Winning the Bidding War: The Power of a Pre-Approval Letter

In Northern California's bustling real estate market where listings are usually on the market for just a few weeks, standing out in the crowd of other buyers is critical. One tool that can elevate your offer in a bidding war is a mortgage pre-approval letter. Understanding what a pre-approval letter is and why sellers and their agents look to it first when entertaining offers, could be your golden ticket to securing your dream home amidst fierce competition. Below, you’ll learn why having a pre-approval letter can give you an edge in a competitive market.

What is a Pre-Approval Letter?

A mortgage pre-approval letter is a document from a lender indicating you have been preliminarily approved for a loan up to a certain amount, based on an initial assessment of your creditworthiness and financial situation. This letter tells sellers that you are not only a serious buyer but also have the financial means to back up your offer. If possible, try to get a pre-approval with a soft credit pull so that your credit score and report aren’t dinged when shopping for a home. It's important to note that a pre-approval is not the same thing as a pre-qualification. It’s more comprehensive and offers a stronger testament to your financial stability in the eyes of sellers in comparison to a pre-qual.

Why Do Sellers Prefer Buyers with Pre-Approval Letters?

1. Financial Credibility: In our fast-paced market, a pre-approval letter serves as a badge of financial credibility, assuring sellers that you have undergone a lender’s scrutiny successfully and will be funded a home once you put in an offer and everything else checks off. A pre-approval letter makes your offer more attractive, potentially giving you the edge in a multiple-bid situation.

2. Faster Closing: Sellers keen on a swift transaction are more likely to favor buyers with a pre-approval, as much of the financial groundwork has already been laid.

3. Strength in Negotiation: When multiple offers are on the table, which is often the case here in NorCal’s competitive market, buyers backed by a pre-approval letter are viewed as more serious and committed. This perceived reliability can make your offer stand out, even if it’s not the highest bid.

4. Seller Peace of Mind: Given the quick turnaround of properties in the region, sellers are naturally inclined towards transactions that promise minimal fuss. A pre-approval letter signals your commitment and readiness, providing the seller with peace of mind and making your offer more appealing.Due to our fiduciary duty, mortgage brokers provide impartial advice focused solely on the client's best interests. We evaluate various loan options objectively, considering factors such as affordability, long-term financial impact, and risk management. This transparency empowers borrowers to make informed decisions that align with their financial objectives. On the other hand, while lenders offer guidance throughout the loan process, their recommendations may be influenced by internal policies or incentives tied to promoting specific loan products or services.

Get a Pre-Approval Letter BEFORE Shopping for a Home

By getting a pre-approval letter before you go to any open houses or ask your real estate agent to take you on a tour of any of your favorite homes you may have spotted online, you save both yourself, your agent, and the sellers of these homes time and energy. By knowing exactly how much money you have to spend (your pre-approval will tell you your highest loan amount), you’ll stay within your budget and won’t set your heart on anything you may not be able to afford.

A Good Mortgage Broker (like Brizzi) Will Call The Listing Agent for You

A good mortgage broker can reach out to the agents of the home(s) you’re interested in and cross-sell your offer along with the agent. By doing this, the listing agent can rest assured that you are a serious buyer, ready to make the purchase, and can meet the closing times.

In a busy market with plenty of cash buyers to compete with, a pre-approval letter can be your saving grace. It lets the sellers know you are interested, you’re financially responsible, you’re in the right position, and ready to go.

Want to see some loan options and discuss what can work for your financial plan? Get in touch.

Lender vs. Mortgage Broker. What’s the Difference & Why Should You Care.

With more than 20 years of experience in the mortgage industry, I can tell you firsthand how important it is for homebuyers to understand the roles of mortgage brokers and lenders. Yes, they are different! As a seasoned mortgage broker, my mission has always been clear: to prioritize my clients' economic well-being above all else. Let's explore the fundamental differences between a mortgage broker (a licensed professional who helps secure the best loan for you) and a lender (the financial institution that loans you money to buy a house) through the lens of personalized service and client empowerment.

Mortgage Brokers Have a Fiduciary Responsibility to Their Clients

First and foremost, as a mortgage broker, my fiduciary responsibility lies squarely with my clients. Unlike lenders who primarily serve the interests of the bank, my allegiance is to you and your financial objectives. It's not just about securing a loan; it's about finding the best loan option that aligns with your needs and goals, even if it means exploring options beyond my own lending platforms.

Lenders primarily serve the interests of the bank they represent, aiming to approve loans that benefit both the borrower and the institution. Conversely, mortgage brokers, particularly in states like California, owe a fiduciary duty to their clients' economic well-being. Backstory: There is a Civil Code in California that mortgage brokers must abide by. A broker's primary obligation is to find the best loan option tailored to the client's needs and financial situation, regardless of the lender involved.

A Mortgage Broker Can Give Access to Favorable Loan Options

When working with a lender, think a Mortgage Loan Officer at Bank of America, for example, you will be given loan options limited to what that specific bank or financial institution has to offer. When you work with a mortgage broker, like Brizzi Financial, you will have access to a network of trusted lending partners, a diverse range of loan products, and terms. In simple terms, a mortgage broker can present you with many more options, whether it's a conventional mortgage, FHA loan, or VA loan that you’re interested in. A mortgage broker’s job is to scour the market to find the most favorable terms tailored to your unique circumstances. Your satisfaction and financial well-being are my top priorities, and I'm committed to providing you with objective advice every step of the way.

Mortgage Brokers is More Likely to Give Objective Advice

Due to our fiduciary duty, mortgage brokers provide impartial advice focused solely on the client's best interests. We evaluate various loan options objectively, considering factors such as affordability, long-term financial impact, and risk management. This transparency empowers borrowers to make informed decisions that align with their financial objectives. On the other hand, while lenders offer guidance throughout the loan process, their recommendations may be influenced by internal policies or incentives tied to promoting specific loan products or services.

A Mortgage Broker’s Approach is Usually Relationship-Centered

Mortgage brokers prioritize building strong relationships with their clients based on trust, transparency, and personalized service. In my practice, transparency and honesty are non-negotiable. If I come across a loan option from another lender that better suits your financial needs, rest assured, I'll present it to you without hesitation. My goal is to empower you with the information you need to make informed decisions that serve your long-term interests.

But beyond just securing a loan, my focus is on building lasting relationships built on trust and mutual respect. Your journey to homeownership is more than just a transaction to me—it's a partnership. By taking the time to understand your unique circumstances and aspirations, I can tailor loan solutions that not only meet your immediate needs but also set you up for success in the years to come.

In the end, whether you choose to work with a mortgage broker or a lender, remember that the key is finding a partner who has your best interests at heart. With a dedicated broker by your side, you can navigate the mortgage maze with confidence, knowing that your financial well-being is always the top priority.

What is a mortgage buydown and is it a good idea?

Have you heard all the buzz about Buydowns? I keep hearing from clients that real estate professionals are throwing around buydowns like they’re the best thing since sliced bread. As you might have guessed, I am not a huge fan. Watch this quick 1 minute video to learn why.

If you’re still interested in learning more about buydowns and how they work, keep reading!

Understanding Buydowns

Buydowns are easy to understand if you think of them as a mortgage subsidy offered by the seller on behalf of the homebuyer. Typically, the seller contributes funds to an escrow account that subsidizes the loan during the first years, resulting in a lower monthly payment on the mortgage. Builders or sellers may offer a buydown option to help increase the chances of selling the property, by making it more affordable.

The builder or seller of the property usually provides payments to the mortgage-lending institution, which, in turn, lowers the buyer’s monthly interest rate and, therefore, monthly payment. The home seller, however, usually will increase the purchase price of the home to compensate for the costs of the buydown agreement.

Buydown Pros and Cons

Whether it makes sense to use a buydown to purchase a home can depend on several things, including the amount of the mortgage, your initial interest rate, the amount you could save in interest over the initial loan term, and your estimated future income. How long you plan to stay in the home also can come into play for determining your break-even point.

The Pros

• A buydown temporarily reduces your interest rate, saving you money and lowering your monthly payments during the initial loan term.

• Choosing a buydown may allow you to pay less for the home than the seller’s listing price.

• It could make sense for homebuyers whose income will increase in the years to come.

The Cons

• Once the buydown rate ends, your monthly payment could be higher than expected.

• A buydown may not be an option for certain property types or loan types.

• If your income doesn’t increase, then you could struggle with making monthly mortgage payments.goals.

Example of a Buydown Mortgage

Here are some examples of how a buydown mortgage can work. Say you're borrowing $250,000 with a 30-year fixed-rate loan at 6.75%. You can choose between a 2-1 buydown or a 3-2-1 buydown.

Here's what the loan breakdown would look like with a 2-1 buydown option:

Year 1: $1,304 at 4.75% interest

Year 2: $1,459 at 5.75% interest

Year 3: $1,622 at full 6.75% interest

The buydown fee for this loan would be $5,759. Now, say you choose the 3-2-1 buydown instead. Here's what your loan payments would look like:

• Year 1: $1,158 at 3.75% interest

• Year 2: $1,304 at 4.75% interest

• Year 3: $1,459 at 5.75% interest

• Year 4: $1,622 at full 6.75% interest

Meanwhile, the buydown fee for this loan increases to $11,324. So when considering a buydown, it's important to look beyond the initial low payment period to determine whether the costs involved in the near term are worth any interest savings you might realize.

Is It Worth It to Buy Down Points?

I do believe buydowns can work for some clients. I also believe in looking at your bigger financial picture and the implications of a buydown.

And remember… There’s no such thing as a free lunch.

That money is coming from somewhere. And if it’s the seller’s pocket, chances are it’s wrapped in the purchase price of the home.

My advice: If you’re going to go with a buydown, make sure you understand exactly what you’re getting into and look at all your options. You could consider putting your own money in a savings account that earns interest as a way to “buydown” your own rate without relying on the seller.

How Will This Year's Elections Affect Mortgage Rates? Here's What You Need to Know.

As we gear up for election years, the big question on many minds is: How do political changes affect mortgage rates? It's a common belief that rates swing during political uncertainty. Stability becomes a top priority to many Americans—especially when making significant financial decisions like buying a home. Regardless of your political leanings, staying informed and adaptable is key. Let’s dive and unpack the facts.

“Forget about the perfect rate. You’ll never get it. Be confident in the payment. Renegotiate when you can, and refinance down the road.”

1. WHAT DOES HISTORY TELL U S?

Over the past 13 years, we've seen election years with both ups and downs in mortgage rates. This inconsistency might make you wonder if elections truly impact interest rates. However, it's crucial to understand that various factors play into mortgage rate assessments, including global indicators and major events like wars. While elections add a layer of uncertainty, their direct influence on mortgage rates is often overshadowed by broader economic factors.

2. NAVIGATE UNCERTAINTY BY STAYING INFORMED AND BEING ADAPTABLE.

Regardless of your political affiliation, the key is to remain informed and adaptable. Consulting with mortgage professionals or financial advisors can provide valuable insights into current market conditions and help you navigate negotiations effectively. Wondering if rates will actually drop this year due to the elections? Check out this article for more advice.

3. LOCK IN YOUR RATE RATHER THAN “WAIT” FOR A DROP.

One common concern among homebuyers is whether to lock in mortgage rates during negotiations or wait for potential rate drops. While fluctuations in federal interest rates can influence mortgage rates, it's important to weigh the risks and benefits carefully. In some cases, waiting for lower rates may result in missed opportunities or unforeseen complications. Working with a trusted professional can help you assess your options and make informed decisions based on your unique financial circumstances and goals.

4. START PLANNING WITH A MORTGAGE PROFESSIONAL.

Ultimately, achieving financial confidence involves finding the right balance between seizing opportunities and managing risks. While it's tempting to wait for the perfect rate, the reality is that market conditions are constantly evolving. Instead of fixating on timing the market perfectly, focus on securing a rate that aligns with your long-term financial objectives. Remember, even if rates fluctuate, locking in your interest rate provides stability and peace of mind amidst uncertainty.

Let us help! Whatever your financial goals are, we are here to help you along the way. Because our goal is to partner with you on your journey as part of your financial advisory team, we are here to provide you with clarity, confidence, and guidance to start building generational wealth for your family.

5 Questions to Ask Your Mortgage Broker Before Buying a Home

Knowledge is power! As you prepare to make one of the largest financial commitments of your life, it's crucial to partner with a trustworthy mortgage broker who can provide personalized advice and guidance. Before taking the plunge into buying or refinancing, here are five essential questions to ask your lender or mortgage broker.

A good broker should be able to answer these questions openly and honestly AND if they can’t… run!

1. Can I get a breakdown of current rates?

Understanding current mortgage rates is paramount to determining your budget and affordability. Requesting a breakdown of rates from your mortgage professional provides clarity on what you can comfortably afford and helps you make informed decisions about your financial future.

2. What type of loans do you specialize in?

It's essential to partner with a mortgage professional who specializes in the type of loan that best suits your needs. Whether you're exploring conventional loans, FHA loans, VA loans, or other financing options, ensure your mortgage professional offers a comprehensive understanding of each loan type and provides tailored guidance to fit your unique circumstances.

3. Are there any upfront or hidden fees I need to be aware of?

Transparency is key when it comes to understanding the financial aspects of securing a mortgage. Inquire about any upfront or hidden fees associated with the mortgage process and clarify who you'll be paying them to. Avoid lenders who impose excessive upfront fees, as transparency and fairness are vital in establishing trust and integrity throughout the transaction.

4. How often and in what ways will you communicate with me?

Effective communication is essential throughout the homebuying journey. Clarify with your mortgage professional how and when they will communicate with you, ensuring transparency and consistency in updates and progress reports. Establishing clear communication expectations fosters trust and confidence in your partnership.

5. Is this right for me to do right now?

Asking whether your mortgage professional has your best interest at heart is a critical step in building trust and confidence in your partnership. Your mortgage professional should prioritize your financial well-being over a commission, and offer guidance that aligns with your long-term goals and aspirations. Feel empowered to ask tough questions and ensure that your mortgage professional's advice resonates with your needs and priorities.

Ready to get started? Our team would love to get to know you and your financial goals. One thing we’re big on is HONESTY. We will never push you into a situation to cash a check. Our vision is much bigger than a single transaction. We aspire to be a part of your lifelong financial team and provide you with clarity, confidence, and guidance to start building generational wealth for your family.

3 Ways A Mortgage Can Help You Save During Tax Time

Owning a home comes with various financial responsibilities, but it also brings significant tax benefits. For homeowners with mortgages, tax time can offer substantial savings. Here are three ways having a mortgage can save you money during tax season:

1. Mortgage Interest Deduction

   One of the most significant tax advantages of having a mortgage is the ability to deduct the interest paid on the loan. Homeowners can deduct the interest paid on up to $750,000 of mortgage debt ($375,000 if married filing separately). This deduction applies to both primary and secondary residences, making it a valuable tax-saving strategy for many homeowners.

SOURCE: BUSINESSINSIDER.COM

2. Real Estate Tax Deductions

Homeowners can also deduct state and local property taxes in the year they pay them. This deduction is particularly beneficial in areas with high property taxes. However, there is a cap on this deduction, limited to $10,000 per year ($5,000 if married filing separately). This includes property taxes, as well as sales taxes, and state and local income taxes, giving homeowners the opportunity to reduce their overall tax liability.

3. Discount Points Deduction

Discount points, which are fees paid to a lender at closing to reduce the interest rate on the mortgage, can also be deducted. Homeowners can typically deduct discount points in the year they pay them, even if the seller paid them on their behalf. This deduction can result in significant tax savings over the life of the mortgage, providing homeowners with additional financial flexibility.

Having a mortgage offers several tax benefits that can help homeowners save money during tax time. From deducting mortgage interest and real estate taxes to claiming deductions on discount points, homeowners have opportunities to lower their tax liability and maximize their savings. Homeowners should take advantage of these tax benefits to make the most of their homeownership experience.

By leveraging these tax-saving strategies, homeowners can not only enjoy the financial benefits of owning a home but also optimize their tax returns for greater long-term financial security. As always, it's advisable to consult with a tax professional or financial advisor to ensure that you are maximizing your tax savings and complying with current tax laws.

My Top 3 Beliefs on Wealth-Building That Anyone Can Follow

In a world where the road to financial success can sometimes feel like an exclusive club, my personal journey to building wealth has been guided by three fundamental beliefs. From running a successful brokerage and managing dozens of agents to ensuring my wife and I are prepared for the future, these principles have been instrumental in our journey to not only save and invest but also lay the groundwork for building lasting wealth for ourselves and our children.

SAVING FOR THE FUTURE IS NON-NEGOTIABLE

Saving for the future is not just a good habit but an absolute must in the quest for financial security. It's about creating a safety net, setting aside a portion of your income for unforeseen circumstances, and ultimately gaining control over your financial destiny.

The best way that I’ve found to be the most effective when it comes to saving money is to do it automatically. You can do this by contributing to a 401(k) if your employer participates, or by setting aside savings in an IRA. This belief emphasizes the importance of disciplined savings.

Whether it's creating an emergency fund, saving for major life events, or contributing to retirement accounts, establishing this financial habit is crucial. Connect with your financial advisor or accountant for information on the best saving strategies for your financial situation. 

SOURCE: BUSINESSINSIDER.COM

Put Your Eggs in Several Baskets: Diverse Portfolios

The principle of having a diverse portfolio resonates deeply with me – the idea that spreading my investments across stocks, real estate, and ventures provides not only a shield against risks but also a gateway to growth. A diverse portfolio may include stocks, real estate, and even ventures in the world of entrepreneurship. 

Diversification not only helps to mitigate risks but also provides an opportunity for growth. While stocks offer the potential for high returns, real estate investments can provide stability and passive income. Similarly, starting or investing in businesses can yield significant rewards. By embracing diversity in your investment portfolio, you position yourself to weather economic storms and capitalize on various market opportunities.

Anyone Can Start Where They Are

The empowering notion that anyone can start building wealth from where they are has been a driving force in my financial journey, emphasizing the inclusivity of the wealth-building process. The key is to leverage your current resources and take consistent, intentional steps toward your financial goals.

Wealth-building doesn't require a large initial investment or a specific background. It begins with a mindset shift, a commitment to learning, and the discipline to save. Whether you're starting with a modest savings account, a small investment, or a side business, every effort counts. The power to build wealth lies in your hands, and the journey begins with a single step. 

Get in touch with me if you’re interested in learning how you can begin building wealth through real estate investments.

Navigating the Mortgage Landscape in 2024: Experts Share Predictions

In the ever-changing terrain of the real estate market, especially in the realm of mortgage rates, 2023 witnessed some dizzying highs and, more recently, a notable cooldown. After reaching a peak of 7.79% in October—the highest in 2023—mortgage rates saw a significant retreat in December. This shift was attributed to the Federal Reserve's indications of waning inflation pressures, prompting a closer examination of what lies ahead for mortgage rates this year. 

So, what does all this mean for mortgage rates in 2024, and how can you prepare for the upcoming market? We’re looking to experts and economists for some insights.

Mortgage Rates Will Continue to Ease

Over the past eighteen months, mortgage rates experienced a dramatic surge, reaching levels not seen in decades. The Federal Reserve responded with aggressive interest rate policies to curb inflation. Recently, rates have displayed a consistent downward trend due to the Federal Reserve's decision to pause rate hikes and the presentation of more moderate economic data, however. 

According to Danielle Hale, Chief Economist at Realtor.com, there's a positive outlook for the coming year. "Mortgage rates will continue to ease in 2024 as inflation improves and Fed rate cuts get closer,"(1) she stated in a recent email as reported in a Forbes Advisor article. Hale anticipates that mortgage rates could approach 6.5% by the end of the year, a development that could bring much-needed relief in terms of affordability for prospective homebuyers.

Many Homeowners Will Be Able to Lower Their Mortgage by Refinancing

This shift will also reignite the flames of refinance activity, a sector that remained sluggish for the better part of 2023. Recent data from the Mortgage Bankers Association suggests a resurgence in refinance applications, reporting that applications for refinancing were 14 percent higher than a previous week in December 2023, and 10 percent above the activity during the same week in 20222. Experts are optimistic about refinance activity this year, especially if the Federal Reserve decides to cut rates. Borrowers who secured mortgages at higher rates are expected to seize the opportunity to reduce their monthly costs through refinancing. 

"If [mortgage] interest rates dropped to even 5.5%, it could result in significant savings for these homeowners, as refinancing at that rate could result in an average monthly payment of $1,917 for them, a reduction of $284 every month,"(1) said Michele Raneri, Vice President of U.S. Research and Consulting at TransUnion.

How Much Will Mortgage Rates Go Down in 2024?

Although opinions vary on the precise extent of the decline, there is a prevailing agreement that mortgage rates are expected to decrease in 2024. The overall consensus suggests the possibility of rates nearing 6% by the close of the year. Below, is a table showing the mortgage rate predictions from different sources.(3)

As we navigate the complex currents of the real estate market in 2024, these predictions from industry experts offer valuable insights for both prospective homebuyers and current homeowners considering refinancing options.  Remember to reach out to Brizzi Financial with any mortgage-related questions! We are never too busy to guide you in the right direction.

Do Mortgage Rates Drop in an Election Year?

As a mortgage lender, it's important to understand the outside forces that might impact the mortgage rates. So, as we head into an election year, what can we predict will happen with  mortgage rates? Keep reading to find out.

Busting Myths

Alright, let’s bust the myth right here and now—contrary to popular belief, there is no consistent data to support the notion that interest rates will improve during an election year.

Let’s take a glimpse at this graph, here.

Looking at the past 13 elections, it's evident that mortgage rates have been hit and miss, with no clear pattern or trend. The housing market and mortgage rates during election years are influenced by various factors, and historical data shows that the market tends to respond to uncertainty, rather than being directly affected by the election itself.

Will the Feds get involved?

Some people believe that the Federal Reserve might lower inflation to favor a particular party in power, but this is a myth. In reality, the Fed's rate policy is unlikely to be swayed by an upcoming election, as it operates independently and makes decisions based on economic indicators and data, rather than political considerations.

More Recent Data

When zooming in on the historical data during the last six election years, again, you can see there isn’t a clear pattern. For instance, in 2020, interest rates were near record lows, but these changes were primarily due to the pandemic and economic concerns, rather than the election. Back in 2004 and 2008 rates we’re all over the place. Again, primarily due to economic factors.

Final Thoughts

It's essential to be educated about the actual impact of elections on mortgage rates. As a mortgage lender, it's crucial to provide clients with accurate information and dispel common myths about interest rate trends during election years.

The good news is that as of now, mortgage rates have decreased for the fourth time in five weeks, with the 30-year fixed rate dipping to 7.37 percent, the lowest level in 10 weeks. There has been a slight increase in applications overall, driven by a five percent increase in purchase applications, but refinance applications decreased over the week.

If you’re looking for more mortgage guidance and interest rate education as we head into the new year, make sure to reach out to our team!

Guess Who’s Back?

There’ve been a lot of changes around here lately, and I want to address a few that might be on your mind:

August 16th, 2022.

On this day, I decided to scare all my family, friends, and loved ones by having a heart attack. While I’m happy to announce that I’m doing well now and am healthier than ever, it certainly changed my perspective on life and the future ahead of me.

That’s why I’ve decided to simplify nearly every aspect of my life. This is the reason why Brizzi Financial has shrunk from its original team model into a more personalized business—where me and my assistant Kelly are holding down the fort.

I am pleased to announce that we are more “service focused.” What does that mean for you? Every loan will be personalized for each client’s needs. I am offering more unique loan options and will tailor the experience to each person.

But most importantly, I will be your main point of contact throughout your entire experience. No handing off from one team member to the next—it’s you and me (and sometimes Kelly) through the entire process.

Thank you to each and every one of you who have trusted me to guide you through the mortgage process. My goal is to get you into a home that is right for you, no matter the market condition.

I’m excited for what’s to come and look forward to working with you and your referrals.

Happy to be back!