Questions You Should Ask
How do I get the best deal on my mortgage?
First is to understand what numbers banks and mortgage lenders control. When you receive a fee worksheet or loan estimate, the majority of the fees you will see are estimates from other involved parties that the lender does not control. You’ll notice these add up to be the majority of the fees. Examples of these would be appraisal, title company, attorney, inspection, survey, escrow deposits, prepaid insurance, home warranty, and county courthouse fees. That just names a few. Borrowers come to us frustrated after working with another lender because they have learned all that lender was doing was guessing at these figures and estimating these costs as low as possible in order to try and win their business. We feel like this is a bait and switch tactic which only leads to ugly surprises in the long run.
Lenders control fees such as underwriting, processing, admin, credit report, tax service, origination and discount points. These will always be listed at the top of the fee worksheet or loan estimate. These fees can add up fast and will impact your overall cash to close amount. Scissortail Financial makes it simple to try and save you money. We only have one fee and that’s for underwriting. We also never charge up front costs like credit report fees or application fees. We want to earn the opportunity to win your trust and do that by by not charging you these upfront costs. In addition, we move away from estimated figures as quickly as possible. You need specific numbers not general guesses to make a decision about a home loan. Getting the best deal on a mortgage always starts with verifying all fees from involved third-parties as early in the transaction as possible. This gives you a more accurate cash to close figure and prevents cash to close surprises in the future.
Why should I shop using a preapproval not prequalification?
Today's market is very competitive. When a great home comes on the market, it is not uncommon to have multiple offers trying to beat each other out. As a home buyer, it is important for you to be viewed by the seller as the highest quality potential buyer. Many buyers will lose favor with a seller and will be beaten by other offers when submitting a contract with only a prequalification letter from a lender. Prequalification means that the lender has only looked at a loan application and taken a quick view of that borrowers credit report to make a determination if the applicant is likely to get approved. The majority of lenders only prequalify their clients. The next step is preapproval. Preapproval is where a lender acquires a portion of the applicants documentation to verify the information provided on a loan application. This is always better than pre-qualification but still does not bring total confidence to a seller. To be the most attractive to a seller and to go head-to-head with cash offers you will need your file to be completely pre-underwritten. How do you do that? You work with a lender that will fully pre-underwrite your file by acquiring all documentation and underwriting the file in advance to reveal and overcome any potential conditions that could be an obstacle going forward. This eliminates any chance of your loan not getting approved after the seller has accepted your offer. A seller's biggest fear is always that your loan will get declined in the final hour and the transaction will not close. Scissortail Financial has a goal to be as proactive as possible when it comes to pre-underwriting your loan. We want to gather and verify all documentation that we can anticipate. We want to have conversations with actual underwriters to resolve and situations that we believe could be a challenge. All of this needs to happen before you make an offer and go into contract. By allowing us to do as much work as possible upfront, we have found we can greatly reduce your stress and accelerate how quickly we can close your loan. Our goal is to get you to the point where all you need is the actual purchase contract that is used when your offer is accepted by the seller, title work and appraisal and then your loan is clear to close. Doing it this way will give the seller great confidence in your quality as a buyer. We have seen sellers take our financed offers over cash offers because they are confident that our deal will close with the least amount of headache. At Scissortail Financial, we want your buyer quality to always match the quality of a cash offer.
Does a local lender offer an advantage?
Local lenders provide many advantages to home buyers looking for a home loan. The advantage we find most borrowers seeking is accountability. When shopping for a lender it is important to have a relationship with your lender that is strong and goes beyond the closing of you loan. Being able to hop in the car and look that lender in the face is very comforting. Every deal matters to a local lender. If your loan experience is poor or even worse doesn’t even close, it could impact the reputation of that lender within the community. When borrowers choose to work with a large lender they find that lender doesn't really care if they spring last minute surprises on you, your file gets declined last minute, or that lender keeps delaying your closing. When there are hundreds of other borrowers in line right after you, it does not impact them when your loan does not close. Don’t risk losing your next home. Choose local. Ask your Realtor what they think when it comes to local or larger regional lenders.
Why do all lenders not provide the exact same rates?
Home loan shoppers tend to find this out the hard way. They shop online for a home loan and see interest rates that appear much lower than what they are finding locally. When you see a really low interest rate advertised there is always fine print written underneath. Those are conditions, extra fees, and cost to get that rate. Without reading the fine print, home loan shoppers proceed with making application and pay for credit report and application fees upfront before any actual interest rates are provided that reflect their personal situation. The lender then comes back with what their actual rate with be and explains they did not meet the conditions to obtain the low advertised rate or that they can have the advertised rate but will need to pay thousands of dollars in fees to get it. The easiest and best thing to do is shop around and acquire loan estimates from local lenders to research where rates are. Local lenders can not hide behind bait and switch marketing because they know their reputation is at risk if they make interest rate promises they can’t keep and do not close your loan on-time.
If my loan was denied with another bank, can I still be approved?
Absolutely, all lenders are not created equal. Many local banks and large regional lenders have what are called overlays. These are additional guidelines on top of the program's standard guidelines. They apply these overlays to try and improve the quality of files that they choose to approve. Lenders that want to service your file after closing are the most common type of lender to have overlays. They want only the best quality borrowers because they want to reduce their risk by preventing borrowers into their servicing portfolio that could have late payments, pay off their loan quickly, or worst case default on the loan completely and go into foreclosure. At Scissortail Financial we believe in only underwriting to the programs guidelines. We want to give equal opportunity to all borrowers and help them buy that next home without the hassle of overlays.
How do increasing rates impact my borrowing power?
Increasing interest rates will reduce a home buyers borrowing power. High rates mean higher payments. Sometimes a buyer will need to reduce the amount of home they wish to purchase because interest rates have increased. It is important to obtain a low interest rate. Not only does it affect how much your payment is monthly, it can lead to significantly higher out-of-pocket interest expenses over the life of your mortgage loan.
Which loan program should I choose?
This is a personal decision that only you can make. To make that decision you will need to explore all of your options. Many lenders do not offer all loan programs. When that happens those lenders tend to only explain loan options they personally have available. In this situation you might not be told of a loan program that you could take advantage of because that particular lender does not offer it. Integrity is a value of Scissortail Financial. If we know of a program that we do not offer that is in the best interest of our client, we will tell them about it. Having multiple options and comparing the advantages and disadvantages of each program will give you the perspective to make the right decision. Applicants are not given peace when a lender gives them one program, rate, and fee option. You need to make a decision that not only makes sense today but also in the years to come. At Scissortail Financial we allow the client to choose how they structure their loan. In addition to program options, we also provide multiple scenarios from lowest rate to lowest fees broken down into available term options. Call us today so we can prepare these scenarios for you.
Does down payment assistance make sense for me?
Some home buyers do not have money saved up for a down payment and some loan programs require a down payment. A down payment assistance program can be a solution in this situation. It is important to read the fine print when considering a down payment assistance program. Even though it can seem appealing to avoid paying a downpayment out of your personal pocket, many times these programs come with higher fees and higher interest rates. When you crunch the numbers and look at the long-term effects of a higher interest rate it can quickly offset the savings of avoiding a downpayment. Overtime these higher rates can really add up and cost you significantly more over the life of the loan. There are other ways to get a down payment if you personally cannot obtain it. Many programs will allow you to get a gift from a family member for your down payment. This is a great option because it will allow you to use a more common loan program that should come with a lower interest rate instead of the higher rate you would be forced to have if you use a down payment assistance program. This will save you money in the long run in the form of reduced interest expenses. Ask a Scissortail Financial loan specialist today about our down payment assistance program. We feel that the program we offer is a combination of down payment assistance and good interest rates to reduce your borrowing costs and keep as much money in your pocket as possible.
What is the best way to pay my loan off early?
There are many ways to pay off a loan early. The most common way to pay off a home mortgage is to make principal reductions. This reduces the principal on the loan which decreases how long it will take to pay off the loan. These principal reductions can be made in one lump sum or as additions to your monthly mortgage payment.
There could be another option for you to consider that can pay off your loan faster than making simple principal reductions but it does come with some risk. This other option is commonly called the house payoff account. The money that you would have applied towards principal reductions on your mortgage would be placed into a house payoff account instead. A house payoff account is an account that earns a rate of return. Borrowers find high interest savings accounts or very low-risk mutual funds for their house payoff accounts. Scissortail Financial is not a licensed financial planning firm so you will need to consult a professional financial planner to help you decide which investment vehicle is best for your personal situation. You will not want to use a risky option such as stocks as you could lose your house payoff funds due to the volatile nature attached to those types of investment products. Once you have found an account that works for your needs, you will want to start funding this account with your house payoff funds. When you do this, you will start to see benefits above just making principal reductions. The first benefit is that your deposits into this account could start to earn a rate of return. If they do, your deposits will start to make money and the laws of compounding interest will start to work in your favor. This means you will accumulate a larger amount of money in this account in the same amount of time compared to if your were making principal reductions. This will mean you will be able to pay your house off in a shorter amount of time then if you were making only principal reductions. Also this money can be safer. What that means is if you were making principal reductions on your home loan and the value of your house decreases, those principal reduction payments could be eliminated by that depreciation. If your money had been placed into a house payoff account, that money in that account would not be impacted by the increase or decrease of your home's value protecting it from real estate market adjustments. Another benefit is that you can access the money in your house payoff account in the event of a serious need. The only way to access your money if you have been making principal reductions on a home loan is to refinance or sell your home. A final benefit is that you are the one in control. Making principal reductions on a home loan is a one-way street. You do not get any other options. If you had used your house payoff money to fund a house payoff account and the time comes when you are ready to pay off your mortgage, you may decide that might not be what you wish to do. Either way you are in control. Scissortail Financial spends a lot of time with their clients strategizing ways to pay off their mortgage sooner than later. Call us today and we will prepare a personalized strategy for you.
Should I buy or rent?
Is buying a home the right choice for you? How do you decide if it's best to buy or rent? There are many questions you need to ask yourself to compare the positives and negatives of homeownership. When renting, you get flexibility and mobility to move whenever you like. The landlord takes care of all the maintenance. Sometimes you get amenities like an apartment pool or on-site laundry facility. But renters soon realize they have no control over the property, cannot decorate to their tastes, have very little privacy, and don't like asking for permission to put a hole in the wall to hang a picture. Paying rent to a landlord only makes the landlord wealthier. A renter does not grow any equity to increase their network financially. The tax benefits attached to home ownership go to the landlord.
When you own your home and you make your monthly mortgage payments, you actually have a chance of seeing your money again. That’s because with every payment, you’re building equity in your home. When your home depreciates in value, the bottom line to your net worth increases. If you chose a fixed interest rate on your home loan, your mortgage payments will be stable in the future. Rent traditionally increases over time, which means the cost of renting the same residence will likely just continue to rise over time. Scissortail Financial provides free rent vs own reports to those trying to make this decision. We would like to show you on paper with actual figures how the savings of home ownership exceed that of renting the longer you stay in your home. And of course don't forget when you own the home, you can paint the walls your favorite color and be surrounded by pets if you want. It is your home after all.
Who can close my home loan the fastest?
Sometimes a seller does not want to wait an extended amount of time to close your loan or maybe you are personally in a bind and need to close quickly. Avoiding the bureaucracy of a large lender tends to be the path to a quick loan closing. A small local lender generally is more nimble and can work with you in person to meet your deadline. Scissortail Financial is the choice of many borrowers and realtors to close a loan fast. We have the ability to rush your file internally, coordinate the process to clear your file to close, and have the relationships in place to accelerate the time it takes for title work, appraisals, inspections, and other verifications. If you need to rush, please ask, we are happy to accommodate you!
When should I talk to a lender if I’m selling my home?
Home loan preapproval is best for sellers sooner than later. The mortgage industry is an ever-changing environment. Underwriting guidelines, program eligibility, and calculation criteria continuously shift. Even if it’s been a short amount of time since you bought your last home, your ability to be approved on the loan program you hope to use on your next purchase could have changed. Peace of mind is important to a seller looking to buy another home. Scissortail Financial Home Loans is here to help clarify your concerns with the specific information you need to make educated decisions when it comes to buying and selling homes.