Don’t Assume Too Much

Did you know a buyer can assume the balance on a seller’s home mortgage loan at their current interest rate? Well, if it sounds too good to be true, it might not be. We’re here to sort out the pros and cons.

CHIC (Pearl)

The most obvious benefit to the buyer would be assuming a mortgage with a lower interest rate than what they could expect to get with their credit history. It’s a good concept for the times we live in, when the added costs of buying a home can be overwhelming for many people. The program is limited to loans from the Federal Housing Administration or VA, and the buyer must be ready and willing to throw in a down payment determined by the total cost of the home. You’ll also need an amenable loan servicer, or the whole plan might fall through.

GEEK (Kevin)

Even if a buyer can swing it, they can only assume the current loan balance to get the lower interest rate. If the purchase price ends up higher than the loan balance, the buyer will need to take out a second loan to make up the difference — or come up with the cash. Either way, the numbers don’t add up, especially when we’re talking about deltas of hundreds of thousands of dollars. That’s why it’s difficult to impossible to find a loan servicer willing to accept a lower interest rate than they could get from a brand new loan to the buyer.

Chic vs. Geek: Paying you back in any market

From building equity to built-in savings, there are real estate principles and benefits to help your property pay you back, even in a down market.

CHIC (PEARL)

Dual Purpose Investment

A home is both a current need and an investment in your future. You can find something that fits your family right now, but how will it suit you ten years down the road?

Valuable Savings

Mortgage payments can deliver equity, improve your credit score, and also serve as a savings account you can leverage now or tap later.

GEEK (KEVIN)

Tax Considerations

Like other life changes, homeownership comes with tax deductions, credits, and other perks. Ask your accountant to get you started with a mortgage payment deduction.

Protection from Inflation

Rents rise with inflation, and sometimes to pay for building upgrades, but payments on a 30-year fixed mortgage remain the same for, well, 30 years!

Want to learn more about the benefits of home ownership?

Chic vs. Geek: What to avoid after you sign

So you’ve applied for a home mortgage loan. Want to know what to do – and what not to do – next? We’ve got a few tips to share.

CHIC (PEARL)

Consistency is the name of the game. Be sure to discuss any changes in income, assets, or credit with your lender so you don’t jeopardize your application. Don’t change your bank account, don’t apply for a new credit card or close any credit accounts, and definitely don’t co-sign any loans.

GEEK (KEVIN)

The banks are always watching because money never sleeps. So the best plan is full transparency. Avoid making any large purchases like a car or a major appliance. And if you receive a cash windfall, don’t deposit it into your bank account before contacting your bank or lender.