A loan assumption allows a buyer to take over the current owner’s mortgage while the loan’s terms – including the prepayment period, loan amount, and interest rate remain the same.

The new owner must qualify for the assumption and be approve by the current lender. Using a seller’s low mortgage rate to market a home can be a great tool. However, there are some key details imperative to know upfront.

Is your loan assumable? Many loans are not assumable. To determine if your loan is assumable contact your loan servicer, or who your monthly payment is paid to. Here are some general guideline per loan type.

FHA LOANS

Are assumable if originated after December 15, 1989. If the buyer is creditworthy, the lender must approve a sale by assumption and transfer responsibility to the buyer. Loans issued before that date may be assumable, but the lender isn’t required to release the seller from liability.

Under special circumstances (such as death and inheritance): The lender isn’t entitled to check the buyer’s creditworthiness in cases of death or inheritance, and doesn’t have to approve the sale.

VA LOANS

Are assumable if originated after March 1, 1988, with lender approval.
Veteran’s and non-veterans can both assume a VA loan. However, if a non-veteran assumes the loan entitlement is not returned to the original Veteran. If you are considering this process, it is suggested to contact us upfront to determine how this effects future home loans. The cost associated with an assumption to a non-veteran are higher than those to a Veteran.

USDA LOANS

Assumable in two ways:

With new rates and terms. Most USDA loans are assumable in this way, which transfers responsibility for the mortgage debt to the buyer at the same time as it adjusts the terms of the loan. When re-amortizing the debt with new rates and terms, the monthly payments and interest costs can change.

With the same rates and terms. Available only in special circumstances, this type of assumption is usually reserved for family members who are exchanging ownership of a property. In these cases, the original mortgage’s rates and terms are preserved. Neither a review of the buyer’s creditworthiness nor an appraisal of the property is required.

CONVENTIONAL LOANS

Conventional loans are rarely assumable. Some ARMs/adjustable-rates mortgages are assumable.

THE CATCHES

Property Equity –The assumption transfers the current loan. However, generally there is a difference between the current loan amount and the appraised value. This difference needs to be paid in the form of a down payment. With most seller’s equity position, this does change the assumption possibility for many sellers and buyers.

Timeline – Most servicers take an extensive amount of time to process a loan assumption. Before opting to proceed with offering or marketing an assumption on a home, confirming the timeline and process to complete an assumption is recommended. Many servicers have been quoting 90 to 120 days.

For more information on assumable loans, check out my video!

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Note an assumption is different than what is called a subject to purchase, which does not release the homeowner from their current mortgage. Reach out for more information regarding subject to financing, which is growing in popularity.

My Team and I are always available to answer any questions or assist in any way, so feel free to reach out! 

When it comes to buying a home, securing an affordable mortgage is often at the top of every homebuyer’s wish list. Mortgage interest rates play a role in determining monthly payments and the overall cost of homeownership. One strategy that can help buyers achieve lower initial mortgage payments is a temporary rate buy down. We will explore what temporary rate buy downs are, how they work, and the benefits.

For more information on how buy downs work, check out my video!

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WHAT IS A TEMPORARY RATE BUY DOWN?

A temporary rate buy down is a financing strategy used to reduce the initial interest rate on a mortgage loan. This reduction in the interest rate applies for a specific period at the beginning of the loan term, often the first few years. The primary goal of a temporary rate buy down is to make homeownership more affordable by lowering the borrower’s initial monthly mortgage payments.

HOW DOES IT WORK?

The mechanics of a temporary rate buy down involve an upfront payment, made either by the seller, or a third party (such as a builder). This payment is used to “buy down” the interest rate. The money is held in an escrow account and is disbursed to the lender to cover the difference between the reduced interest rate and the actual interest rate specified in the mortgage contract. Temporary buy downs are offered as 3-2-1, 2-1, and 1-1 terms.

For example, if the borrower qualifies for a 30-year fixed-rate mortgage at 6.5%*, a 3-2-1 buy don reduce the initial rate to 3.5% for the first year, 4.5% the second year, and 5.5% for the third year. After the specified period (in this case, three years), the interest rate would revert to the original 6.5%, and the borrower would continue making payments based on that rate for the remainder of the loan term.

TEMPORARY BUY DOWNS, THE MOST EFFECTIVE WAY TO LOWER A MORTGAGE PAYMENT

There is no better way to lower a monthly mortgage payment than with a temporary rate buy down. The reduction in monthly payment is more than any other product available. The subsidy provided is also fully refundable in the event of a loan payoff or refinance. Pair this product with our rate protection program and save big on your home loan today!

My Team and I are always available to answer any questions or assist in any way, so feel free to reach out!

Are you in the market for mortgage financing but concerned about the impact of a credit inquiry? Many potential homebuyers worry about how pulling their credit might affect their credit score.

For more information on soft credit pulls, check out my video!

UNDERSTANDING THE SOFT PULL

A soft pull to your credit is a relatively new development that has evolved over the past few months, offering more options than were previously available. Not all mortgage lenders offer soft pull credit reports, and Service First Mortgage is investing in cutting-edge technology to offer it to their clients.

A soft pull is a credit check that does not result in a formal credit inquiry. When you, as a consumer, pull your own credit report, it does not count as an inquiry or an application for credit. A soft pull works in a similar way – it provides your mortgage credit score and a complete credit profile without affecting your credit score or leaving a trace of an inquiry.

MORTGAGE PLANNING MADE EASY

One of the great benefits of soft pulls is their ability to support early-stage mortgage planning. Reach out early and start the conversation. Mortgage planning is not just about securing a loan, it is about setting your purchase price, aligning it with your monthly payment goals, and defining your out-of-pocket objectives.

Our Path to Homeownership Plan helps you identify and bridge any Gap to Goals that may exist. We provide a clear actionable plan helping you reach your homeownership dreams, even if it is several months or a year away. With soft pulls, you can now undertake the entire mortgage planning process, even months or a year before purchasing your home, without any inquiry impact.

CREDIT MAXIMIZATION

One more incredible feature offered by our team is credit maximization. When you apply, our team examines your credit report to see if there are any opportunities for improvement. This may include paying down debts, making adjustments, or other strategies that can boost your credit score and secure a lower interest rate. And yes, they can do all of this even with a soft pull.

CALL EARLY AND WORRY LESS

Whether you are considering a home purchase in the near future or further down the road, Service First Mortgage’s soft pull option can make the entire mortgage journey a smoother and less intimidating experience. Reach out to us and start planning your homeownership journey today!

My Team and I are always available to answer any questions or assist in any way, so feel free to reach out!

Are you in the process of purchasing a new home and torn between renting or selling your existing one? Here are some key factors you should consider when deciding what to do with your prior property.

Check out my video for a deeper dive into the question of renting or selling your existing home!

Examples used in this video are for illustrative purposes only.

1. Customize Your Plan

The first and most crucial step in this decision-making process is to create a customized plan for your unique situation. It’s important to recognize that everyone’s financial circumstances are different. As such, what works for one person may not work for another.

2. Rental Comps

To begin, consider the potential rental income from your existing home. A real estate agent can run rental comparable properties just as they run sale comps. This step will give you a clear picture of how much you could earn by renting out your property.

3. Consider Monthly Cash Flow

One key factor to consider is how renting your old home will affect your new monthly mortgage payment. We will run you two scenarios comparing, selling with a larger down payment vs keeping with a smaller down payment, resulting in a higher monthly payment. We will see if the rental income derived covers this delta.

4. Home Appreciation

You should also factor in the expected home appreciation in your market. Even if your property doesn’t yield significant monthly cash flow, it may appreciate in value over time, allowing you to make more money when you eventually sell it. This is a long-term wealth-building strategy.

5. Diversify Your Investments

If your property doesn’t provide the desired cash flow, it doesn’t mean you can’t invest in real estate. You can sell your existing property, use the proceeds to buy your dream home, and invest in another property with less down payment. This diversifies your real estate investments and opens up opportunities in different locations or property types.

6. Maximize Interest on Cash

Consider what you can do with the funds from the sale of your property. Currently, some banks offer significantly lower interest rates than they should on savings accounts. With high-interest rates available elsewhere, you can earn more on your cash. For example, a 4.5-5% interest rate on a $100,000 deposit can earn you over $400 a month. This interest can help pay your mortgage or cover other expenses.

This example is for illustrative purposes only.

7. Evaluate Your Financial Picture

Ultimately, the goal is to build wealth in real estate and make your money work for you. Let us evaluate your entire financial picture and create a wealth-building strategy using real estate.

My Team and I are always available to answer any questions or assist in any way, so feel free to reach out!

t’s that time of the year where you have or will soon be receiving a property tax valuation for 2023 via mail from your county. This information is also available on your county’s central appraisal website by searching the county name + CAD or central appraisal district.

To help you better understand how this will affect your upcoming tax bill and monthly mortgage payment if you do escrow for property taxes, here is some additional information that you should know when reviewing your property tax valuation.

Property Tax Valuation Review

Watch my video below or keep reading to learn more about reviewing your property tax notification.

• Exemptions are discounts the county gives. The most common is the homestead exemption. This is available when you live in a home. Unlike in prior years this exemption is allowed right after purchase vs a required delay until the following year.
  • For your primary residence do ensure this discount is listed.
  • If your homestead is not listed, a form can be completed on the same county website. This is free to complete. There are third parties that try to have you pay for this service.
  • If you did not have a homestead exemption on the home for a prior year and should have this can be still added. If you call the county, they are generally able to add this exemption to a prior year and send you a refund for the savings.
  • Other exemptions exist such as over 65 and specific military exemptions. Visit your central appraisal district for the full list and applications.
• Market Value is the value that the county has given to your property. This is not the same as what your home is worth or what it can be sold for.
• Assessed Value is the value the county is using to calculate your tax bill. This value accounts for any exemptions.
  • A homestead cap is the main reason this is lower than the market value. In the State of Texas, a 10% limit applies year or year to the assessed value when a homestead exemption is in place (after ownership of 2 years). This is one of the most important reasons to ensure your homestead exemption is filed.
• Tax Protest
  • The county allows 30 days from receipt of the valuation to protest the market value.
  • This can be completed on your own or by hiring a tax protest company.
  • Consider contacting your trusted REALTOR to assign in running comparable sales to possibly help disputing the value.
  • Values can also be disputed based on property condition as well as what other properties in your market are taxed at.
  • For a recently purchased home, ensure the value is not higher than you recently paid for your property. A dispute can be made using your appraisal or settlement statement (I would suggest using the lower of the two).
  • If you wish to hire a tax protest company a vetted resource is Texas Tax Protest
• ​Preparing for a Tax Increase
  • ​Compare your 2022 actual tax bill and your estimated taxes using your 2023 value notification.
  • Calculate the difference between these two figures to determine your increased tax bill.
    • The tax bill is normally paid in December.
    • ​A best practice is to budget to pay this amount in one payment if you are notified of an escrow account shortage.  Some servicers may allow you to pay in this additional amount to your escrow account each month starting now. Ensure you manually pay this to escrow not principal.
    • If the shortage is not paid, an analysis is completed by serving and increased payment options are presented to be paid overtime. These additional funds go to catch up your escrow account. This can increase your monthly payment significantly. By reviewing this now, this sharp an increase can be avoided.

My Team and I are always available to answer any questions or assist in any way, so feel free to reach out!