10 Common Mortgage Myths and How to Identify Them

Mortgage myths can make the home-buying process confusing — especially for those who are going through it for the first time.


What should you look for in a mortgage? How do you know if you have a good interest rate? How much down payment do you need? 


One quick Google search for the answers to these questions and more can turn up all sorts of misinformation.


In real estate transactions, time is of the essence. Simply applying for a mortgage is a tedious process so you definitely don’t want to waste your time following bad advice. 


That’s why we’re here. Let’s debunk 10 common mortgage myths


Myth #1: You Must Have a 20% Down Payment

The idea of coming up with a 20% down payment to buy a home can be overwhelming. Yet, many people are under the assumption that this is what is needed — or else you won’t be able to make the purchase. 


This is a myth that stems from the common lender requirement of private mortgage insurance (PMI). This protects your lender should you default on the loan. How it works is if you do not put down 20% of your loan as a down payment, you may have to make up the difference by purchasing PMI. This will add additional payments to your monthly mortgage payment until you reach 20% equity. 


Conventional loans usually require 3% down and many first-time buyer programs don’t require any down payment at all. Know your mortgage options before you apply. 


Myth #2: You Can’t Qualify for a Loan Unless You Have Perfect Credit

Having perfect credit means you have access to the best loan options available. However, you do not need to have perfect credit to buy a home. 


If your credit score is less than perfect, don’t be discouraged. There are many mortgage options, each with its own credit requirements. Some work with credit scores as low as 580.


Myth #3: Renting is Cheaper than Buying

The idea of investing in something that is hundreds of thousands of dollars, like a new home, can seem excessive when compared to paying a small monthly rental payment. But when you look at the bigger picture, it is easy to see that renting is not cheaper than buying. 


Here are a few things to consider: 


  • Homeownership builds equity, meaning that you are paying money into something that is yours. Renting, on the other hand, is paying money to someone else with no concrete long-term gain. 

  • With most loans, mortgage payments are fixed. Rental payments are not. 

  • When you own a home, you can usually take advantage of tax benefits. 


Renting can be more costly, shelling out a lot of money each year with nothing of value to show for it. 


Myth #4: The Lowest Interest Rate is Always the Best

Most people look for the lowest interest rate. But is that always the best option? No. This is another one of the common mortgage myths you will want to avoid. 


Sometimes lenders can entice buyers with a low rate and then hit them with higher fees, including loan origination fees, PMI, closing costs, and the like. Take a closer look at your loan’s APR in order to confirm the interest you’d be paying. 


Myth #5: Adjustable Rate Mortgages (ARMs) Are Always a Bad Idea

An adjustable-rate mortgage (ARM) will have an interest rate that changes over time. It may begin with a low, fixed interest rate before it begins to fluctuate up and down. Homebuyers often shy away from ARMs because of the uncertainty. 


Does that mean ARMs are always a bad idea? Not at all. Some may find it to be the best choice, especially those who don’t intend to live in the home for a long time or who plan to pay the loan off early.  


Myth #6: Pre-Qualification and Pre-Approval are Essentially the Same Thing

Pre-qualification and pre-approval are not the same thing. Both are assessing your qualifications for a mortgage, but one requires more verifications than the other. 


A mortgage pre-qualification means that your chosen lender has used very basic, self-reported financial information to assess whether or not you may be approved for a loan — including how big of a loan you will qualify for. 


A mortgage pre-approval is a little more in-depth, often including the review of some of your financial information rather than just going by self-reporting. This will give you more detailed results about the size of the loan you may be approved for. 


Myth #7: The Down Payment is the Only Upfront Cost

As many search for their new home, they may assume that having their down payment is all they will need when it comes time for the real estate transaction. It is important to note that there will be closing costs that will vary based on the price of the home. These will have to be paid upfront, too. 


Myth #8: A 30-year Fixed-Rate Mortgage is the Best

Sure, a 30-year fixed-rate mortgage is one of the most popular loans out there, but it is not the only one. There are other mortgage options available that may be a better fit for you. For instance, 15-year mortgages often have lower interest rates and help you build equity faster. 


Always check your options before assuming one loan is better than another.


Myth #9: People with Student Loan Debt Cannot Get Mortgages

The last of these 10 common mortgage myths – Student loans stick around for a long time. Don’t fall for the mortgage myth that this debt will keep you from being able to buy a home. It will not. 


Lenders are more concerned about how much income you have and how much money you have in the bank than they are about how much student loan debt you have. 


Myth #10: You Can’t Have Debt and Buy a Home

How many times have you told yourself that you’d start the homebuying process when you paid off this credit card or that outstanding bill? Needing to be debt-free to buy a home is a myth. As long as the debt-to-income ratio is where it needs to be, you can have debt. 


Lenders are only concerned with your ability to pay the mortgage with the amount of debt you carry. 

Don’t be fooled by these 10 common mortgage myths. Learn more about your mortgage options from Ahmad Azizi and the team at Option Funding.

Loan Officer

How Long Does a VA Loan Take to Close?

Being able to buy a home of your own is the ultimate dream. And for many who have served in the US military, VA loans can help.  


How long does a VA loan take to close, though?  


Unfortunately, over the years, VA loans have been tainted with a reputation that they take forever to close. In reality, it takes an average of 40 to 55 days for these loans to close – from contract to closing. This isn’t much longer than the 30-day average closing for buyers with a conventional mortgage.  


Below you will find a closer look at the timeline and what you can do to speed up your VA loan process.  


VA Loans: The Timeline 

How long does a VA loan take to close? The exact amount of time will depend on just how quickly you make it through the timeline of events. After all, there are certain steps you have to take to successfully make it to the closing.  


Get Pre-Approved For a VA Loan 

Although it is not a mandatory step, getting pre-approved for a VA loan before moving forward with your home search is always a great idea. There aren’t many things worse than finding the home of your dreams and losing it because you took too long to qualify for a loan.  


Keep in mind that getting pre-approved does not guarantee you a loan, but it does prove that you have met basic requirements set forth by the lender and, as long as you are able to meet a few additional conditions, you will likely be able to secure the loan.


Obtaining the Proper Appraisal 

VA loans require getting an appraisal done by an appraiser that has been approved by the VA. Setting this up is often handled by the lender, but it is worth knowing in case you decide to hire your own appraiser.  


To get through the process, you will have to consider the time it will take the appraiser which seems to be about 10 days, on average.  


Response to Appraisal 

Once the appraisal is submitted, two things can happen. The file can continue to move forward as is because all is well with the property and it is valued appropriately. Or, there may be repairs that need to be done before the loan can be approved. Depending on the size of these repairs, it has the potential to significantly disrupt your closing timeline.  


What’s more, VA loans require the home to be appraised at or above the loan amount. If it is not, this could also throw a wrench in the process. If the seller does not agree to reduce the price to meet the appraised value, the buyer may have to come up with money to make up the difference or let the home go.  


Final Underwriting 

After the home has been appraised, you are moving into the home stretch of the closing process. The underwriter will take care of all the specific details that they are responsible for and this can take some time – especially if additional documentation is needed or other issues arise.  


If all goes well, the file will be ready to close sooner rather than later.  


Personal Timelines 

A seller may list a home and want to sell it, but perhaps they won’t be willing to move for a few months. They could, after all, be waiting on their new home to be ready and a buyer would have to be understanding of this.  


On the flip side, buyers may be looking to purchase a home but need to wait until their current home is sold to complete the sale.  


There are many different personal factors and timelines that can interfere with the overall length of time it takes to get through the home-buying process. Rest assured that most often, both parties are anxious to get through the process as quickly as possible. 


Reduce the VA Timeline 

Getting a VA loan means going through some structured steps. You cannot get out of going through them or avoid a step or two. However, there are a couple of things you may do that will reduce the timeline for VA loans, including:  


Choose an Experienced Realtor

There are certain criteria that the VA requires their properties to meet. They are referred to as Minimum Property Requirements or MPRs. Without them, you may run into issues with your funding – even if you do have pre-approval. Working with a realtor who is experienced in the VA’s requirements will help you avoid these issues.  


Obtain a Certificate of Eligibility (COE)

If you have a COE, then you can feel confident in the fact that you have a piece of proof for your lender showing that you qualify for VA home loan benefits.  


Getting Pre-approved

How long does a VA loan take to close if you have pre-approval? Knowing that you have already gone through the application process and have pre-approval means that there are fewer hiccups to encounter after you make an offer, thus reducing the timeline.  


Is a VA Loan Right For You?  

If you meet the requirements to be eligible for a VA loan, you may find that they are a great option. However, they are not the only option. VA loans can be great for those who take the time to get pre-approved, work with an experienced lender and realtor, and find a home that doesn’t need repairs. They offer a lot of perks.  


How long does a VA loan take to close? How does this compare with your other mortgage options?  


It is important to note that VA loans are not the only mortgage option you have. Working with Option Funding, Inc. will open you up to many different choices for funding your home purchase.  


Before you make a move, talk to Ahmad Azizi and his team of mortgage experts. See if a VA loan is right for you or if there may be a better option to meet your needs.  


Contact Ahmad today!


Adjustable-Rate Mortgage: Everything You Need to Know

Many people find the home of their dreams and want to rush through the process of taking out a mortgage as quickly as possible. However, you never want to agree to a mortgage without fully understanding the terms of the loan. Otherwise, you could end up with some surprises down the road. 


Both fixed-rate and adjustable-rate mortgages are popular options, but they have one major difference: the interest rate. With a fixed-rate mortgage, your monthly payment will never change. With an adjustable-rate mortgage, it fluctuates. 


Let’s take a closer look. 


What is an Adjustable-Rate Mortgage? 

An adjustable-rate mortgage, often referred to as an ARM, is a type of loan given to purchase a home or other property. As its name suggests, the interest rate will adjust every now and then. Payments, in turn, will go up or down. 


It is common for an adjustable-rate mortgage to start out with an interest rate that is lower than other types of loans, including a fixed-rate mortgage. This always makes it seem like the better option. 


An ARM will keep this initial interest rate for a while before it adjusts in one direction or the other. As a result, your monthly mortgage payment will then increase or decrease for a period, and you won’t know which way it is going to go until it happens. 


The adjustment period is the time between changes in interest rates. Depending on the specifics of the loan, the interest rate can change monthly, quarterly, bi-annually, annually, every 3 years, or even every 5 years. This means your payments can go up or down for the duration of the period. 


Is It a Good Idea to Get an Adjustable-Rate Mortgage?

Is an adjustable-rate mortgage a good idea? Why choose this type over a fixed-rate mortgage? 


An adjustable-rate mortgage can be a great idea for the right person. Because they often start off with a low-interest rate, they can save you money right away. For those who are just getting started – and plan to be making more money soon – this can be a great idea. 


It is worth noting that interest rates are incredibly unpredictable. They may go up for a few years and then trend downward for a few years. You just don’t know so you must be prepared either way. 


Types of Adjustable-Rate Mortgages

Did you know that there is more than one type of adjustable-rate mortgage? 


Hybrid adjustable-rate mortgages are considered the traditional ARM. They will initially have a low-interest rate for a few years before it begins adjusting itself annually. In other words, it may increase or decrease each year. 



Interest-only adjustable-rate mortgages are those that require the borrower to only pay interest for a certain time. Then, following that period, the borrower will be paying toward both principal and interest. 



Payment-option adjustable-rate mortgages allow the borrower to select their own payment schedule. These can be trickier than you’d imagine. For instance, if you find yourself in negative amortization, your lender may require you to make very large, exorbitant payments. 


How Do Adjustable-Rate Mortgages Work?

Each adjustable-rate mortgage comes with a name that consists of two numbers, such as # / #. Believe it or not, this quickly gives you an idea of their terms. The first number will tell you just how many years you will get to pay using that low introductory rate whereas the second number lets you know how often the interest rate will adjust. 


Here are a few examples


  • A 3/6 ARM means that you will pay the initial low-interest-rate payment for the first 3 years and then for the next 27 years it will adjust every 6 months. 


  • A 3/1 ARM means that you will pay the initial interest rate for the first 3 years and for the remaining 27 years of your loan you will pay based on the interest adjustment annually. 


  • A 5/6 ARM will give you a low initial interest rate for the first 5 years of your loan. Then, for the following 25 years, the interest rate will adjust every 6 months. 


  • A 7/1 ARM will help you maintain low, initial interest payments for 7 years— followed by 23 years of annual adjustable interest. 


  • A 10/6 ARM allows you 10 years of a low-interest payment based on the initial interest amount. Then, for the next 20 years, interest will be adjusted every 6 months. 


Adjustable-Rate Mortgage: The Pros and Cons

As with anything in life, there are pros and cons of adjustable-rate mortgages. For some, these may be the perfect option. For others, not so much. Knowing all the details about them is the only way to make an educated decision about your future home loan. Weigh the good and bad to determine whether or not an ARM loan should be your go-to choice. 

The Pros of ARMs

If you choose to take out an adjustable-rate mortgage, you can benefit from: 


  • A lower interest rate for the first few years. This means lower monthly payments.
  • Have extra money for savings or for projects upon move-in to your new property. 
  • The potential for your interest rate to drop in the future. 


The Cons of ARMs

Of course, you will want to be aware of these cons, as well: 


  • Interest rates may increase and lead to increased payments. 
  • Complex terms that may be fully understood. 
  • Payments may become unaffordable.


Is an Adjustable-Rate Mortgage Right for You?

Adjustable-rate mortgages can sound like a great deal during the initial period, but are they the best option for you? Sometimes it helps to discuss your mortgage options with the professionals. 


Ahmad Azizi and the entire team of mortgage experts at Option Funding, Inc. can be an essential resource as you embark on your home-buying journey.


Because we have so many mortgage options to offer, we can review your situation and determine whether an adjustable-rate mortgage is the right fit — or if there is a better solution available. 

Contact Ahmad today to get started.


How to Prevent Home Title Theft

Purchasing a home is one of the biggest investments you will make in your lifetime. 


After searching and finding your dream house, you went through the legal channels of purchasing it and taking over the rights to it. The deed reflecting all of this is recorded with the title to your property reflecting you as the rightful owner. 


In an ideal world, none of this should change unless you sell or transfer the property. Unfortunately, your home ownership can easily catch the eye of thieves— and they want what you have. 


Home title theft happens more often than you’d think. Let’s look at what it is, what to look out for, and how to prevent it from happening to you. 


What is Home Title Theft? 

Home title theft happens when someone fraudulently uses a homeowner’s personal information to forge a deed and transfer their home into their own name. From there, they can try to sell it, take out a line of credit, or try to rent it out to an unsuspecting tenant. 


The scammer makes money without you ever knowing. 


Real estate scams are on the rise. And while home title theft isn’t the most common, it happens enough that homeowners need to be aware of it. 


Because thieves are looking to make a buck, they often choose homes that have been owned for years – giving them access to the most equity. So, don’t think you are out of the woods if you have been a homeowner for decades. In fact, this could make you an even greater target. Vacant properties and those with a satisfied mortgage are also vulnerable.


What happens if the thieves succeed at stealing the title of your home? You may lose your property. Often, these scams leave homeowners with a heap of financial debt they don’t know about. And mortgages, home equity lines, etc., all allow the lender to foreclose on the property to get their money back.


How Does Home Title Theft Happen? 

There are many ways that home title theft can happen. However, there are a few common methods that thieves use.


Sending phishing emails or letters

Scammers are getting better and better at making their fake emails and letters look legitimate. This requires homeowners to be even more diligent when they receive something that seems out of the ordinary. Phishing is a way for scammers to obtain personal information by looking like they are the proper lender, bank, or government agency. 


Invasive computer software, such as malware

Adding malware to your computer using a virus allows thieves access to your personal information. Unless your device is protected, you won’t even know they are there. 


Data Breaches

Hackers can break into different company servers and gain access to your personal information. 


Using an unsecured internet connection

Anytime you use an unsecured network for personal use, scammers can be in the background watching your every move and stealing your private information. 


The best thing you can do is learn how to prevent home title theft. 


How Can You Prevent Home Title Theft? 

Knowing how it all happens is one thing, but knowing how to prevent home title theft is another. Protect yourself by taking these steps: 


Invest in Title Insurance

When you buy your property, a title search will be performed to ensure it is free and clear. You will then be offered title insurance – one for you and one for your lender. In most places, owner’s title insurance is optional. Yet, for the sake of protecting your title rights, it is worth the investment. 


One premium payment at closing can protect you from title issues for as long as you have an interest in your property. If any fraudulent claims or old liens arise, for example, then your title insurance will cover the legal fees and defense, if necessary. 


Stay On Top of Your Financials

Always stay on top of your mail, your bills, and other financials. Knowing what you have and what you don’t, as well as where you stand with all your bills will allow you to more easily see when something changes. 


As soon as you notice something seems off, it is important to act. 


Remain In-The-Know

The more you know about real estate scams and how they work, the greater you will be protected. It is critical to educate yourself on how and what is happening so that you can always be prepared should it happen to you. 


Knowledge is one of the most effective tools in preventing home title theft. 


Signs of Home Title Theft

Now that you know about home title theft and what you can do to prevent it, you should familiarize yourself with the signs. Keeping an eye out for these things will enable you to act before things get worse. 


Changes to your credit report 

It is always a good idea to monitor your credit report. This will give you a glimpse of things that are going on — and an opportunity to catch those things that don’t belong, such as new mortgages or lenders. 


Pay attention to your mail

Are you receiving information regarding financial matters you didn’t initiate? Are you missing mail you should have received? 


Random calls or emails from your lender

Scammers may call you and pretend to be your lender to try and obtain your private details. Use caution if you receive calls and emails asking you for this personal information. 


Keep in mind that home title theft often begins with identity theft. So, if you have any inclination that your identity may be in jeopardy, take steps to safeguard yourself and your home. 

Guidance From Option Funding, Inc. 

At Option Funding, Inc., Ahmad Azizi and his team of experts can guide you through the mortgage process – and can offer you personalized guidance and support along the way. 

Contact us today to get started.

Loan Officer

Clear to Close: Everything You Need to Know

It can take some buyers months to find the perfect property. And once they do, the mortgage application process can seem endless—especially when you’re anxious to get the keys to your new home. 


Before that can happen, you’ll need to hear from your lender that everything has been approved and that everything is good to go. 


Then, with just a few simple steps remaining, you will finally be able to exhale. In other words, you will have the loan you need to buy the home you want. 


So, what exactly is clear to close in terms of your mortgage? Here is everything you need to know. 


What Does it Mean When You Get the Clear to Close? 

Getting a “clear to close” means that your loan has passed all the requirements and has met all the conditions set forth by the lender – allowing the file to move forward to the closing. 


Your lender carefully reviews all the documents you have provided and verified that the mortgage you have chosen, as well as the amount, are all a good fit for you. They are, after all, taking a huge risk in loaning you the money and want to do their due diligence to make sure they are making a wise decision in doing so. 


Once your file has been dubbed “clear to close”, the lender will then move into the next phase of prepping for your closing. This is when you will sign all your loan documents, as well as the documents provided by your title company so that they can officially transfer the title to you. 


How to Achieve Clear to Close Status on Your Mortgage

When applying for a home loan, the goal is to get approved and cleared to close on the property. While a lot of the work rests on the shoulders of the loan officer and underwriter, there are things that you can do, too, to make this a much smoother process. 


The more thorough and swift you are at providing the following information, the greater chance you have of your mortgage application getting approved. 


Provide All Documentation 

Your lender will require quite a bit of documentation along with your application. This is because they are trying to determine whether you have the money to pay back the loan. Documents often required include pay stubs and bank statements in order to prove your income and your assets. 


A list of your monthly expenses and debt is also needed. Most lenders will look at your debt-to-income ratio to determine whether you are a good fit for your loan. And granting permission to pull your credit report is also necessary. 


Don’t overlook anything when providing your documentation or you could be denied.


An Accepted Offer

When you find the home of your dreams, you need to make an offer on it – and get the seller to accept it. Your lender will need to know exactly how much you need for the purchase, as well as whether it makes sense. 


Before you make your offer, consider the market, how long the property has been listed, any work that needs to be done to it, and how many other interested parties there are. If you are not sure how to strategize and come up with the right offer, your realtor will be able to help. 


The Appraisal and Inspection

The home will need to be appraised and inspected before you will be approved for a mortgage—and both should be handled by third parties. 


The appraisal determines the fair market value of the property while the inspection will uncover any problem areas or issues with the property’s interior and exterior. 


The results of these are used by the lender to determine what the property is worth and if the amount of your accepted offer makes sense. 


Underwriting Approval

Many borrowers fear underwriters. After all, without the underwriter’s approval, you likely will not get approved for the loan. 


These are the individuals who go over everything with a fine-toothed comb. They look at all your documents, your debt-to-income ratio, your credit history, your current income, your assets, the details of the loan you are seeking, and so forth. 


They let the lender know if you are a good fit. 


How Long Does it Take to Get Clear to Close Status? 

There are many steps – and many people – involved in gaining loan approval from your lender. Each of the above steps must be completed. While you may turn over all your documents right away, you may still have to wait on the appraiser and inspector based on their schedules, as well as the review of the underwriter. 


On average, you can expect the entire process, from your initial application to being cleared to close to take about 30 to 45 days. Then it should only be a couple more days until you have the closing and get the keys – if things flow smoothly.  Stay in contact with your lender so that you can address anything that comes up without delay.


Your Mortgage is Now Clear to Close: What’s Next?

Once you are cleared to close, you are almost there. When you have reached this stage, you can feel quite confident that you are going to be purchasing your new home. However, there are still a couple of things that need to be handled. 


A Closing Disclosure outlines the terms and conditions of your new mortgage agreement and explains what you are going to be responsible for. You must review this carefully, make sure you fully understand it, and then sign it before you can close. 


Lastly, a final walkthrough will take place to make sure that the home is still in proper condition. A lot can happen in 30 days, so this is always a good way to protect yourself. 


Get through all of this and then you can celebrate your closing day


Ready For Your Mortgage to Achieve Clear to Close Status? 

At Option Funding, Inc., we make sure you have mortgage options available to you that will give you the greatest chance for a clear to close. 

Contact branch manager Ahmad Azizi when you are ready to get started.


How to Write a Gift Letter for a Mortgage

How to Write a Gift Letter for a Mortgage

To qualify for a mortgage, you often need to have some form of a down payment. Getting the money together for this, however, can be quite a challenging task. 


To help bridge the gap between what they already have put aside and what they need for their down payment, it is not uncommon for many new homebuyers to reach out to friends and family for some help. Getting some assistance with additional funds may be all that is needed for their loan to go through. 


If this is the way you have accumulated your down payment, don’t be surprised if you are required to submit documentation showing that your friends and family gave you money out of the kindness of their hearts – as a gift. 


Here’s how to write a gift letter for a mortgage. 


What is a Gift Letter for a Mortgage? 

As long as you have money for your down payment, it shouldn’t matter where the money comes from, should it? After all, a quick look at your bank account will prove that you have the funds to cover it. 


For lenders, it matters where the money came from and the terms surrounding it. So much so that when you apply for a loan, the lender will diligently review every aspect of your submitted financial documents. They are looking to see if you have enough money to cover the down payment and if you make enough to cover the monthly mortgage payments. 


If they see that you didn’t have enough money for your down payment – and then one day you miraculously did – they are going to question where it came from. Did you take another loan that you will have to repay? Did you get a loan from a friend? Are there circumstances surrounding that money that could inhibit your ability to pay your monthly mortgage amounts? Did you receive these funds from a legit source – and not fraudulently? 


To get the answers they are seeking, lenders will require a letter from the person who gave you those funds. Known as a gift letter, this will need to be a statement advising that the funds were a gift to the loan applicant – and they do not expect to be repaid. 


What Funds Must Be Included in a Gift Letter? 

Whether or not you intend to use the large lump sums of money you have received from someone as part of your down payment, if your lender asks for a gift letter, you need to supply it. Will they know about the funds you received 4 months ago when they only asked for two months’ worth of bank statements? Not likely. Do you need to supply a gift letter for funds they aren’t questioning? No. 


To save yourself some trouble, you can always just wait for 60 days to pass before moving forward with your mortgage application. That way your gift money will not be included in the 60 days of financials the lender is likely to monitor. Otherwise, it’s important to know how to write a gift letter. 


How to Write a Gift Letter for a Mortgage

When writing a gift letter for a mortgage, you will need to include a few pieces of information, including:

The amount of the gift

The dollar amount stated needs to match the amount of the gift that was deposited into your account. 

When the gift funds were delivered

The letter will need to state when the gift funds were (or will be) delivered.  

A statement that it does not require repayment

The gifter will have to sign a statement that it was a gift and that it does not need to be repaid. 

Stated purpose

The gifter will need to write a statement that the funds are to be used for the new property, specifically stating the address of the new property.

Relationship of the gifter to the borrower

This relationship will need to be stated and it may impact whether you can proceed. 

Personal information about the gifter

The underwriter will be reviewing where this gift money came from to make sure it is from someone with no interest in the property. For instance, they want to confirm that a realtor or loan officer didn’t pay you the money. They may request personal information such as a banking name and account number. Not providing this information could be a deal breaker. 

Signatures of both parties

Finally, this gift letter will need to be signed by both parties – the one giving the money and the one receiving it. This will make it a legally binding document. 


Specific Mortgage Guidelines

It is worth noting that not every lender is going to require a gift letter. And not every lender is going to question the who, what, when, and why of deposits into your bank account. Some don’t even require a down payment at all. Yet, others only allow that money to come from certain people. And some require you to use a percentage of your own money as a down payment along with the gift money. 


The best thing you can do is be prepared for lenders to look through your financials, know the guidelines surrounding gift money, and be able to prove where it came from with your gift letter. 


Here are a few examples:

  • Conventional loans, like those from Fannie Mae and Freddie Mac, require the gift money to come from a family member. 


  • FHA loans allow gift funds to come from certain family members and even employers. 


  • VA loans and USDA loans don’t really have any restrictions on who can supply you with gift money. 


Keep in mind that guidelines can change at any time. It is always a good idea to have a mortgage broker on your side throughout the application process. You can explain your situation – and the experienced team will be able to guide you to the mortgage that will fit your needs and circumstances. 


Learn More at Option Funding

You have mortgage options and Ahmad Azizi of Option Funding, Inc., will be the first to let you know. If you received gift funds, he and his experienced team will be able to guide you to those lenders that will accept your gift letter. 

Ready to get started? Contact Ahmad today!


How is a Mortgage Payment Broken Down

You know you must pay your mortgage every month when it is due. But do you actually know what you are paying? How is a mortgage payment broken down? Do you know what is included in the amount owed? 


When buying your property, you likely spent a lot of time going over all sorts of documentation for your new loan. There were likely a few changes along the way, too. Or maybe you are getting ready to go through it all now. Either way, it’s important to know what a mortgage payment consists of. Unlike other monthly bills you receive in the mail, your mortgage payment is a bit complex. It includes a lot. 


How is a mortgage payment broken down? Because you should always know where your money is going, below is an explanation of how mortgage payments are broken down. 



The money you borrowed in order to purchase your home is the principal. This is the initial loan amount that you were given from the lender. The principal does not include anything else – just the purchase amount. 


Your mortgage payments each month only contact a percentage of a payment that goes toward the principal amount of the loan. The larger your principal balance, the greater your mortgage payment will be.


How your mortgage payment is applied to your principal amount will vary depending on the type of mortgage. For instance, with a fixed-rate mortgage, the amount that goes to the principal will remain the same throughout the life of the loan. 


Interested in knowing how to save on principal? You must have the right mortgage option for you. And, of course, since your down payment is applied to your purchase price, the bigger the down payment, the lower the loan amount you will need. 



The interest amount on your loan is considered a profit for the lender. In the most basic form, your lender will offer to provide you with the funds needed to purchase a property (the principal) with the understanding that you will pay it back – with interest. 


The portion of your mortgage payment that goes toward your interest is all profit for the lender. And it is essential to note that they want this paid back first. This means that for the first several years, you are working to pay off the interest of your loan rather than the loan itself. 


The payment will reduce the interest amount you owe before it begins deducting from the principal. 


Having a lower interest rate will result in lower payments. But how do you get a lower interest rate? Have a great credit score – or work with the right mortgage lender or broker to help you secure the best loan for your needs. 



Property taxes are almost always figured into your mortgage payment. This means breaking down your annual property taxes into 12 payments to be paid with your mortgage throughout the year. 


The taxes collected each month are placed into a separate account known as an escrow account. This is where they will continue to accumulate until they are due. The lender will then pay your property taxes for you using the funds you have paid each month throughout the year. 


Why are lenders so worried about your property taxes? 


Believe it or not, they are not doing this out of their own kindness to ensure you don’t have to pay your taxes in one lump sum. Rather, they are looking out for their own interest. If you choose to not pay your property taxes or find yourself in a situation where you cannot pay them in one lump sum, then it is possible to have a lien placed against your property. And tax liens take precedence – impacting your lender’s lien position. 



Insurance is another amount – like taxes – that is collected each month and tossed into the escrow account for when you need it. That way should an emergency arise, you will have access to the funds to take care of it and protect your home. 


Private mortgage insurance (PMI) is another type of insurance that may apply to you if your down payment was less than 20% of the purchase price. This protects you – and the lender – should you be unable to pay your mortgage. A twelfth of your annual PMI is going to be included in your monthly mortgage payment. This, too, will be placed in the escrow account. 


Insurance payments do not fluctuate too often so having it included in your mortgage payment should not impact the monthly cost. And, if you would like to avoid having to pay PMI, make a down payment of at least 20%. 


FHA mortgage loans don’t require PMI, but they do require an Up-Front Mortgage Insurance Premium and a mortgage insurance premium (MIP) to be paid instead. Depending on the terms and conditions of your home loan, most FHA loans today will require MIP for either 11 years or the lifetime of the mortgage.


The Amortization Schedule

If you want to know how your mortgage payments are broken down specifically, you can take a look at your amortization schedule. This will give you a detailed look at each of your payments, including an explanation of where the percentages are going. 


You can even watch how your balance owed drops over the years. 


Don’t ever hesitate to discuss your mortgage payments with your mortgage company if you are not understanding how your payment is being applied. Your home is one of the biggest investments you will likely ever make, and you should make a point to understand this monthly expense. 


Learn About Mortgage Options at Option Funding

How is a mortgage payment broken down? Securing the right mortgage can help you maintain an acceptable monthly mortgage payment. This means knowing your options


At Option Funding, Ahmad Azizi and the entire team will work with you, discussing your goals and finding the perfect mortgage to help you meet them. 


But we don’t just stop there. 


We will help you throughout the application process and in securing the loan. And we are also there for you when you make your first mortgage payment. In fact, Option Funding, Inc. is always here to answer any questions you may have about your mortgage payment so that you have a thorough understanding going forward. 

Ready to get started? Your mortgage team is waiting. Contact Ahmad today!

Mortgage Broker

How Can a Mortgage Broker Help You

As exciting as it can be to buy a new home and dream about the adventure you will have and the future memories that will be made there, all the new terms can be confusing. 

For instance, a mortgage broker. 

A mortgage broker could play a significant role in your home-buying process. So, what are they? What do they do? Where can you find one? How can a mortgage broker help you? 

Before you go any further on your quest, let’s talk about mortgage brokers. 


What is a Mortgage Broker? 

If you have put forth any effort to find a lender, then you know it can be tough to decide where to start. After all, all lenders are not created equal. There are hundreds of lending institutions that each have their criteria for borrowers. The idea of trying to find the right fit for your situation and needs can be a bit overwhelming. 

In its simplest definition, a mortgage broker acts like a middleman. They work with many different lenders on your behalf to find the right lender for you. When you apply and are approved, the mortgage broker becomes the originator of the loan. 

A good mortgage broker will have a large network and an understanding of the application criteria for many lenders. This means staying on top of competitive rates and prices, too. They will easily be able to link you with a lender that is the best fit.  

You can expect your mortgage broker to: 


  • Simplify the loan process 
  • Help you determine the size and type of mortgage you will qualify for
  • Have a wide variety of mortgage options for you to choose from


Your mortgage broker will charge a commission fee for their services, but it is worth noting that this fee is often paid by the lender – not the borrower.


Is a Mortgage Broker a Lender or Loan Officer? 

No. The roles of a mortgage broker, a lender, and a loan officer are all different and distinct.

Mortgage brokers do not lend money to borrowers. Instead, they link them with the funds. They are considered the originator of the loan and they close mortgages, but they do not lend the actual funds. The funds come from the lender. 

A loan officer is an individual that works for the bank. They work with borrowers looking to take out a mortgage, but they are only able to offer the loan products that their financial institution offers. Due to this limitation, loan officers are often not as well-versed as mortgage brokers when it comes to getting borrowers a mortgage that fits. 

Advantages of Working with a Mortgage Broker

Many new homebuyers find themselves working through the tedious loan application process – spending a lot of time and not even knowing if they will get approved by the lender. Getting rejected can have a slight impact on your credit, but it can have a bigger impact on you. 

Your time is precious and finite. And your hopes and dreams of your future home are right in front of your eyes. Working with a mortgage broker means that you will no longer need to work through multiple applications hoping to get approved by at least one. Or put all your energy into one – only to get rejected because it wasn’t a good fit. 

Take advantage of working with a mortgage broker. 

Save money

In some cases, mortgage brokers may be able to help you save money by getting the lender to waive some of the fees that are charged when taking out a mortgage, such as the application fee, appraisal fee, and origination fee, which can save you hundreds, sometimes thousands, of dollars.

Save Time

As previously mentioned, you can save time with a mortgage broker. You won’t have to worry about doing all the heavy research or applying with multiple lenders. 

Get the Right Loan

When you have the right mortgage to fit your situation and needs, you can also save money. Not every loan is right for every borrower – and choosing the wrong loan can cost you down the road. Mortgage brokers match you with a loan that is the best fit for you. 


If you have special circumstances, such as poor credit, unique income, or a property that is out of the ordinary, you may have trouble gaining loan approval with all types of lenders. A mortgage broker will know the right lender for your circumstances. 


Choosing the Right Mortgage Broker

You will want to choose a mortgage broker that is knowledgeable and experienced in the field – which means they will have a lot of knowledge about available loans from different lenders. 

To find the right mortgage broker, do your research. You can always ask your friends, family, or realtor for referrals. Or do an online search. Just be sure to do your own research once you have the names. You want to make sure that the broker’s goals align with yours. 

Read reviews, ask questions, and get a feel for the mortgage broker before you move forward. Since you are the borrower, you have the choice of finding the person you feel comfortable with – and want to work with. 


Learn About Your Mortgage Options at Option Funding 

Are you ready to invest in your new home? Are you overwhelmed with where to start? Having a pre-approval in hand before you begin your search can give you the greatest advantage when competing with other offers. And having the right team on your side can give you access to the best mortgage options. 

That team includes Ahmad Azizi and the entire team at Option Funding, Inc.

We are a direct lender and a mortgage broker. That means we have access to a variety of mortgage options and are sure to find one that is perfect for your needs. This allows Ahmad Azizi to close 95% to 100% of all deals that come his way. 

If you are ready to see what your options are – from the one who has many to choose from – contact Ahmad today!


What Happens to a Mortgage in a Divorce

Wedding days are magical moments shared between a happy couple who vow to be together for better or for worse. They start a family, buy a home with a white picket fence, and live happily ever after. 

Unfortunately, despite the best intentions, life does not always work this way for everyone. 

Nobody ever kicks off their marriage thinking about divorce – but it may happen one day. And, if it does, what will you do with your marital home? What happens to a mortgage in a divorce? 

The good news is that you have options, but knowing which one to choose comes down to a few key factors, including:


  • Whether or not someone is going to remain living in the home
  • How much equity is in the home
  • How the property was financed and titled initially


Let’s take a closer look at the mortgage options in a divorce based on the most common scenarios. 


Refinancing Your Mortgage

If you are getting a divorce and have agreed that one person is going to remain in the home, then refinancing the mortgage into one name can be an easy route to take. And because the refinance closes out the old loan and replaces it with a new one, the other spouse is no longer liable for the mortgage on the property. 

Bear in mind that removing them from the mortgage does not remove them from the property’s title. This means they will still have rights to the equity and to the proceeds if the property is sold. So, be sure to take the additional step to update the title as well so that it reflects the sole owner. 

Refinancing can be a great choice for those dealing with a divorce, but it might not be the best option for everyone. This is because the lender will still make that sole owner qualify for the loan. In other words, they will have to prove they have the income and means to cover the new mortgage premiums. And, yes, they will consider long-term alimony or spousal support, too. 


Selling the Home

Many times, divorce agreements come down to selling the property and splitting the profit. If refinancing isn’t an option financially or if neither party wants to live in the marital home, then selling the property may be a good option. 

With this, the mortgage gets paid off, there is no more dispute over how much the home is worth, and there are no costs necessary for refinancing. However, keep in mind that you will likely be responsible for the real estate commission fees, any improvements that need to be made to the home, as well as taxes. 


Buying Out Your Spouse’s Share in the Property

It is possible for one person to remain in the home by buying out the other person’s share of interest in the property. This can be done using equity, as well as a new loan.

This is often seen as a 50/50 split between parties. For instance, if the property is valued at $400,000 and $300,000 is remaining on the mortgage (in both names) with $100,000 in equity. To buy out the other party, the spouse would need to pay their ex their share of $50,000.

Unless they have this amount of money in a bank, they will need to take out a new mortgage in the form of a refinance. This loan would be for the remaining $300,000 plus $50,000 for the ex. 

While this can be a rather simple task when working with the right mortgage team, it does require that the sole owner qualify for the loan. Just like mentioned above, they will have to be able to prove they can make the loan payments on their own. 


Keep the Current Mortgage, Remove the Spouse

If the mortgage is going into one person’s name, is it possible to keep your current mortgage without refinancing? Sometimes. 

Most often in this situation, it leads to a refinance. After all, only the lender can remove your ex’s name from the mortgage. Should they agree to do this transfer, it is known as a mortgage assumption. They will transfer the existing mortgage to the one keeping the house and will often require a divorce decree and an executed deed showing that the ex no longer has an interest in the property. 

It is imperative that you read the terms that come along with mortgage assumptions. Lenders are not at all required to allow them and can sometimes set the terms to protect themselves. 

A couple of side notes to consider is if, by chance, only one spouse is on the mortgage, but both are on the title, a new deed can be drawn up removing the ex. The mortgage would remain the same. 

Finally, it is always important to remember that keeping both parties on the mortgage after the divorce has been finalized means that you are both responsible for the repayment – regardless of who lives in the house. Depending on the situation, this could lead to negative impacts on credit health and one’s future eligibility to buy a home. 


Explore Divorce Mortgage Options at Option Funding

Dealing with a divorce and the separation of assets can be a tough and trying time. Working with the right mortgage team at Option Funding, Inc. can help to lift some of the weight off your shoulders. 

There are many options for mortgages, refinances, HELOCs, and more when it comes to settling your divorce and handling your marital property. The above is a very brief overview of what is available. 

When you work with an experienced team with powerful relationships with many banks, you will learn that there are multiple ways things can be done to achieve the desired outcome. And Ahmad Azizi at Option Funding, Inc. can help. Contact us today to learn more.


Do You Get a Tax Break for Mortgage Interest?

As mid-April rolls around every year, a lot of tax questions arise. Everyone wants to know what they can do to either decrease the amount of money they owe on their taxes or increase the return they get. 


For homeowners, the Home Mortgage Interest Deduction (HMID) is a tax break that can yield some savings. Though there is a lot to understand in order to be able to take advantage of what it can do for you. So, let’s not waste any more time – and jump right into it. 


Mortgage Interest Deduction: What is It? 

In its most simplistic form, the mortgage interest deduction can allow you to deduct the amount of interest you have paid on your home loan throughout the tax year. Again, this is only for the interest paid – not the payments applied to the principal. 


There have been slight changes over the years. In 1986, Congress held in place a law that allowed a tax break for mortgage interest. The stipulation is that the cap for the eligible loan principal is $1 million. 


The latest change was made in 2017 under President Trump, with the cap being reduced to $750,000. Those homeowners who made their purchase prior to this 2017 change were grandfathered-in at $1 million. These amounts are split in half for those filers who are married and filing separately. 


While many homeowners are excited to know that they can save money, it is necessary that they understand that not everyone can. They can either take the mortgage interest deduction on their taxes – or the standard deduction that every taxpayer is given. It is one or the other. 


Currently, the standard deduction for someone filing as single is $12,950 in 2022 and $25,900 for those who are married and filing jointly. That means to benefit from an HMID, the amount of interest you can deduct should be greater than the standard deduction amount. 


What is – and is not – Deductible? 

Your mortgage is accruing interest and many of the payments you make throughout the year may be able to be included in your tax deductions. However, it is important to note that not every bit of what you pay out counts. Let’s break this down some more. 


When preparing your taxes, you may want to deduct the following: 


Interest on Your Primary Residence’s Mortgage

Whether it is a single-family home, apartment, condo, mobile home, etc., the interest of this primary residence can be deducted as long as this property is listed as collateral on the mortgage. 


Interest on Your Second Home’s Mortgage

This second home must be listed as collateral on the mortgage for which you are deducting the interest. 


Interest on a Home Equity Loan or Line of Credit

You can deduct the interest paid on your loan or HELOC if the money was used to add improvement to your home. 


Prepaid Interest or Mortgage Points

If you chose to buy mortgage points when you took out your mortgage, you may be able to qualify for the deduction.


Late Payment Charges

Just like interest, these late payment charges can often be deducted. Though, incurring these charges is not something you want to do. 


The following are other expenses that are not deductible. 


Mortgage Insurance and Homeowner’s Insurance Premiums

You will not receive any tax breaks for paying your necessary insurance premiums. 


Down Payments/Earnest Money

When buying a home, you provide a good faith deposit and a down payment. These are not deductible. 


Reverse Mortgage Interest

On these types of loans, interest isn’t paid until the loan comes due. In the meantime, it is just accruing – and you are not paying for it. Therefore, it cannot be deducted. 


Closing Costs. Any closing costs required to be paid as part of your real estate transaction cannot be deducted. 


Expenses for Moving. Moving can be quite costly but the only ones who can benefit from tax breaks are those who are on active duty in the military.  


Keep in mind that the above is just a brief overview of what can and cannot be deducted so that you can get a tax break. There are, of course, always exceptions. To make the most of your tax breaks for mortgage interest, it is best to speak to a tax advisor or skilled accountant. 

How to Claim this Mortgage Interest Tax Break

Even though you qualify for a tax break on your mortgage interest, you are only going to benefit from it if you take advantage of it. And that means taking the time to itemize your deductions – and spending more time on your taxes. 


You will receive a Form 1098 from your mortgage lender that will let you know the amount of interest you paid for the year. This will also include any other costs, fees, or points you paid for throughout the year that can be deducted. 


When you receive this, you will want to determine whether you can get a bigger deduction with your interest paid – or with the standard deduction. If the latter is higher, then submitting your mortgage interest tax break just doesn’t make sense. 


If you choose to move forward with the mortgage interest deduction, then you would turn your Form 1098 with your other tax information over to your accountant. 


Learn More About Your Mortgage at Option Funding, Inc. 

There are many different types of home loans that will allow you to take advantage of this interest tax break deduction, such as: 


  • Mortgages to buy
  • Loans to build
  • Home equity loans to improve your home
  • Home equity lines of credit for remodels
  • Second mortgages
  • Refinancing


Working with the right lender and mortgage broker can help you secure the right financing for your real estate needs – with the option of future tax breaks. 


Ahmad Azizi at Option Funding, Inc. offers you mortgage options and can help answer any questions you may have about the process, including mortgage interest tax breaks. 

Contact Ahmad today!

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