The Next Generation of Homebuyers
The next generation of homebuyers is beginning to explore the real estate market. Buying a home is a great way to invest in your future. We at J.P. Morgan Private Bank want to ensure that you are equipped with the necessary tools for a successful purchase of your new home.
Where do I start as a potential homebuyer?
We at J.P. Morgan have a team of mortgage specialists who, along with your realtor and private banker, will help you navigate the purchase process with confidence. Once you select a realtor, our team will work closely with them to ensure that your goals and expectations are exceeded. Below are some fundamental items to consider and discuss with your team of trusted partners.
Tip: On August 17th, 2024, The NAR Settlement went into effect, changing how real estate buyers engage with their agents. Be sure to understand and discuss the implications of this settlement with your agent.
Identify the True Cost of a Home
While the purchase price will be the primary cost of a new home, it's important to consider the additional costs that come with home ownership. At the closing table, you will be responsible for the down payment and closing costs. Be sure to utilize a closing cost calculator, like this one accessible here, to help you plan. For estimated closing costs for your specific purchase price and location, reach out to your realtor.
It's also important to consider the recurring costs that you will be responsible for such as making payments towards your mortgage, homeowner’s insurance, and annual property taxes. Other costs to consider include utilities, routine house maintenance costs, and HOA fees if you are part of a community. Given J.P. Morgan does not charge closing costs, we recommend researching all related third-party costs before making an offer on a home.
Tip: Check your county’s website to see if discounted property taxes are offered in conjunction with early property tax payments.
Starting the Mortgage Process
Now that you’ve evaluated the costs that come with home ownership, you’re ready to start searching the housing market for your future home. What are the best next steps? Before you even make an offer on a new home, J.P. Morgan gives you the option to initiate a pre-approval application with your mortgage specialist. By initiating an application, our underwriters can complete their full review of your financials to work toward approval for a loan.
Tip: In competitive markets, sellers are more likely to consider offers from buyers who have already been formally pre-approved by a lender.
The mortgage underwriting process is often the most difficult part of the loan process, but the Private Bank strives to make it as simple as possible. At J.P. Morgan, our ability to simplify the underwriting process for our clients ensures minimized document collection and correspondence.
An overview of the process
Once your offer is accepted and you are under contract, there are some additional steps that need to be taken prior to closing. Below is an illustration detailing those steps:
Please don’t hesitate to reach out to your mortgage specialist at any point of the process with questions.
Structuring your mortgage
One key consideration when buying a home is how you plan on titling the property. Title designates the legal ownership of the home. You can own the home in your personal name as well as separate entities, including trusts and limited liability companies (LLCs). Clients who title their homes in LLCs typically do so to limit personal liability and to maintain privacy and anonymity with their home purchases. We also see that many clients who are interested in estate planning prefer to title their homes in the name of a trust to allow for smooth transition of ownership when their estates are settled. We recommend you connect with your estate planning team and attorney to identify the best way to structure your mortgage based on your individual financial situation.
Picking the right mortgage product for you
There are many different products you can choose from for your home purchase. The right product for you can differ depending on your situation and goals. Below are some mortgage considerations to think about when deciding on your product.
Fixed Products
• Payment remains constant as the rate does not adjust during the life of the loan
• This stable payment can help simplify your budgeting
Amortizing Adjustable-Rate Mortgages (ARMS)
• Interest rates are generally lower than fixed rate product
• Rates will be locked for a set period of time, and then adjust according to rates at the time of adjustment
• Once the loan enters the adjustment period, it will readjust on a fixed schedule (often in intervals of 1-, 6-, and 12-month intervals)
Interest-Only ARMs
• Interest rates are typically higher than the fully amortizing equivalent ARM
• Monthly payments are lower because only interest payments are made
• These products do not begin to pay down principal until after the interest-only period is over
Home Equity Lines of Credit
• A home equity line of credit is a revolving line of credit with your home as the collateral. Similar to a credit card, you pay interest on the amount you borrow. You can pay-down/use the line of credit freely throughout the draw period
• Floating rate debt that is interest-only over the first 10 years (the draw period), followed by a 20-year principal repayment period
Fixed Rate Interest-Only
• Similar to Interest-Only ARMs, these products do not begin to pay down principal until after the interest-only period is over
• Rate is fixed for the life of the loan
Closing on your new home
At the closing table, you will sign the paperwork to officially exchange your funds to the seller. You will also pay the closing costs related to your purchase. There will be no closing costs from J.P. Morgan to you; there will only be third-party transaction fees such as the appraisal fee, recording fee, title fees, and in some states, mortgage tax and stamp tax.
Tip: For closing costs, most title companies will require that they receive the funds via a wire or cashier's check, so please coordinate with your bank/banker accordingly to avoid any issues at the closing table.
Once the documents are signed and funds are received by the seller, the title for the home will officially be transferred, and you will be a new homeowner! Once you close on your home, there are additional steps to take to ensure a smooth transition into your new home and responsibilities as a homeowner, and we at J.P. Morgan have you covered. Ask your advisor about our post-closing checklist which will detail the necessary steps to take.
The Next Gen Advantage:
The real estate market can be a competitive place, especially when home inventories in certain areas are low. It is our goal to ensure you and your family are positioned to have the winning bid once you find your ideal property. Here at the Private Bank, we treat your mortgage as part of your relationship and not just a simple transaction. We have outlined solutions on our platform to help you leverage your portfolio and benefit from your family’s broader relationship if they plan to assist with your purchase.
Gift letter: If a family member plans to gift for any portion of the down payment, a gift letter can be considered to provide additional liquidity.
Intra-family loan: If a gift is not an option, family members can lend you the necessary liquidity at a lower interest rate than what a bank or other lender would charge.
This program allows you to finance up to 100% of a property’s assessed value by pledging securities from an investment portfolio in lieu of making a cash down payment. A family member could pledge assets on your behalf to assist with the purchase without being a borrower on the loan.
Rather than selling assets to generate liquidity for a purchase or down payment, your family member can help you become a cash buyer by utilizing their Portfolio Line of Credit. J.P. Morgan is then able to help you obtain a mortgage after the cash-closing and pay down the bridge loan made through the credit line.
J.P. Morgan can guide you through the process of adding a co-borrower or guarantor to use their income to help support the new home purchase. Even if a co-borrower or guarantor is part of the transaction, there is flexibility on property ownership and loan structuring for estate planning.
The J.P. Morgan Difference
We approach your mortgage with a holistic view, focusing the product around your broader financial goals and objectives. We take pride in diligently analyzing income flows, your desired outcomes from a mortgage and advising how we can achieve those outcomes. Our goal is to deliver mortgage solutions that align with the priorities and objectives of our clients.
Holistic advice
Our advisory services aim to align your mortgage with your overall wealth planning. Your mortgage stays with us for the life of the loan, ensuring we continue to look out for your best interests.
Tailored solutions
Every mortgage is unique. We deliver customized solutions to fit your goals, including innovative approaches to income for qualification, non-traditional borrowing, and tax-efficient strategies.
Attention and expertise
A dedicated Mortgage Specialist will guide you through every step of the process. You will also have access to a priority servicing team to help with any questions related to your loan after closing.
Congratulations on Your New Home!
J.P. Morgan’s service does not end once you leave the closing table. Feel free to reach out to your mortgage specialist at any time with questions or concerns you may have.
Remember, we are here to help. J.P. Morgan understands that the home-buying process can be stressful, especially for the next generation of first-time homebuyers. If you are ready to take the first steps of the home-buying process, please reach out to your J.P. Morgan banker and mortgage specialist.
Talk to your J.P. Morgan team to learn more about mortgages
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