots of information with some basic questions. You should start by asking why the seller is selling the home and how long they lived there. Start to build a relationship that could be helpful during the negotiation process. If you're looking to buy a house that has been frequently moved out of, it could be a sign that there is something wrong in the area that requires closer attention.  Are there any problem neighbors? Are there traffic issues, crime, or local businesses that could pose a difficulty? You may notice the neighborhood has lots of litter or bright lights. Conversely, there could be barking dogs at all times of the day and night and broken street lamps. Any of these issues could be a warning sign not to buy, so it is crucial to ask early on and avoid homebuyers' remorse from not asking enough questions.  Talk to an agent — While you should know what's going on in the area, you may lack local knowledge. It is crucial to talk to a real estate agent to gain real insight into the area. If you're new to the area, you may not be comfortable with certain aspects of the neighborhood. Ask about issues such as school catchment areas, litter problems, parking, traffic, and noise. Think about all the things that could bother you and ensure you ask the agent about the possibilities. Visit the property at different times of the day and night, so you can get a realistic picture of the neighborhood.  Use online neighborhood comparison tools — Numerous online tools can give you a general overview of new neighborhoods. Realtor and HomeFinder will not give you the skinny about the home, neighborhood, crime, schools, and more. GreatSchools.org, on the other hand, can help you to find out where the schools rank. You can compare new neighborhoods with where you currently live. This will help you to find a similar neighborhood or one with better schools or lower crime rates.   Win a bidding war on the house you really want How do you win a bidding war on the house you want? It’s a very important question to consider, and here are some steps you can take to help ensure that the home will be yours: Make a good impression when you initially visit the home. Be polite, ask questions, and develop a rapport. Real estate can be a highly emotional process — the seller may be emotionally attached to their property, so it is nice to express what you like about it and why you want their home.  Work with your realtor to compare listings in the area, so you can determine the right amount to offer. Generally, the more competitive the market, the nearer to the asking price you'll need to be.  Come with cash. Not everyone is able to do this, but if you're in a position to make an all cash offer, you'll have an advantage. In very hot markets, with heavy investors, there are usually cash offers on the table. Sellers will be reluctant to deal with the possibility of loans now coming through, or they may not want the delay needed for mortgage processing, so cash is preferred.  Develop a relationship with the seller. In the end, real estate is all about people. As we touched on above, a good relationship with the seller could help you to win a bidding war. So, you should start working on your relationship from the moment you initially visit the house. You could try writing a personal letter to the seller, explaining why you want to buy the house. If you have a young family, you could write about picturing your kids enjoying the cozy family room or playing in the yard. You could also write about how much you love the neighborhood and are looking forward to becoming an active part of it.  Use the win/win perspective when negotiating Your best strategy is to position yourself as a strong buyer who’s serious about getting to the closing table. However, don't skip negotiations and be ready to walk if necessary. One of the worst things you can do is get over emotional and overextend yourself.  Many people make the mistake of starting each negotiation like going into battle. This will not only annoy the listing agent you're likely to work with again in the future, but it could hurt you in the long run. Instead, focus on solutions. This will help you to avoid turning every point into an adversarial crisis. Understand what is important for the seller and aim to allow them to feel that they also won.  For example, if there is a roof issue, but the seller wants to sell and move now, you could ask for a discount and do the repair yourself. If the seller is unwilling to compromise on the price, you could request extras that were not included in the home inspection report.  Dealing with a rejected offer If your offer is rejected and there is no counter offer, you need to ask the seller’s agent for a reason why. There are limitless reasons why sellers choose not to move forward with an agreement. For example, the seller may have received several offers, and yours may not be the most attractive. Alternatively, the seller may decide to wait for an even better offer. If you discover your offer was rejected due to a better offer from someone else, find out if the other offer has been accepted. If the offer has already been accepted, you’ll need to start shopping for a new home. However, if the offer is still in the negotiation stage, there may be time to present a new offer. This will mean working with your agent in a bidding war.  If you’re a first-time home buyer, reach out to your agent for tips on making an attractive offer. An agent familiar with the local market, who has negotiation experience will provide an invaluable resource for you during the home-buying process.  Managing the inspection process When dealing with inspection, it’s recommended to have someone who understands the process with you. Understanding the inspection process is mainly based on experience, but if you know someone who deals with inspections this can be even better. When I bought my first home, I had no real idea of how it worked, so I called my father. He had a lot of experience and knowledge, so he paid attention to the details, asked the right questions, and helped me to understand potential problems. Although you'll get a report, it will be easier to understand a problem that's been explained to you, so you can see what the issue is.  To negotiate for credits or repairs, you should start by obtaining a local contractor or construction professional estimate for how much the repairs should cost. If you're working with a real estate agent, they can handle the negotiations on your behalf. Supply your agent with a copy of the inspection report, so they can use it as leverage when working with the listing agent and the sellers.  Make sure you get the right mortgage for your needs You need to ensure you weigh things out appropriately, and you work on which mortgage lender will be best for you and your family in the long term. This may be paying equally from the beginning or paying a little now and more later. This is based on three different things: The mortgage term — The loan term has an impact on every aspect of the loan. It affects how much you pay every month, the interest costs, and other expenses. With a longer term, you will have lower payments, making it attractive for many people, but you need to be prepared to pay more in the longer term. Interest rates and types — A fixed rate means that there will be no change in how much you'll pay. Adjustable rates are subject to interest changes, usually at specified times. Which type is preferable will depend on your specific circumstances. Mortgage types — In addition to choosing between a fixed and adjustable rate mortgage, you should look at conventional mortgages versus government loans. Each of these has drawbacks and benefits, so carefully consider these before you make a final decision. Buyers should have their funds for closing costs readily available. You'll need to be ready to wire the funds or present a cashier's check on the day prior to closing. Lenders require proof of sufficient funds for a down payment and closing costs before closing. You should also bring copies of the paperwork you received or signed during the home-buying process, plus two forms of ID and the payments you need to make. Top Mortgage Lenders Compare rates, terms, and mortgage types, and find the best mortgage lender for you. Compare Baruch Mann (Silvermann) is a personal finance expert and founder of The Smart Investor, a financial online academy for millennials that helps thousands invest smartly and make better financial decisions.