Real Estate Information Archive

One of the challenges buyers are having with financing may be their own understanding or lack thereof.

In a recent survey done by research firm Ipsos for Zillow, a surprising number of incorrect answers to true or false questions were given by prospective buyers.

Over 3/4 didn't realize how the mortgage rate was determined for a borrower thinking that annual income was the most important factor. Other considerations lenders do evaluate are credit score, debt-to-income and loan-to-value ratios.

A variety of myths seem to have influenced some of the common answers such as interest rates are set and released once a day; FHA loans are for first-time buyers only; prequalification commits the lender; lender fees are not negotiable and adjustable rate mortgages always go up.

Buyers' misunderstanding of actual mortgage practices may give some insight into why more of them are not taking advantage of the greatly reduced prices and incredibly low mortgage rates.

While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one step in the home buying process. Success in buying a home in today's unique market should begin with a real estate professional that will coordinate all of the different parts of the transaction including mortgage, title, insurance and inspections.

Here's an interesting thought. Instead of pulling money out of your equity when refinancing your home, consider putting some cash into your equity. The strategy would be to get a considerably lower rate and a shorter term than 30 years. It will pay off your mortgage sooner, build equity faster and save lots of money in interest.

If you have some extra cash available, this might be very atteractive compared to what your are earning currently on those savings.

In the example below, the current mortgage is at 5% for 30 years with payments of $939.44. The owner can refinance for 15 years at 3.875%. If he puts $30,000 into the refinance, his payments will be slightly more than the current $1,011.06 but the mortgage will be paid off in 15 years. At that same point, if he keeps the current mortgage, his unpaid balance will be $101,572.88.

In order to have the same payments as the mortgage he is refinancing, he'll need to add $39,764.68 to the refinance.

If you have a goal to get your home paid off and you have some funds available, a Cash-In Refinance may be just the strategy for you.

Whether you rent or buy, you pay for the house you occupy. You must live somewhere and there's a price to pay for it. A simple analysis will show you whether it's cheaper to rent or buy.

Some people don't have any choice but to rent because they don't have the means to qualify for a loan. But for those who do have a down payment and good credit, they actually have a choice of whether to rent or buy. In some cases, owning will cost significantly less than renting.

Rentals are in high demand in many markets and rents are going up. People who have experienced foreclosures and short sales have increased demand. The first comparison a discerning buyer needs to make is whether the house payment is lower than what they'd have to pay in rent.

The next comparison needs to consider the other benefits that accrue to an owner such as principal reduction, appreciation and tax savings. These can dramatically weigh in favor of owning rather than renting.

Tenants have made the decision to buy a home. The decision currently facing them is whether to buy it for themselves or their landlord.

Recently, a homeowner had a burglary and part of the insurance claim was denied because they didn't have proof of purchase or a current inventory of their personal belongings.  This is something that could happen to anyone.  Even if you had an inventory but it was several years old, it could cost you money.

Some homeowners who have placed an insurance claim for losses say that they realized something was missing months after they had filed.  The inventory can actually serve as a guide to make sure you get compensated for all of your loss.

The best proof of purchase is to have a receipt for the item.  The reality of the situation is that most people don't keep receipts.  The next best item is to have an inventory and the more details like pictures, the better.

Contact me for a Home Inventory.  Once you get it completed, put it somewhere safe so you'll have it when you need it.  Saving it in the "Cloud" like  Microsoft Office Live is convenient because you can acess it from any computer with Internet access.

Besides the obvious Federal Income Tax deadline which is April 18th this year, the deadline for individuals who can qualify for the Homebuyers Tax Credit is quickly approaching - April 30, 2011.

The extension was granted for members of the military, Intelligence and Foreign Service who have served outside of the U.S. for at least 90 days between January 1, 2009 and May 1, 2010.  The sales contract must be signed by all parties by April 30, 2011 and closed by June 30, 2011.

Qualifying taxpayers may be eligible for either the first-time credit of $8,000 or the current homeowner credit of $6,500.  To get additional information from IRS.gov, click here.

This is a wonderful opportunity for a person to have a home of their own, to raise their family, share with their friends and feel safe and secure.  We're in a market that is ripe with advantages for buyers who can afford it.  Prices have come down considerably in the last two to three years.  Interest rates are at an almost all-time low but are expected to rise soon.  The selection of homes is good which allows buyers to find the home that meets their needs.

A qualifying veteran with eligibility could get into a home with no down payment, no closing costs if paid by the seller and the tax credit.  These tax credits are refundable which means that any amount that isn't used to offset tax liability will be refunded to the taxpayer in a check.  You're practically being paid to buy a home.

There probably will never be this combination of advantages available for buyers who qualify.  Don't miss this opportunity.  You owe it to yourself and your family to see that it may actually cost you less to own than to rent and what it will take to get into a home.

Since 2004, the maximum VA loan is the same as the maximum FNMA mortgage which is currently $417,000. Occasionally, a Veteran wants a loan in excess of that amount. If the Veteran will put a 25% down payment on the excess amount, a lender will loan the other 75%.

Example

Sales Price $475,000

Maximum VA Loan $417,000

Excess Amount $ 58,000

25% Required Down Payment on Excess $ 14,500

Adjusted Loan $460,500

VA loans are eligible for veterans of the military with a certificate of eligibility. A Veteran can get a 100% loan up to the maximum VA loan amount and the seller can pay their closing costs which would allow a Vet to get into a home with no down payment and no closing costs. The VA Funding Fee can be rolled into the mortgage or paid by the Seller.

When the Vet sells the home, their VA loan is assumable at the existing interest rates but does require qualification of the new buyer. The benefits would be a possible lower interest rate and lower closing costs.

There's more to finding the "Right" home than driving around looking at houses. A Residential Finance Consultant can help you make better decisions to help you understand the tax advantages, financing alternatives and investment aspects of homeownership.

If you haven't heard by now, FHA is increasing the annual Mortgage Insurance Premium again by .25% on April 18, 2011.  Payments will be higher even if the interest rates remain the same.

Buyers who are ready to take action can still lock in the lower MIP.  If they have a contract signed by all parties and get a FHA case number issued prior to 4/18/11, the lower MIP rate will apply.

For a $175,000 home at 5% interest, the new MIP will mean the buyer will pay $35 more to live in the same home.  If you don't have to pay more, why would you?

Another possibility is that if interest rates go up .5% by the same effective date, you could pay $88 more to live in the same home.  What would you spend $88.36 on if you don't have to make a larger payment?

April 18th is a Monday this year, so you'll probably need to get your contract completed by the previous Friday at the latest to give your loan officer an opportunity to order the case number.  If you don't have a loan officer, your real estate professional can recommend a reliable one.  Making good decisions will improve your entire homeowner experience and save you money.

• "It's impossible to get low down payment loans." - UNTRUE! 
  FHA down payments are only 3.5% and VA is 0%.  In some areas, there may be some 100% USDA loans available.
   
• "It takes perfect credit to get a loan." - UNTRUE! 
  There is a relationship of better rates to better credit but many issues on a credit report may be explained.  The way to know for sure is to speak to a reliable lender.
   
• "If I've had a bankruptcy or foreclosure, I can't qualify." - UNTRUE! 
  Credit history following a short sale or foreclosure is very important and there can be extenuating circumstances.  It only takes a few moments with a reliable lending professional to find out if your individual situation will allow you to qualify.
   
• "Getting pre-approved is expensive." - UNTRUE!
  Usually, the only expense to getting pre-approved is the cost of the credit report which could be around $35.  The advantage is that you will know that you qualify for a particular mortgage amount.
   
• "I should wait to qualify until I find a home." - UNTRUE!  
  The best interest rates are only available for the highest credit scores.  It can take time to qualify for a mortgage especially if there are issues that need to be corrected.  It is to your advantage to start the qualifying process early in your home search.
   
• "All lenders are the same." - UNTRUE!
  Reliable lending professionals will explain the entire process before collecting fees, quote fees up-front, have competitive products, do what is necessary to get the loan approved and close at the locked rate and terms.  Ask for recommendations from recent borrowers.
   
• "Adjustable rate mortgages are more expensive than fixed rate mortgages." - UNTRUE!
  Adjustable rate mortgages can be less expensive than fixed rates if the buyers' circumstances warrant it.  There are many variables and you need to be aware of them before deciding which type of loan to finance your purchase; the ARM may provide the cheapest cost of housing.

Buyers and Sellers need solid information to make good decisions.  The agent who represents you in the sales may be the BEST recommendation for a reliable lender.  The mortgage plays an enormous role in determining the overall cost of housing and you need solid information to make good decisions.

In many cases, the seller and the buyer are actually represented by their real estate agent.  In those situations, there is a fiduciary relationship created that requires the agent put the client's interests above their own.

There is generally no such relationship between buyers and lenders.  Some of the housing crisis issues may have been avoided had the lenders been more concerned for the buyer's best interests.

The following are a few warning signs that should cause a buyer to do much closer investigation:

1. Claims that bad credit is not an issue
2. Prepayment penalty
3. Larger than normal loan charges
4. Rate gouging by brokers - yield-spread premium
5. Loans without escrow accounts for taxes and insurance
6. ARM loans that only go up and not down
7. Initial loan to secure property with plan to replace it later

As a real estate professional, I can recommend a lender who is experienced in your market and has a history of providing good service.  A real estate professional can be a good intermediary between you and the lender.

An annual physical is an important proactive approach to personal health and an annual homeowner advisory can be just as beneficial for you and your finances.

Regardless of whether you're moving, knowing the values of homes similar to yours that have sold recently allows you to keep your hand on the pulse of the market.  It should be interesting to know how many homes in the area have sold, their time on the market and how much current inventory is available.

Even though mortgage rates are starting to creep up, it may be the last opportunity to refinance your home to lower your monthly housing costs.  I can provide a simple analysis showing your monthly savings and how long it will take to recapture the cost of refinancing.

A powerful strategy might be to continue making the higher payment from your current mortgage on the newly refinanced mortgage in order to pay the principal down faster.  It will build equity faster and shorten the term of your fixed rate mortgage.

Maybe you'd like to know how much extra you'll need to pay on your mortgage each month to get it paid off by a certain date.  I can quickly calculate that amount and send it to you.

Don't forget to call whenever you need a recommendation of a painter, plumber or other workmen.  We're constantly evaluating service providers based on work done on the homes we're selling.

Contact me if you want information on any of the following:

• List of properties sold and available near subject
• Refinancing analysis to lower your cost of housing
• Estimate to pay off the home within a specific period of time
• Repairmen and contractor recommendations
• Information on rental property opportunities

These services are being offered so you'll consider me your real estate professional, and think of me when you buy, sell or hear of someone who does.