What a home buyer should expect at closing

Closing is the last and most important step in getting a mortgage. It is through the closing process that ownership of a property changes hands officially, and you become owner of your new property. People who have purchased property before certainly know what to expect, but if you are a first-time buyer, the closing process may seem daunting.

Columbia Mortgage Group is focused on providing a transparent and open closing experience to our clients, and the purpose of this article is to shed some light on what the first-time buyer can expect.

See below for some key steps in knowing what to expect at closing.

 

Understand and examine the disclosure form

At least three business days before your scheduled closing you will receive a final Disclosure. Read and understand this document closely. It details your loan terms, such as the loan amount, interest rate, monthly payment, type of loan and the amount of funds you need to close. This amount also includes a breakdown of your closing costs and down payment. This document is oftentimes referred to as a HUD-1 statement as well.

 

Prepare for Final Walkthrough

Before closing and taking possession of your new property, you should schedule a walkthrough of the property in question.

This is your opportunity to walk through the property and determine the condition prior to assuming ownership. Do not rush through this process. Check the plumbing,  electrical and be sure to bring a home inspection report with you. If the seller agreed to certain repairs, be certain that these items have been fixed.

 

Items to bring to closing

You will need to show your driver’s license or another government-issued ID. Keep in mind that the name on your ID must match your name as it will appear on the mortgage loan documents and title.

If you are bringing cash to closing, you will also need a cashier’s check for the full amount. If you are wiring funds, these funds must arrive at the title company's office before closing day. Make sure you allow enough time to transfer funds. The company handling your closing will provide wire transfer instructions. Wire transfers often take more time and need to be scheduled more carefully than a standard ACH payment.

The final part of the process is signing the paperwork allowing you to take official ownership of the property. Once this is complete, the keys will be handed over and you are the owner of new property. 

We strive to make this experience a positive one for our clients, and we would love to discuss your options regarding home loans today! 

Common hurdles for hard money borrowers

Lender capital for real estate investment, especially in major urban areas, is at an all-time high since the mortgage crisis in 2008. There are more private lenders in the marketplace now than there were 15 years ago, and this means that as a borrower it is your responsibility to understand what each different money source brings to the table as both a positive and a negative. Scrutinizing a lender is an important aspect of successfully getting an investment deal done, and the first key point that a potential borrower needs to understand is that the lender will be scrutinizing the borrower even harder in return. When planning your loan application or proposal for the purpose of acquiring an investment property, here are a few things in your own file you need to be prepared to answer for successfully in order to be approved:

  1. Less than stellar borrowing history: Many borrowers often have unrealistic ideas about their negative credit history and the ways it can impact their ability to secure a loan. The first thing we often do with clients is to paint a realistic picture of the deal structure they can likely be approved for and strategize based around that. People who have inflated expectations often see their aspirations fade in the real estate investing business sooner than later, so having a partner on your side to tamper those ideas is a huge benefit.
  2. Little to no equity: Lenders like to provide financing to developers with skin in the game. It's all about risk mitigation and it's a method that works. When you borrow 90% of a project, you're only assuming 1/10th of the risk in real assets. That's a big deal and something that all lenders will well understand. The more a borrower is willing to put into a deal, the greater the odds of lender approval will be. 
  3. Successful project track record: A major boost to prospective borrowers is their ability to provide a history of successful deals completed or properties managed to a lender as a testament to their ability to successfully complete deals and pay back loans. This is telling, as a lender willing to grant a loan to a new borrower will most likely be taking higher fees and a higher interest rate. 
  4. Property potential: Because a hard money or private lender is typically lending solely on the title of the property in question, the property involved in the deal is often the most important aspect in their eyes. A borrower with a contract on a fantastic property but with a poor financial situation is often still able to find money based solely on the potential of the deal. This is not always a positive, it is important to note that many lenders will lend with the intention of eventually owning the property via default or foreclosure. It is key that you're able to discern between the good lenders and the predatory ones.

At CMG we handle these types of deals for clients often and are well versed in the ins and outs of hard money. We'd be happy to give you a consultation on your proposed loan. Reach out today and we will ensure you get the best deal possible.

Choosing the right neighborhood to invest - Brentwood, Washington, DC

As a mortgage and capital broker operating in a number of markets around the US, one thing that sticks out when analyzing an investment property's potential for a client is the health and overall development of the surrounding neighborhood. Of course, any great property will always be subject to the surrounding conditions of the area it finds itself. The beautiful Victorian needing a small amount of finishing to be a slam dunk resale property will never realize its full potential if the property next door is known for frequent police visits and a foul smell emanating from the basement windows. This is why real estate professionals rely on sales comps to tell the story of a surrounding area, because they put qualitative data into a quantitative value. Utilizing this data as well as other in depth knowledge, this will begin a series of posts about several different sub-markets in cities around the US in the midst of a real estate investment explosion.

The mantra of "buy low, sell high" demands that investors should always be looking for signs of the next neighborhood ready to explode in terms of property values. With the trend in the US still leaning towards a reverse exodus back into urban zones, there are still ample opportunities to seize upon no matter what market you're in. For example, Northeast Washington, DC was a realty dead zone for decades following the riots in 1968. Over the last 12-15 years however large swaths of this quadrant of the city have seen enormous gains in property value over time, leading to what many investors believe is now an overweight market in some micro-zones. Looking on the bright side, this glut of residential investment in DC has opened the door for smaller, less brand-name areas to benefit on the back end of this realty boom. A good example is the Brentwood neighborhood.

Sandwiched between the now-booming sub-markets of Eckington, Brookland, and Ivy City, Brentwood is poised to become the next residential hot spot for property flips and condo developments. Property values are still relatively low compared to those aforementioned areas, and according to the DC Recorder of Deeds and Labor Statistics, home values in the neighborhood have lagged behind its counterpart subsections since 2009 to the tune of roughly 15% on average. This means that in order to catch up to the surrounding area, many investors are starting off at a sizable advantage on purchase price alone. Our forecast for this neighborhood is positive for the foreseeable future, buyers should still be able to find good inventory at prices that will yield high margins on estimated outsale figures. As more desirable units begin to creep into the area as spillover from the aforementioned surrounding neighborhoods, it will be a matter of time before Brentwood is considered among these residential areas as well, with property values to support it.

 Brentwood is sandwiched between multiple booming sub-markets in Washington, DC. 

Brentwood is sandwiched between multiple booming sub-markets in Washington, DC. 

Know your options: hard money financing

Short term loans from hard money lenders are often a tool used by investors to finance a multitude of project classes. When compared to a conventional mortgage, these loans carry both pros and cons that can either make or break your bottom line at the end of the day:

Pros

  • Flexibility: Hard money loans are issued by private lenders and are more flexible. This allows borrowers to work with the lender to craft a loan structure that suits their needs. The ability to tailor a repayment schedule and down payment terms directly with the lender is crucial to being able to determine a deal's feasibility. 
  • Access to capital: A hard money loan makes it possible to get funding turned around in a much shorter time frame. Many hard money lenders are able to get a deal done in as little as 10 days. 
  • Collateralization: The big benefit of a hard money loan is that collateral in the deal is on the property in question. It is important to understand where collateral lies in these deals regardless, as personal guarantees can often lie elsewhere in a contract. Use a smart mortgage broker to get you the most borrower-friendly deal possible.

Cons

  • Loan term: Compared to a traditional mortgage, loans of this nature typically have shorter term lengths ranging from 6-24 months. This makes time management and scheduling in a hard-money financed project that much more important. The last thing you need is extension fees eating into your bottom line.
  • Fees/Expenses: With convenience and flexibility naturally comes higher cos regarding fees and expenses. Hard money allows borrowers access to capital that would otherwise not be there, so be prepared to pay for that convenient access.

As always, it is imperative that you consult with a knowledgeable mortgage professional when weighing your options regarding project financing. At CMG we are extremely well versed in hard money financing and would be happy to show you the ropes on your next acquisition where it is required.

 

The benefits of borrowing locally

Technology and instant communication today provide potential borrowers an endless number of options to field offers on their home purchase or investment project loan. Internet aggregators and marketplaces like LendingTree and QuickenLoans have turned the pre-qualification process into a seconds-long process yielding sometimes hundreds of options. The internet has also allowed lenders across the country to be able to originate loans from anywhere, naturally creating lower rates for borrowers with the additional competition. This has created an environment that is the most borrower friendly since before 2008. 

With the amount of options and competition, however, there are still obvious advantages to searching within a local radius for a lender close to home:

A local lender comes with local knowledge

Choosing a lender close to home allows you to tap into their local knowledge and resources. Many hard-money lenders and community banks also work directly with contractors, material retailers, and other logistics providers in the area. This dearth of knowledge is something you will not get from an institutional lender or out-of-state financier.

A more personalized experience

Knowing where your loan officer's office is located and having the potential to see them around town is something that, while difficult to quantify, is an invaluable asset to the borrower. Familiarity breeds comfort between both parties, which could help you save money in the long run. Many local lenders offer discounts to repeat customers over the course of several projects or purchases. It's imperative you have a mortgage broker on your side who understands how to tap into these relationships to get you the best deal.

Greater flexibility, less waiting around

Processing times are significantly lower when dealing with a direct lender or community bank if only based on the fact that the volume of loans being processed is far less than a national bank or lender. This also leads naturally to less processing time or waiting for draw requests to be fulfilled. We'll spare you the "time is money" cliche. This direct line of access between lender/borrower also opens up opportunities to work with one another to ensure the borrower is getting the best possible outcome from the loan. This often times comes down to the abilities of your mortgage representative in working with the lender.

In finality, choosing your mortgage provider is the most important decision in the home-buying or investment process. A strained relationship between borrower and lender can sour a deal overnight, leading to lower margins and lost capital. Be sure that you know all of your options and entrust your loan to a broker who knows how to get every last incentive for you from the right lenders. 

 

 

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