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.


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 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!


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!


What is a Mortgage Note?

Whether commercial or residential, unless you are paying cash when you purchase a piece of property, you will likely take out a mortgage. This is a loan from your chosen lender that is secured by the real estate you are investing in. 

At your closing, the document you sign agreeing to these terms is referred to as the mortgage note. What is a mortgage note? Let’s take a closer look at what it is.


What is a Mortgage Note? 

Applying for a mortgage involves a lot of research – known as underwriting. This is when the lender will take a very close look at your financial situation, the amount of the loan you are seeking, the value of the real estate, and so forth. 

The bank is taking a risk when they agree to loan you money, so in order to protect themselves, they want to make sure that they are covered in case you don’t follow through with your end of the deal. For instance, if you do not make your monthly mortgage payments, they will use your new home as security so that, one way or another, they will get their money back for the loan they gave you. 

The mortgage note will provide all of the details of the mortgage, including how you will repay the loan – as well as what will happen if you don’t.

At your closing, this document will be presented to you. It will appear as a formal legal document, detailing everything we just discussed above. More specifically, you can expect to see: 


  • The full amount of the loan you are receiving.
  • The amount of down payment you have provided.
  • The details about your payments, whether monthly, bimonthly, etc. 
  • Information about the interest rate, whether fixed or adjustable, etc. 
  • If there are any penalties for prepayment


As the signing agent provides you with the document, he or she will likely state that it is the mortgage note. And, if not, you can always ask. Keep in mind, they will not be able to provide you with specific details or answer specific questions as that will need to go through your loan officer. However, they can let you know the title of the document. 


A Mortgage Note vs. A Mortgage Promissory Note

A mortgage note and a mortgage promissory note are not the same things. Though, they do go together when signing your loan documents. 

The promissory note provides more detailed financial information regarding the loan and its repayment – all the way down to the methods of payment. This legal document will also specify what will happen if you do not repay the loan according to its terms. 


The Importance of an Accurate Mortgage Note

As you can tell, these formal documents contain some very vital information pertaining to your loan agreement. Therefore, as you go through the closing, it is very important to make sure you understand what it is you are signing. 

By the time you reach the closing, you have hopefully already reviewed the details of the loan and discussed any questions or concerns with your loan officer. As you go through your signing, you simply want to make sure that the terms listed on the note are the same as what you discussed with the lender. 

Mistakes have been known to happen, as well as confusion between parties. Never sign a document if it doesn’t expressly state what it should – and never assume you can fix it later. It is true that questioning an incorrect document could delay your closing, but it is much safer to make sure that all documents are correct before you sign. 

Just as these documents you are signing are there to protect the lender, they protect you, too. 


Who Holds the Original Mortgage Note?

What happens to the original mortgage note after you sign at closing? Where does it go? 

Your lender will hold the original mortgage note until it is paid in full and satisfied. However, because it is a security instrument, it can be sold to another party. It is not uncommon for real estate investors to purchase these notes and receive income from them. Because the underwriter did all the work, they are essentially low-risk. 

It is important for you to know that it does not matter who holds the original mortgage note as you are still obligated to continue paying according to the terms listed on it. 

Once you pay the mortgage in full, the note is turned over to you. This satisfies that mortgage and will reflect that you are the owner of the property and the lender no longer has a vested interest. 


Defaulting on a Mortgage

We have discussed that the mortgage note and promissory note will address defaulting on the loan. And you know that your property is used as collateral to secure the loan. But what happens if you cannot make your monthly payments? 

Not paying according to the terms of the loan puts you into default. Unless otherwise stated, this will give the lender the opportunity to initiate the foreclosure process. Only the party holding the mortgage note can move forward with the foreclosure. 


Why Prepayment Matters

Your loan terms will state whether there is a penalty for prepayment. In most circumstances, prepayment is a good thing because the person who loaned the money gets their money back faster. However, in the mortgage world, prepayment means losing out on the interest. 

Just as it saves you money to pay early and avoid interest, it costs the bank money because they won’t get back as much as they expected. 

Before taking this step, carefully read through your documents to make sure that it makes sense to do so. 


Agreeing To Mortgage Terms

Now that you know about mortgage notes and what to expect, you are better prepared when you decide to invest in your new property. 

The first step is to get pre-approved for a mortgage with terms that you can feel good about. 

To give yourself the best opportunity, contact Ahmad Azizi at Option Funding, Inc. to discuss your mortgage options and, of course, get answers to any questions you may have along the way.

Homebuyer Mortgage

Can You Get a Mortgage Without a Job?

Here is the situation: You want to buy a home – but need a job. Is it possible? Can you find a lender willing to give you a home loan without supplying proof of steady income? Maybe you would like to refinance your current home but aren’t working – will you qualify? 


It is not at all uncommon for lenders to require a job to get a mortgage, asking potential buyers to submit pay stubs and tax information to reflect employment. But what happens if you try to get a mortgage without a job? 


You can exhale right about now. The answer is yes. You can still get a mortgage or move forward with a refi even if you aren’t employed. However, be prepared to meet a few lender requirements along the way. 


Buying a Home Without a Job

Confirming that a borrower has steady employment is always one of the boxes lenders check off when deciding whether to give you a mortgage. They want to ensure that when they agree to invest hundreds of thousands of dollars into your purchase, you can repay it over time. 


Without a job, how would you do that? 


Believe it or not, people always buy property without a job. Think about it – individuals who are retired, recently divorced, or even those sitting on investment accounts can buy a home with a new mortgage. 


The lender needs reassurance that you can meet monthly payments and will be able to repay the mortgage when it is due. This doesn’t have to come from a job. And, it doesn’t mean you have to be sitting on investments, either. 


Let’s look at a few ways to buy a home without a job. 


Have a Source of Income 

Just because you don’t have a job does not mean you don’t have a reliable source of income. Again, the lender wants to confirm you have a way to repay your mortgage. Whether that comes from waiting tables at a local restaurant or alimony payments does not matter. 


A few alternate sources of income that many lenders will consider instead of employment include investment income, retirement income (social security and/or pension payments), alimony payments, child support payments, rental property income, and so forth. 


Find a Cosigner

If you have someone with a steady income and good credit who would be willing to step up and co-sign your mortgage with you, you may qualify without a job. Co-signers are often parents, relatives, or loved ones who want to help.


It is important to note that this person will be financially responsible for your mortgage, ensuring it is repaid. Otherwise, if you cannot make your payments, they, too, will be held liable for the outstanding balance.


Housing Counselors May Help

As their name suggests, housing counselors are those who can help you uncover how you can get a mortgage – and be able to prove you can pay it back. They are trained and certified in helping individuals plan to make this investment. 


You can find housing counselors through the Department of Housing and Urban Development (HUD). 


Using Investments and Cash-on-Hand

If you have cash reserves that you are sitting on, you may not need to work to get a mortgage or refinance your property. This money may have come from some wise investments you have made over the years, or it could be due to an inheritance you received. 


Depending on the amount of the mortgage and the amount of money you have on hand, you may be able to get approved for a mortgage if the lender feels as though you have enough to make your monthly payments with ease. 


Available Home Loans with No Job

Although there are ways to secure a home loan without a job, you may also want to consider the different types of loans available for those who aren’t working. 


Non-Qualifying Mortgages

A mortgage that doesn’t require income verification is sometimes called a non-qualifying mortgage or NON-QM. This is a viable option for those seeking a home loan without a job – especially those who are self-employed or seasonal workers.


The downfall is that these loans often come with a higher interest rate than other options and additional requirements. But the approval rating is higher for those without a steady income source. 


An Asset Depletion Mortgage

If you have assets, you may be able to use them as leverage to get approved for an asset depletion mortgage. In other words, you would be relying on your assets to cover your mortgage rather than an income. 


The idea is not to take the assets to pay the mortgage but to show that you could do so if you wanted. Instead, you can pay your monthly loan however you want to – if it gets paid. 


Refinancing Without a Job

Just as you can get a new mortgage without a job, you can also refinance without one. There are two main options available that let you do so: 



The idea behind a refinance is to lower your interest rate and, ultimately, your monthly mortgage payment. These streamlined refinances are put in place to help you – and typically have very few qualifications you must meet. 


So, Can You Get a Mortgage Without a Job?

I, Ahmad Azizi at Option Funding, Inc., think it is possible. 


Having a job may be helpful when it comes to meeting the qualifications for a mortgage, but it is not a necessity. There are ways to get a mortgage without one. 


Just remember that the lender is taking a risk in giving you a loan. They want to have proof that you will be able to make your monthly payments. If you can provide it, then you may be well on your way to securing a mortgage. 

Still trying to figure out where to start? Contact me today to discuss your mortgage options.

Homebuying Mortgage

Co-Signing a Mortgage for Your Child: What You Need to Know

As a parent, one of the most rewarding experiences is helping your child achieve their goals, especially when it comes to buying their first home. However, the process of buying a home can be daunting, especially for first-time buyers. As a parent, you can play a crucial role in helping your child buy a home by co-signing a mortgage for your child, navigating them through the home buying process, and making informed decisions.


Co-Signing a Mortgage for Your Child? Consider this:

As a parent, you may be considering the idea of co-signing a mortgage for your child. This can be a great way to help them achieve the milestone of homeownership and provide them with a stable place to live. However, it is important to carefully consider the financial and legal implications of buying a home for your child before deciding.

Financially, helping your child buy a home may seem like a good investment. However, it’s important to keep in mind that owning a home comes with ongoing expenses such as mortgage payments, property taxes, and maintenance costs. Additionally, if your child is not able to make these payments, the financial burden may fall on you.

From a legal standpoint, co signing a mortgage for your child can have implications for estate planning and taxes. If you plan to transfer ownership of the home to your child in the future, it’s important to consult with a lawyer to understand the tax implications and ensure that it aligns with your overall estate plan.

On the other hand, if you are financially stable and willing to take on the responsibilities, helping your child buy a home can be an excellent way to provide for them and support their dream of homeownership. However, it’s important to have clear communication and agreement on the terms, such as who is responsible for the payments, who will live in the house, and when the ownership will be transferred.

It’s important to consider both the pros and cons before deciding about buying a home for your child, and to seek the advice of financial and legal professionals. With proper planning and guidance, co signing a mortgage for your child can be a positive step towards achieving their goal of homeownership and to secure their future.



  • Can be a good investment for the future, as property values tend to appreciate over time
  • Can help your child establish credit and build wealth
  • Can provide financial assistance and support for your child, especially if they are just starting out in their career or are facing financial difficulties
  • Can be a way to help your child achieve the milestone of homeownership at a young age
  • Provides them with a stable and permanent place to live
  • Can be a way to keep your child close to family and loved ones
  • Can be a way to diversify your portfolio and invest in a tangible asset
  • Can be a way to provide a sense of security for your child, as homeownership is a sign of stability and permanence



  • It may create expectation of financial support in future, or create resentment if the child does not have the means to support the home
  • Legal and tax implications may arise, especially when transferring ownership of the property to your child
  • Ongoing expenses such as mortgage payments, property taxes, and maintenance costs
  • The process can be complex and may require legal and financial expertise
  • It may create a sense of dependency for the child, and not allow them to learn the responsibilities of homeownership.


Considerations for Parents Before Helping Your Child Buy a Home

When helping your child buy a home, there are several factors that parents should consider before deciding.

Financial Readiness

It’s important to determine if your child is financially ready to take on the responsibility of a mortgage. This includes having a stable income, a good credit score, and enough savings for a down payment and closing costs.


Relationship Dynamics

Buying a home together can have a significant impact on your relationship with your child. It’s important to discuss expectations, responsibilities, and plans for the future before making a decision.


Legal and Tax Implications

There may be legal and tax implications when transferring ownership of the property to your child. It’s important to consult with a lawyer and a tax professional to understand the implications and to ensure that the process is handled correctly.


Future Plans

It’s important to consider your child’s future and how the home may fit into those plans. For example, if your child plans to move away soon, buying a home may not be the best option.


Emotional Readiness

It’s important to consider if your child is emotionally ready to take on the responsibilities of homeownership, and to ensure they understand the responsibilities that come with owning a home



It’s important to understand the extent of your support, and to ensure that your child understands that homeownership comes with responsibilities and costs, and that you can’t be expected to pay for everything all the time.


Ultimately, helping your child buy a home can be a great way to provide them with a stable and permanent place to live, and to help them achieve the milestone of homeownership at a young age. 


5 Home Buying Assistance Options

When helping your child buy a home, there are several options parents should consider to assist their child in the home buying process.

Co-signing on a Mortgage

This option allows parents to co-sign on the mortgage and assist with the down payment, but the child is still responsible for the monthly mortgage payments.


Providing a Gift or Loan for a Down Payment

This option allows parents to provide financial assistance for the down payment, but the child is still responsible for the monthly mortgage payments.


Rent-to-Own Agreement

This option allows the child to rent the home for a certain period, with the option to purchase the home at the end of the rental period. This can be a good option for those who need time to improve their credit score or save for a down payment.


Buying the Home and Renting it to the Child

This option allows the parents to purchase the home and rent it to the child. This can be a good option for parents who want to provide a stable place for their child to live but don’t want them to take on the full responsibility of homeownership.



This option allows parents and the child to jointly invest in the property, with both parties sharing the responsibilities and benefits of owning the home.


Consider Helping Your Child Buy a Home with Ahmad Azizi of Option Funding

Helping your child buy a home can be a rewarding experience for both parents and children. However, it’s important to consider the financial and emotional implications before deciding. As a parent, it can be helpful to explore different assistance options such as co-signing on a mortgage, providing a gift or loan for a down payment, rent-to-own agreement, buying the home and renting it to the child or co-investing. It’s also important to seek the advice of financial and legal professionals before deciding.

At Option Funding Inc, we understand that buying a home is a big decision and we are here to help parents navigate the process. I, Ahmad Azizi, can help you understand the different options available and guide you through the process of buying a home with your child. From finding the right property to securing the best financing options, we have the expertise and resources to make the process as smooth and stress-free as possible. Contact us today to learn more about how we can help you and your child achieve the dream of homeownership!

Homebuying Mortgage

Shopping for Mortgages in the New Year

The housing market changes so quickly, from one season to the next. For the majority of last year, most communities around the country found that sellers had the upper hand in real estate transactions. Multiple homebuyers were trying to buy up property – increasing offers and making concessions at every turn. Some even went way above the asking price (and market value) just to have a chance to purchase their future home.

Today, the tides are turning ever so slowly. More and more buyers are finding that they have a bit more control – or at least have a more level playing field – as they move forward with finding the house of their dreams. Of course, before they can proceed to make an offer, they need to be pre-approved for a mortgage.

So, what is it like shopping for mortgages in the new year? Let’s take a look at the current trends and the different options available.

Current Trends for the New Year

Believe it or not, shopping for mortgages in January is a fantastic time for buying a new home. It comes with competitive pricing and discounted rates when compared to other seasons – especially summer and fall.

Why is this? Well, there is no definitive answer. The reason likely has to do with the fact that the competition is nowhere near as fierce in the winter months as it is during the warmer months.

Does that mean you should only apply for one mortgage? Does that mean you should just grab the first mortgage that you get approved for? Not at all. Just because the volume of buyers is down doesn’t mean that the offers from mortgage companies aren’t still competing for your business.

Although interest rates may fluctuate for 2023, January is proving to be a very good time to invest in a mortgage as we move through the year. Most tend to agree on the fact that continued inflation, the looming idea of a possible recession, and high-interest rates are all going to make an impact on homebuyers.

Different Types of Mortgages

If you are interested in buying a new home this year, now is the time to get shopping for mortgages. And understanding the different types of home loans available can help you to secure something that is a great fit for your needs.

  • Fixed-Rate Mortgages: Fixed-rate mortgages are the most well-known type of loan. You pay a monthly payment that includes principal and interest – and it never changes throughout the loan’s term. You can often find these for terms ranging from 10 years to 30 years.
  • Adjustable Rate Mortgages (ARM): ARM loans have an interest rate that varies throughout the term of the loan. It may or may not start out as fixed, but then it will fluctuate due to market conditions.
  • Interest-Only Mortgages: Mortgages that are interest-only focus on repaying the interest first for a specific amount of time before moving on to paying toward the principal. While this can start you off with small payments, the downside is that the longer you pay interest only, the bigger your monthly payments will be in the future.
  • Graduated Payment Mortgages: With this type of mortgage, graduated payments increase each year for a certain number of years before becoming fixed. This is commonly used for buyers looking to qualify for a loan when the interest rates are high.
  • Government-Backed Loans: Government-backed loans, such as FHA home loans and VA loans, all help you to get the mortgage you are looking for, but often with less-strict requirements.
  • FHA home loans: Backed by the Federal Housing Administration and allow more people to become homeowners. They often have low mortgage rates and require a minimum down payment.
  • VA loans: For military veterans, giving them low-interest rates, reduced closing costs, no down payment, and more. These are great perks for veterans and their families to take advantage of.
  • Jumbo LoansLenders of conventional mortgages will not often finance properties that are too high. For those looking to purchase a new home that exceeds the maximum amount, jumbo loans are often the best choice. Depending on the lender you choose, you could find a loan that is fixed rate or adjustable.

Tips For Securing a Great Mortgage

  • Boost your credit score. You will find that it is possible to get a mortgage even when you have a credit score below 650. But, if you could take steps to boost your credit by even 100 points to between 700 -749, you will see tremendous savings on your mortgage rate.
  • Choose the right size mortgage. As of 2023, the Federal Housing Finance Agency (FHFA) announced new conforming loan limits, raising them by 12% (an increase of $79,000 from 2022). This change could lead to savings for borrowers!
    • Any mortgage under $726,000 in most areas will get you a lower rate. However, in high-cost areas such as Los Angeles, Orange, and Alameda, rates are higher at $1,089,300. Elsewhere, you’ll find rates for Ventura county at $948,750, San Diego county at $977,500, and Riverside county at $726,200.
    • Keep in mind each loan comes with the costs of loan origination, regardless of the size of the loan. The larger the loan, the greater the return. So, to cover the costs, it is common to find rates a bit higher for lower loans.
  • Decrease your LTV and DTI. People spend a lot of time focused on their debt-to-income ratio (DTI). And while it is important, decreasing your loan-to-value (LTV) rate will often help both. Get the best rate when you can keep your LTV below 80% and a DTI below 30%.

The Wrap Up

If buying a new home is on your 2023 bucket list, then you may not want to delay. As we mentioned, the competition is lower during the winter months. And, with predictions of fluctuating interest rates as we make our way through the year, you may not get a better opportunity than you have right now.

Shop for Mortgages at Option Funding, Inc.

Make shopping for mortgages easy.

Visit Ahmad Azizi at Option Funding, Inc. in Westlake Village to find the best home loan and mortgage options today!

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