I think that there are still challenges in today’s real estate market in either buying or selling a house. Suffice it to say that there are a lot of folks who owe more than what their home is worth (“underwater”). There are enough people who have credit problems because of the recession that started in 2007. Lots of recent college graduates are strapped with student debt and no jobs and living at home. The economic “recovery” has begun but it is taking forever. And certainly the banks and mortgage companies have not eased up that much on underwriting criteria for buyers. An average credit score to get a conventional mortgage is still almost in the mid 700s. FHA and VA are still options but I think we need to do a better job in spreading the word on those programs and how they work. Plus there are concerns regarding FHA continuous funding. FHA mortgage insurance premium is the highest of any program and never goes away until you finally sell.
I would speculate that with the uncertainty of the economy, that customers are just reluctant to take the risk in owning.
I’ll offer a few alternatives that you might consider in getting into the housing market. I mean you have to live somewhere. Might as well be a place of your own. Here are three for your consideration.
1. Rent with an option to buy. Probably the most well-known and popular. However it can be the most misunderstood program. An “option” is exactly that. You enter into a lease to rent a home and you agree with the owner that at some point in time you will, or will not, exercise the option to buy the house at an agreed upon price. You may or may not have put up any money toward that option at the lease signing. You and the landlord may have decided that a portion of the rent goes toward the purchase price or the option. Just remember if you don’t exercise the option, you just remain a tenant and have no ownership rights. Whether you get any money back is determined by the terms of the option agreement.
2. Lease purchase , land contract or installment contract. Buyer and Seller enter into an agreement of sale for the purchase of property. The sellers maintain the title to the property during the term of the contract and the buyers have an equitable interest. A note of caution here to both parties. If the seller has an existing mortgage on the property there may be and probably is a “Due on Sale ” clause in the mortgage documents. This will indicate that if any transfer of equity occurs then the entire loan will become due in full immediately. Depending on the size of the existing loan, this could cause some major problems for both buyer and seller. Any real estate agent worth their salt will check all recorded documents before proceeding with a proposal. A good real estate attorney needs to be involved for each party. If there is no mortgage , then the owner can act as the bank and transfer title to the buyer . Depending on any down money and credit obligations the equity build up is subject to negotiations at the time of the offer. Again I would recommend a good real estate attorney get involved with any preparation for both buyer and seller.
One nice benefit of this type of transaction is that the buyers can get the tax benefits of home ownership.
3. New program. Just heard about this one. A company buys the home for you and the client enters into an agreement of sale to purchase the property within a certain period of time, i.e 5 years. You put up a down payment of 5 or 10% and pay a 3% admin fee to the company at the time of occupancy. You get the house and its yours to live in as a renter at an agreed upon monthly rent and purchase price. The big difference between this and the rent with option is if you do not get a mortgage by the end of the term you get your down payment back. They keep the 3%. You also agree to a 2-3 % annual rent increase during the term. Again this program is for people who have not been able to qualify for a normal mortgage because of unusual catastrophic circumstances. Lost a job, unusually high medical bills, and then lost a home through foreclosure or just had some hard times and are trying to work yourself back. That’s why you agree to a 5+ term. And of course if you can a mortgage sooner, there is no prepayment penalty. There are some additional features. Give me a call and we can discuss some additional details.
A few “options” to think about. Just leave me a comment. Contact me via Facebook, Linkedin or Twitter or the old fashion ways of email, firstname.lastname@example.org or cell phone 6107372310
Haven’t played Jeopardy in a while or watched it on TV. But I always thought that the premise was a good one. Give someone the answer and see if they can come up with the right question. It occurred to me that I am usually walking around with what I think are all the right answers to all kinds of questions. I guess I might now recognize that I am somewhat pretentious in my conclusion. I guess I need your help. How about I give you some answers and you give me what you think are the right questions. Hopefully, I can learn something with you and become a better agent.
You know, years ago when I first got into the Real Estate business, I had a Broker who told me “Sam, you don’t sell real estate, you solve people’s problems”. That’s stuck with me and I think I have done a pretty good job in asking the right questions to solve those problems. But I think its time to get the customer’s take on this and get you to ask some questions. Anyway, lets see where we go with this and work together. I’ll give you the answer. You let me know what the questions should be. I’ll look at your questions and post them later to get some other folks to chime in if they think you are right wron. Let me give you an example. 3.5% down payment is the answer. The question might be,” What is an FHA mortgage ? ” Okay, lets give it a try.
1. Seller Assist is the answer. What is the question? This is the format which I won’t repeat every time. You’ll get the drift.
2. No down payment required
4. Buyer’s Agent
5. Seller’s Agent
6. Multiple Listing Service
8. Radon Gas
9. Short Sale
10. Transunion, Experian, Equifax
11. Title Insurance
13. 2 years worth of tax returns
14. A real estate agent
15. Purchase offer
Okay, that’s enough for now. Give it a shot. Either comment below with your questions or email me if you like. The more I think about it there can be several different questions for the answers. In addition here is a podcast that will explain how one might go about purchasing a multi family home where you can live in and collect rent to help pay for your mortgage. If you would like to pursue that let me know. It can be challenging , but it can be the start of a pretty good investment portfolio.
Contact me at 610-737-2310 or email me at email@example.com. Appreciate it.
I’m not one who just takes recent economic news as gospel. But having said that, it does look like we are moving forward with a better housing market. Just take a look at this recent post by Don DeZube of the National Association of Realtors. Spring Market. You have to admit its pretty positive. The increases are slight but are running ahead of last year. The office that I manage is up about 6% over last year. That includes all categories: average sale price, less time on the market, list price of homes, total volume sold and total listing volume.
If there is one problem, it’s that we do not have enough good salable properties on the market. The buyer demand is there and we find ourselves in multiple offer situations. The sellers are happy but the buyers are not. One cause for the shortage certainly can be attributed in part to thousands of properties still”underwater”, that is, the owners owe more than the house is worth. Banks are slow in approving possible short sales. Also the Feds have not extended the “debt forgiveness ” provision that allowed sellers to escape the tax consequences of such a sale. There is also some implication that lenders are holding back millions of stalled foreclosures from the market in the hope that rising prices will allow the lenders to recoup a larger return of dollars at the “Sheriff Sale”. Who knows…Plus under the new QM rules (Qualified Mortgage), underwriting guidelines are making it much harder for the average home purchaser to qualify for a mortgage.
Lenders are trying to address the above issues by loosing up certain underwriting criteria. Credit scores of 620 and in some cases 550 will get you into a home. The fact that mortgage applications for all types of loans are off in some cases 60% from last year might be one reason that lenders are looking for business with less than a truant officer’s mentality. If they don’t lend it, they are not going to make it. Not rocket science.
Here is an explanation to help you better understand the “QM” rules.
One last thing that I have mentioned several times. If you are in financial trouble, wondering about whether you can stay in your home because you are behind in your mortgage, are considering bankruptcy or in a reverse mortgage and you have any questions, please give me a call. Don’t do anything drastic until you have a chance to talk to a professional. I can recommend several that can help. Call me at 6107372310. No obligation.
I think you know what I mean. Its inevitable. But I guess I anticipate the tax portion of this phrase with utmost dread every year. April 15, or some day real close when the government comes a calling and tells me to pay up. God I hate it. and I always pay. Oh I know what some you are thinking… you always get money back. How come I don’t. Well because I basically don’t want to give the government the use of my money interest free all year-long. That what it is. They take it out of my paycheck send it in and then those spend happy bureaucrats use it all year-long without so much as a thank you let alone any interest on it. Where’s the fairness in that?
No, I’ll take my chances in taking as many exemptions as I can to get as much cash as I can in my paycheck. I’ll pay up once a year and the penalty. But in the meantime I am using the money for me and my family. But ideally I should zero out, no refund, no penalty. I’m working on that.
But regardless,you can’t escape. But the good news is, if you are a home owner and borrowed money to purchase the home ,the mortgage interest is deductible. That, along with any property taxes that you pay. Pray to God that our leaders in Washington stop trying to eliminate these deductions from the average homeowner. That fact that we are almost 18 trillion dollars in debt as a country, leaves little doubt that they will continue to come up with creative waves of separating you from your hard-earned money.
It really is a war. Us fighting to keep it, and them fighting to take it. And even death won’t free you from the tax man. Your federal estate is taxable over 5.4 million dollars and in some states like Pa. the inheritance tax can be as high as 20%.
Because of the terrible economic situation that has occurred since the crash of 2007-2008, many folks have found themselves owing money to the Federal government when they thought they were out of the woods and on the way back to stability. Let me give you some examples.
1. Selling your home short. This is where you received the okay from your lender to sell your home for less than what you owe. Up until the end of 2013, there was no income tax due on debt forgiveness by a lender for an owner occupied single family home. This exclusion expired at the end of 2013 and Congress has shown no interest in extending this provision. So if you sell underwater in 2014 you may owe a big fat tax bill to Uncle Sam. The only way to escape this is to file Bankruptcy or be declared “Insolvent” by the IRS. There is a difference. Talk to a lawyer and an accountant about these alternatives.
2. Forgiveness on credit card debt. This is similar to the above scenario except there has never been an exclusion. I have met several folks who have worked long and hard to rearrange credit card debt only to receive a 1099 C from the credit card company indicating that the debt is forgiven but now report it to the IRS as income.
It really is a shame that folks are trying hard to work out some equitable solution to pay their bills and find out that the hole is some cases is deeper.
Because of situations I mentioned, it is getting harder and harder to reestablish oneself for the possible purchase of a home, let alone pay off debt. But there is hope. Did you know that you can buy a house and get a mortgage after a discharged bankruptcy. Also if you lost a home to foreclosure, yes you can buy another house after a period of time. There are some new credit caveats for sure, but it is possible. If you are in a Chapter 13 Bankruptcy your time frame is even quicker. Chapter 13 is when you are actually making payments to a creditor under court supervision.
Look, we all have problems. Some are financial, some are medical, some are emotional. But I am one of those guys that feels if you recognize your limitations and mistakes and are willing to keep on plugging for you and your family, then don’t give up the dream. That’s why I’m here, to discuss the options and give you some advice. Those experts that I can suggest you meet with will help you, not for free, but they won’t break the bank for you again.You owe it to yourself and those you love. But you have to take the initiative. Call me and get started. 6107372310. The first meeting with me is on the house. Click here for some additional 2013 tax tips.
There is nothing I like to do in this world than to be with my grandkids and mess around. I also love my job in helping and advising folks on the purchase or sale of their home. I have been doing it for over 35 years. There is something about watching the excitement in the eyes of the first time home buyer or the satisfaction from a senior citizen (me by the way) when he or she is able to move on, supplement their nest egg and enjoy a nice retirement.
Well, I don’t plan on retiring anytime soon. I like working. Besides, I am not a big hobby guy. I am sure my wife Gloria would get tired of me real fast following her around like some puppy dog while she does her thing with her girlfriends. Forget it.
I gladly prognosticate on the future of the real estate market. What are you waiting for? If you are a buyer, rates are still low. Under 5%. Prices are still reasonable. But they are starting to creep up. Mortgage lenders are aggressively going after FHA and 5% down buyers. Foreclosures are down and a lot of folks are pulling out of their underwater status. And they have to sell.
Now all this doesn’t mean we will have the free for all that we had in the early 2000’s when you didn’t even need a job to get a loan. Thank goodness those days are over. But don’t let those that have a home and are not in my business given you a bunch of baloney that you need an 800 credit score to get a loan. Did you know that you get a new FHA home loan if you filed for Bankruptcy and have been discharged for at least 2 years, and of course if you have been paying your bills on time since then.
Did you know that as a Veteran, you don’t even need a down payment and you can have the owner of the home pay for all of your closing costs. There are also 100% loans available through the USDA , that would be the United States Department of Agriculture. They are loans that are available for single family homes in designated rural areas.
This is for real. Give me a call at 6107372310 or email me at firstname.lastname@example.org to discuss some real possibilities. I’m not kidding.
I don’t know, I just kind of gave up last fall. When someone told me it was hard to keep a blog up and have a fresh ideas day after day, I knew it was hard but I didn’t think I would go into brain freeze almost permanently. Well I did. I thought to myself I have to become more aggressive and try to get some reaction from folks who read this stuff. Well that didn’t happen and I thought I might as well get on to bigger and better things. I really don’t know what that means either.
In the final analysis I guess I had to ask myself the question; was I doing a blog for you or for me. For me, because at one time I thought I actually enjoyed writing . For you because I hope I could drum up some business while giving you some helpful information.
At this point I’ll just try to write about some things I am passionate about, which is cathartic for me. Maybe you will join in and let me know how you feel, but if you don’t that’s okay too. Because now I don’t feel the pressure to perform for anybody else but me.
So here goes….. Since I last wrote we have had the reelection of the President, the murder of 26 folks, 20 of whom were kids, a Pope resigned, avoided a Fiscal Cliff, did not avoid a Sequester, watched the rebound of the housing market begin, (which by the way I still don’t trust), QE infinity courtesy of the Fed and saw the Unemployment rate drop to 7.9%
Maybe its the Jesuit training in me but its smoke and mirrors to me. How the heck can we have an almost $17 trillion dollar deficit and growing each day, printing money like its drug to an addict and 1-2% Interest rates set for the next several years, and listen to all of those folks in Washington saying things are getting better. Who is going to pay for all of this insanity? You and me folks and our kids and grandchildren. That’s because the boys and girls in DC can’t get along. The cost of servicing that debt will eventually eclipse the total GDP of the entire country.
One thing is for sure. Regardless of your feeling of the housing market, the freaking mortgage rates are at an all time low. A $100,000 mortgage at 3.5% not including taxes and bank fees will cost $449 a month. Try renting for that kind of monthly payment.
Foreclosures are down, that’s good. Short sales are up, that stinks. No matter what the banks tell you, they still take months and I have had more than one buying client walk away. Because foreclosures are down and short sales take a while, we have a decrease in available housing. So Buyers beware, the sellers that are not underwater are going to start raising their prices. It’s already happening. And if Uncle Ben ever stops buying bonds and mortgages, rates will go through the roof.
Anyway, I feel better, that was a good start. It’s like when I talk to myself in the shower. It’s probably the most creative time for me.
I just need someone to turn up the temperature of the water.
Well lets see, I can sit around thinking about the Presidential election and come up with some esoteric, ideological baloney that no one will believe anyway or actually give you some interesting real estate investment information that might even make you a couple of bucks if you act to buy some property.
Well I picked this up from our friends at the National Association of Realtors. Seems like Fannie Mae is going to give a break to so called “Mom and Pop” Investors. You can now purchase up to 20 properties now and get a Fannie approval. The underwriting for those mortgages…. well that is a whole separate article that we can discuss later and that I would place under the heading of “Miracles in La La Land”. Oh ye of little faith. But what the heck. Give me a call if you have any questions. Good stuff.
Visit houselogic.com for more articles like this.
Copyright 2012 NATIONAL ASSOCIATION OF REALTORS®
Here is a great primer for starting that search for the dream home. Info comes right off the HUD site. Need help? Give me a call at 617-737-2310 or email me at email@example.com
1. HOW DO I KNOW IF I’M READY TO BUY A HOME?
You can find out by asking yourself some questions:
|Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?|
|Do I have a good record of paying my bills?|
|Do I have few outstanding long-term debts, like car payments?|
|Do I have money saved for a down payment?|
|Do I have the ability to pay a mortgage every month, plus additional costs?|
If you can answer “yes” to these questions, you are probably ready to buy your own home.
2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?
Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a “To Do” list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.
3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?
The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.
Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.
4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
5. HOW DO I SELECT THE RIGHT REAL ESTATE AGENT?
Start by asking family and friends if they can recommend an agent. Compile a list of several agents and talk to each before choosing one. Look for an agent who listens well and understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and services you need.
6. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?
Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities – things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a ‘wish list.” Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential.
7. WHAT SHOULD I LOOK FOR WHEN DECIDING ON A COMMUNITY?
Select a community that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.
8. WHAT SHOULD I DO IF I’M FEELING EXCLUDED FROM CERTAIN NEIGHBORHOODS?
Immediately contact the U.S. Department of Housing and Urban Development (HUD) if you ever feel excluded from a neighborhood or particular house. Also, contact HUD if you believe you are being discriminated against on the basis of race, color, religion, sex, nationality, familial status, or disability. HUD’s Office of Fair Housing has a hotline for reporting incidents of discrimination: 1-800-669-9777 (and 1-800-927-9275 for the hearing impaired).
9. HOW CAN I FIND OUT ABOUT LOCAL SCHOOLS?
You can get information about school systems by contacting the city or county school board or the local schools. Your real estate agent may also be knowledgeable about schools in the area.
10. HOW CAN I FIND OUT ABOUT COMMUNITY RESOURCES?
Contact the local chamber of commerce for promotional literature or talk to your real estate agent about welcome kits, maps, and other information. You may also want to visit the local library. It can be an excellent source for information on local events and resources, and the librarians will probably be able to answer many of the questions you have.
11. HOW CAN I FIND OUT HOW MUCH HOMES ARE SELLING FOR IN CERTAIN COMMUNITIES AND NEIGHBORHOODS?
Your real estate agent can give you a ballpark figure by showing you comparable listings. If you are working with a real estate professional, they may have access to comparable sales maintained on a database.
12. HOW CAN I FIND INFORMATION ON THE PROPERTY TAX LIABILITY?
The total amount of the previous year’s property taxes is usually included in the listing information. If it’s not, ask the seller for a tax receipt or contact the local assessor’s off ice. Tax rates can change from year to year, so these figures may be approximate.
13. WHAT OTHER TAX ISSUES SHOULD I TAKE INTO CONSIDERATION?
Keep in mind that your mortgage interest and real estate taxes will be deductible. A qualified real estate professional can give you more details on other tax benefits and liabilities,
14. IS AN OLDER HOME A BETTER VALUE THAN A NEW ONE?
There isn’t a definitive answer to this question. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn’t mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don’t want to worry initially about upkeep and repairs.
15. WHAT SHOULD I LOOK FOR WHEN WALKING THROUGH A HOME?
In addition to comparing the home to your minimum requirement and wish lists, use the HUD Home Scorecard and consider the following:
|Is there enough room for both the present and the future?|
|Are there enough bedrooms and bathrooms?|
|Is the house structurally sound?|
|Do the mechanical systems and appliances work?|
|Is the yard big enough?|
|Do you like the floor plan?|
|Will your furniture fit in the space? Is there enough storage space? (Bring a tape measure to better answer these questions.)|
|Does anything need to repaired or replaced? Will the seller repair or replace the items?|
|Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round?|
Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint.
16. WHAT QUESTIONS SHOULD I ASK WHEN LOOKING AT HOMES?
Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller’s or real estate agent’s answers are clear and complete. Ask questions until you understand all of the information they’ve given. Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive. The HUD Home Scorecard can help you develop your question list.
17. HOW CAN I KEEP TRACK OF ALL THE HOMES I SEE?
If possible, take photographs of each house: the outside, the major rooms, the yard, and extra features that you like or ones you see as potential problems. And don’t hesitate to return for a second look. Use the HUD Home Scorecard to organize your photos and notes for each house.
18. HOW MANY HOMES SHOULD I CONSIDER BEFORE CHOOSING ONE?
There isn’t a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, homebuyers see 15 houses before choosing one. Just be sure to communicate often with your real estate agent about everything you’re looking for. It will help avoid wasting your time.
19. WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A HOME?
An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs,that are needed.
The Inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.
It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed, you’ve bought the house as is.” Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection t clause gives you an ‘out” on buying the house if serious problems are found,or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.
20. DO I NEED TO BE THERE FOR THE INSPECTION?
It’s not required, but it’s a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you’d I like to purchase and it is a good time to ask general, maintenance questions.
21. ARE OTHER TYPES OF INSPECTIONS REQUIRED?
If your home inspector discovers a serious problem a more specific Inspection may be recommended. It’s a good idea to consider having your home inspected for the presence of a variety of health-related risks like radon gas asbestos, or possible problems with the water or waste disposal system.
22. HOW CAN I PROTECT MY FAMILY FROM LEAD IN THE HOME?
If the house you’re considering was built before 1978 and you have children under the age of seven, you will want to have an inspection for lead-based point. It’s important to know that lead flakes from paint can be present in both the home and in the soil surrounding the house. The problem can be fixed temporarily by repairing damaged paint surfaces or planting grass over effected soil. Hiring a lead abatement contractor to remove paint chips and seal damaged areas will fix the problem permanently.
23. ARE POWER LINES A HEALTH HAZARD?
There are no definitive research findings that indicate exposure to power lines results in greater instances of disease or illness.
24. DO I NEED A LAWYER TO BUY A HOME?
Laws vary by state. Some states require a lawyer to assist in several aspects of the home buying process while other states do not, as long as a qualified real estate professional is involved. Even if your state doesn’t require one, you may want to hire a lawyer to help with the complex paperwork and legal contracts. A lawyer can review contracts, make you aware of special considerations, and assist you with the closing process. Your real estate agent may be able to recommend a lawyer. If not, shop around. Find out what services are provided for what fee, and whether the attorney is experienced at representing homebuyers.
25. DO I REALLY NEED HOMEOWNER’S INSURANCE?
Yes. A paid homeowner’s insurance policy (or a paid receipt for one) is required at closing, so arrangements will have to be made prior to that day. Plus, involving the insurance agent early in the home buying process can save you money. Insurance agents are a great resource for information on home safety and they can give tips on how to keep insurance premiums low.
26. WHAT STEPS COULD I TAKE TO LOWER MY HOMEOWNER’S INSURANCE COSTS?
Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at homes. Newer homes and homes constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding. Choose a home with a fire hydrant or a fire department nearby.
27. IS THE HOME LOCATED IN A FLOOD PLAIN?
Your real estate agent or lender can help you answer this question. If you live in a flood plain, the lender will require that you have flood insurance before lending any money to you. But if you live near a flood plain, you may choose whether or not to get flood insurance coverage for your home. Work with an insurance agent to construct a policy that fits your needs.
28. WHAT OTHER ISSUES SHOULD I CONSIDER BEFORE I BUY MY HOME?
Always check to see if the house is in a low-lying area, in a high-risk area for natural disasters (like earthquakes, hurricanes, tornadoes, etc.), or in a hazardous materials area. Be sure the house meets building codes. Also consider local zoning laws, which could affect remodeling or making an addition in the future. Your real estate agent should be able to help you with these questions.
29. HOW DO I MAKE AN OFFER?
Your real estate agent will assist you in making an offer, which will include the following information:
|Complete legal description of the property|
|Amount of earnest money|
|Down payment and financing details|
|Proposed move-in date|
|Price you are offering|
|Proposed closing date|
|Length of time the offer is valid|
|Details of the deal|
Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just Making an offer.
Other ways to lower ins-insurance costs include insuring your home and car(s) with the same company, increasing home security, and seeking group coverage through alumni or business associations. Insurance costs are always lowered by raising your deductibles, but this exposes you to a higher out-of-pocket cost if you have to file a claim.
30. HOW DO I DETERMINE THE INITIAL OFFER?
Unless you have a buyer’s agent, remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agent’s advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home’s condition, how long it’s been on the market, financing terms, and the seller’s situation. By the time you’re ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price.
31. WHAT IS EARNEST MONEY? HOW MUCH SHOULD I SET ASIDE?
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.
32. WHAT ARE “HOME WARRANTIES”, AND SHOULD I CONSIDER THEM?
Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by homeowner’s insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves cash-strapped.
33. WHAT IS A MORTGAGE?
Generally speaking, a mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.
34. WHAT IS A LOAN TO VALUE (LTV) HOW DOES IT DETERMINE THE SIZE OF MY LOAN?
The loan to value ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. Each loan has a specific LTV limit. For example: With a 95% LTV loan on a home priced at $50,000, you could borrow up to $47,500 (95% of $50,000), and would have to pay,$2,500 as a down payment.
The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV the less cash homebuyers are required to pay out of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require mortgage insurance policy.
35. WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?
Fixed Rate Mortgages: Payments remain the same for the the life of the loan
These guidelines can be a little tedious to work through, but if there is any strong advice that I can offer, its to plow through the paperwork and work with an experienced real estate agent and mortgage officer. If you do, and you are looking for that Lehigh Valley home for sale you have a great chance to get the home of your dreams.
FHA underwriters have a great deal of discretion when they decide who will be approved and who will not be approved for loans. They are allowed to use compensating factors to offset conditions when a borrower’s profile falls outside general loan parameters. Any compensating factor used to justify mortgage approval must also be supported by documentation.
The table below describes the compensating factors that may be used to justify approval of mortgage loans with ratios that exceed FHA benchmark guidelines.
COMPENSATING FACTORS BENCHMARK GUIDELINES
|Compensating Factor||Guideline Description|
|Housing Expense Payments||The borrower has successfully demonstrated the ability to pay housing expenses greater than or equal to the proposed monthly housing expenses for the new mortgage over the past 12-24 months.|
|Down Payment||The borrower makes a large down payment of 10 percent or higher toward the purchase of the property.|
|Accumulated Savings||The borrower has demonstrated· ability to accumulate savings, and· a conservative attitude toward using credit.|
|Previous Credit History||A borrower’s previous credit history shows that he/she has the ability to devote a greater portion of income to housing expenses.|
|Compensation or Income Not Reflected in Effective Income||The borrower receives documented compensation or income that is not reflected in effective income, but directly affects his/her ability to pay the mortgage.This type of income includes food stamps, and similar public benefits.|
|Minimal Housing Expense Increase||There is only a minimal increase in the borrower’s housing expense.|
|Substantial Cash Reserves||The borrower has substantial documented cash reserves (at least three months worth) after closing. The lender must judge if the substantial cash reserve asset is liquid or readily convertible to cash, and can be done so absent retirement or job termination, when determining if the asset can be included as cash reserves, or cash to close.Funds and/or “assets” that are not to be considered as cash reserves include· equity in other properties, and· proceeds from a cash-out refinance.Lenders may use a portion of a borrower’s retirement account, subject to the conditions stated below. To account for withdrawal penalties and taxes, only 60% of the vested amount of the account may be used. The lender must document the existence of the account with the most recent depository or brokerage account statement. In addition, evidence must be provided that the retirement account allows for withdrawals for conditions other than in connection with the borrower’s employment termination, retirement, or death. If withdrawals can only be made under these circumstances, the retirement account may not be included as cash reserves. If any of these funds are also to be used for loan settlement, that amount must be subtracted from the amount included as cash reserves. Similarly, any gift funds that remain in the borrower’s account following loan closing, subject to proper documentation, may be considered as cash.Note: Reserves from retirement accounts and gifts as described above may be considered as cash reserves when scoring the mortgage application through TOTAL.Reference: For information on acceptable sources of cash reserve funding, see HUD 4155.1 5.B.|
|Substantial Non-Taxable Income||The borrower has substantial non-taxable income.Note: This applies if no adjustment was previously made when computing ratios.|
|Potential for Increased Earnings||The borrower has a potential for increased earnings, as indicated by job training or education in his/her profession.|
|Primary Wage-Earner Relocation||The home is being purchased because the primary wage-earner is relocating, and the secondary wage-earner· has an established employment history· is expected to return to work, and· has reasonable prospects for securing employment in a similar occupation in the new area.Note: The underwriter must document the availability of the potential employment.|
I have worked with several good bankers and mortgage pros over the years. If you want to consider a home purchase, my suggestion is to start with the financing. With a credit approval and estimate of home purchase in hand, you will be way ahead of others in a similar credit situation. Email or call me for a recommendation.
What Is the Best Way to Finance a HUD Home?
FHA financing is the best way to finance a HUD Home for most buyers.
FHA has certain advantages over conventional financing:
HUD Homes offered with FHA financing offer special incentives to buyers. HUD Homes eligible for FHA 203(b) financing have reduced closing costs because there is NO APPRAISAL fee. Lenders are required to use the appraisal that HUD has on file if the appraisal is less than 150 days old. (If you sell a HUD Home near the end of the 150-day window, you can make a written request to HUD to extend appraisal validity 30 days, to 180 days. That request must be in writing two weeks before the 150 day appraisal expiration date.)
Keep in mind an important fact about FHA financing for HUD Homes:
FHA will only finance a maximum loan amount that corresponds to HUD’s asking price. If a buyer is inclined to “bid up” a property and finance that property with FHA financing, he will have to make up the difference between the asking price and the bid amount with additional down payment monies.
For instance: A buyer expects that there will be competing bids for a house at 123 Main Street. HUD’s list price is $85,000. The buyer is confident that the real value of the property is closer to $100,000. He bids $90,000. His down payment will increase from 3.5% of $85,000 ($2,975 down payment) to that amount PLUS an additional $5,000 ($6,912 down payment).
I know that I mentioned this in my last blog, but here is a good primer on searching for a loan for your new home. Click here for the video.
Remember if you want a list of already approved HUD Homes or have in mind a conventional purchase using FHA financing, give me a call at 610-737-2310 or email me at firstname.lastname@example.org. Start your search on the right at the Lehigh High Valley link.