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Part 2: Forms of Homeownership: Leasehold

Oct 13

5:43

Category | General

Welcome back to our four-part blog series on the different forms of homeownership. In Part 1, we learned about Fee Simple. In case you missed it, click here to learn more. This week, let's dive into Leasehold Ownership.

You may have never heard of the term “leasehold”. You’re not alone. In fact, its pretty uncommon and only really encountered in New Jersey, New York and Florida.

Basically, someone who buys a leasehold buys the right to live in the building, but does not own the land the building is standing on. Instead, the owner, called the freeholder, grants the buyer use of the building and the surrounding land for a set amount of time in an agreement called a ground lease. A ground lease allows the freeholder to establish how long the leaseholder can live on the property, and requires a down payment. Once paid, the leaseholder pays the freeholder rent, called ground rent, every month. When an agreement is met between both parties, they enter into what’s called a leasehold interest.

Leaseholds are common in commercial properties. Residential leaseholds are rare in the U.S. but exist in New Jersey, New York and Florida. And, unlike apartment leases which are granted in one- and two-year spans, leaseholds can be established between 40-120 years. Once a leasehold expires, full ownership of the property remains to the freeholder.

Can you make improvements on a leasehold?

Under leasehold ownership, you can treat it like you would a home that you own. As long as the changes you want to make meet building codes of the city you live in, you’re free to make improvements. Tenants or leaseholders can choose to make improvements on things such as:

Landscaping
Painting the house
Installing a pool
Expanding the property by adding additional rooms (if city approves)

Is it a good idea to make these improvements? It depends. Since the leasehold agreement can last a long time, the tenant may want to renovate. They do so knowing that they won’t be investing in the property for themselves. Once the tenant reaches the end of the lease, the home switches ownership to the freeholder and they will then own the house with all the renovations that have been made.

Leasehold Co-ops:

Leasehold co-ops are also known as ground lease or landlease buildings (popular in New York City). In a leasehold co-op, the co-operative does not own the land that the building sits on, rather, they are leasing it from their landlord.

Leasehold Condos:

In this type of scenario, condo owners get an actual deed and therefore own their property, even though the building is under lease to a larger ownership entity, to which it pays rent.

Fee Simple vs. Leasehold: Which type of ownership has more value for you?

Leaseholds have a lower value than a similar property with fee simple ownership. When comparing valuations of leasehold properties, they should be matched against other leasehold real estate and not properties with fee simple ownership. This will give you a more accurate value of the property. Full fee simple ownership is what most home buyers want because it gives them the most control of their property. However, if you find yourself in a situation that requires leasehold, you may find that it suits you fine and allows you a home of your dreams.

Stay tuned, next time we'll learn more about Housing Cooperative Ownership. In the meantime, feel free to click here to learn more about the different forms of homeownership.

Part 1: Forms Of Homeownership: Fee Simple

Sep 29

4:10

Category | General

In this four-part blog series, you'll learn about the different forms of homeownership which include Fee Simple, Leasehold, Co-Op, and Condominium Ownership. So, stayed tuned each week to learn more!

Did you know there are a few different forms of home ownership? Indeed, there are! If you’re considering buying real estate, it’s important to know what type of ownership you want to have.

Let’s start with Fee Simple (aka as freehold/fee simple absolute), the most common form of ownership. Many home buyers are familiar with this type of ownership because that’s how most homes are purchased. It’s important to note that whether real estate is fee simple vs leasehold, it will determine what a homeowner can do with it, regarding possession, ownership, and more.

Under Fee Simple ownership, an owner has full possession of their property when bought. The buyer is given the title of the property, and has the right to sell it, transfer ownership of it, remortgage it, or put it in a will. In addition, no one can legally take real estate from an owner with a fee simple title.

Fee Simple: Condos & Townhouses

Fee simple can be contrasted with condo ownership. What does this mean? An owner will have complete access to the land, but they don’t own it. Owners of single-family residences have fee simple ownership, but condo and most townhouse owners do not since they only own the individual unit and not the land. However, they obtain the right to use the community property.

Each unit has its own tax bill, deed, mortgage, and ownership rights, but shares in the maintenance of the common areas. A condo or townhome development will list the type of ownership available in the Covenants, Conditions and Restrictions (CC&Rs) document.

Keep your eyes peeled for Part 2: Forms of Homeownership: Leasehold. In the meantime, you can learn more about each type of homeownership by clicking here.

Step One: Get Pre-Approved Before You Start House Hunting

Aug 18

1:30

Category | General

It’s no secret that buying a home can be a complicated and confusing process. In fact, surveys over the years have shown just how stressful Americans say the process is. We’re here to say, you’re not alone!

In fact, many Americans, about 40%, say buying a new home is the most stressful event in modern life, according to a survey of 2,000 Americans by Homes.com. Another 44% said they felt nervous throughout the home-buying process.

Think of it like this, buying a home isn’t a single action, but rather a series of small steps that eventually lead you the dream to homeownership. Each step in the process has its own challenges. That’s why our number one goal is to make the mortgage process a breeze for our first-time homebuyers AND for our seasoned homeowners.

If you’re currently in the process of buying your first house, keep reading! We’ve got some major tips to help keep your stress at bay!

Some common questions you may have early on in the process are the following:

At what point do I need to secure my pre-approval letter?
Should I shop around for mortgage rates first?
How much documentation would I need to provide before a lender would pre-approve me for a mortgage?

While the mortgage process may seem daunting at first, you’ll come to realize that with Greenway by your side every step of the way that it is actually quite simple!

Step #1: Get Pre-Approved!

If you’re thinking about house hunting, the first step you should take is getting pre-approved. In order to make an offer on a house, your real estate agent will want you to have a pre-approval letter in hand.

Why? A pre-approval letter is a statement from the lender that you qualify for a specific mortgage amount based on an underwriter's review of all of your financing information (credit report, pay stubs, bank statement, assets, salary, etc). Getting an upfront loan approval will help you beat out the competition, negotiate with power and let you know how much you can afford.

What is Pre-Qualification?

Getting pre-qualified is important if you are just looking around, thinking about buying a house. Home loan pre-qualification helps you get a better idea of what size and type of mortgage you might qualify for in advance of submitting your actual mortgage application. With this information in hand, you can better plan and prepare financially for meeting your home ownership goals.

Tip: If you’re serious about buying a home, we highly recommend getting yourself-pre-approved to avoid losing out on the home of your dreams.

Getting Pre-Approved During COVID-19

Over the past few months, sellers and listing agents have been extremely cautious about who is coming into their homes due to the COVID-19 outbreak.

Having that pre-approval letter is key during this time, especially because agents and sellers want to come in contact with as few people as possible. A pre-approval letter will show them that you’re taking the process seriously. In fact, it may be your ticket into the homes you want to tour! So, what are you waiting for? Click here to get your pre-approval letter today.

The Good News About Getting Pre-Approved

The good news is, our online pre-approval application doesn’t take long. You’ll want to get yourself prepared with the necessary documents before you start. All of this and more will be needed once your loan is in process, so you may as well put it together now!

Pay stubs – last 30 days
W2s – last 2 years
Federal tax returns – last 2 years, all pages and schedules
Bank statements – Last 2 months, all pages
Realtor and attorney contact info
Copy of photo ID – must be legible

Trust us, having this letter in hand will save you so much time and stress! And you won’t have to worry about someone else making on offer on the home you had your eye on.

Mortgage Rates

If you’re in the market for a new home, this summer might be a good time to buy! Rates are low. How low? Contact your Greenway Loan Officer to discuss your financing options and to see what type of rate you could get.

Tip: Lower rates translate to lower monthly payments. That means you may be able to purchase more home for the same monthly payment or have a lower payment for the home you’ve always wanted.

As always, Greenway is here to help when you’re ready. Give us a call [908-489-4658] or visit us online to learn more.

Other Helpful Resources:

Home Buying Comparison Chart: Don't Leave Without It!

Aug 4

3:35

Category | General

Download Your Free Home Comparison Chart Here.

Purchasing a home is a major milestone that tops many people's lifetime to-do lists—and maybe their list of financial fears too. But it certainly doesn't have to be a scary or stressful experience. With time, care, and research, you can take control of the home-buying process.

When looking for a home to buy, it becomes easy to get individual houses confused with one another because there are so many details.

That's why Greenway Mortgage has created a Home Comparison Chart to help keep everything in order!

Our handy checklist identifies important factors to consider when choosing a home. In addition to an affordable sales price, you will also want to be sure that the neighborhood and house meets your needs.

Download and take this checklist along with you when you are house hunting. It will help you to evaluate the neighborhoods and assess the availability and condition of various features of up to three homes in a side-by-side comparison.

Planning Ahead for the Perfect Mortgage Application

Jul 21

7:02

Category | General

Planning ahead for your mortgage application will save you time and trouble once you start making offers. Here's a list of things you'll need to gather!

Income

Provide your last two paystubs along with your W2s and Federal tax returns for the last two years (include all schedules). State returns are not needed.
If you are self-employed, ask me for the additional documentation requirements.
If you receive bonus or commissions or have changed your job or position, let’s talk.

Assets

Combine all the funds needed to close into one account at least two months prior to your application.
Document any other deposits here as each could be scrutinized.

Your Statements

Save all pages of your asset statements, even if some are blank or are just advertisements.

Deposits

Deposit checks individually.
Don’t deposit cash without clear proof of the source.

Liquidation

If you are going to sell stocks, bonds, investments or borrow against a retirement account, do it now. Cashing out now may cost you a few dollars in additional gains, but it also protects against losses.

Current Housing

If you own and are selling, provide a copy of the HUD-1 settlement statement.
If you own and are not selling, you'll need to qualify for both homes or meet the requirements for renting the current.
If you are renting, show 12 months of canceled checks demonstrating timely payments and/or written verification from your management company. Ideally, pay your rent on the same day each month on or prior to its due date.
If you live with family, you may need a letter stating that you live rent-free.

Credit

Check your credit report at www.annualcreditreport.com. Identify any errors now and consult with us for the correct action to take.
If you co-signed a loan or are being reimbursed for a loan that’s in your name, you’ll need at least six months of checks to exclude it.
Avoid new credit or inquiries. These can lower your score and increase your rate.

Employment Stability

Ideally, you’ll have two years or more with your current employer.
Consult with us before changing employers, position or method of compensation. For example, don't switch from salary to commissions.

Have questions? Reach out to the Greenway Mortgage Team! We are here to help. And if you're ready to get started - click here to apply online! Start closing your loan in about 15 minutes with our easy online application!

Resources:

In fact, many Americans, about 40%, say buying a new home is the most stressful event in modern life, according to a survey of 2,000 Americans by Homes.com. Another 44% said they felt nervous throughout the home-buying process.