by jeffp | Jun 10, 2016 | Inside Real Estate
In real estate, the ‘closing’ is the final step in the home buying and financing process. It generally involves legal forms (and often representatives) from the title insurance and escrow companies, your mortgage lender, your real estate agent, the seller and seller’s real estate agent, and—in some states—both parties’ attorneys. During the closing, you’ll sign various loan and real estate transfer documents as well as pay any outstanding closing costs that you haven’t rolled into your mortgage.
While a smooth closing can take as little 30 minutes, certain circumstances can delay the process by hours or even days. Many—such as errors in documents, missing documents and last-minute lender requests—are out of your control. You can take action to avoid others, however, by taking the proactive steps below.
- Ask your agent to stay abreast of the situation. Communication is key as all parties count down the days and hours to closing. Ask your real estate agent to check in with all parties involved at least twice a week. This should help him/her identify potential issues and take action before they become problems.
- Touch base with your lender frequently. With so much paperwork required for a mortgage transaction, requested documents may be misplaced and unforeseen underwriting issues sometimes arise. Anytime your lender requests more information from you, submit it as soon as possible to avoid delaying your closing.
- Ask to review the closing documents in advance. While you’re allowed to ask questions about the forms you’re signing on closing day, ask your lender and real estate agent to provide you with as many of them as possible in advance. By law, you have the right to review the HUD-1 form (also known as the closing settlement statement) at least 24 hours before your scheduled closing. Look for typos and compare the information on this document to the GFE (or good faith estimate) you received from your lender when you applied for the loan. Address any conflicting or inaccurate information immediately.
- Guard against seller surprises. If the seller is selling and buying property simultaneously, a delay in their purchase transaction can derail yours as well. Make sure you have a contingency plan in the event the seller cannot move on the agreed upon date. You should also put a deadline—well in advance of closing—on any necessary repairs. If they haven’t been completed to your satisfaction by the final walkthrough, your closing will be delayed.
- Watch your finances. The slightest change in your credit score and/or bank balances can have an effect on your ability to close. Never apply for new credit or make major purchases between applying for a loan, signing the purchase contract, and closing on your home. If you’ve been planning a career move, you should also avoid changing jobs until after closing day.
Are you ready to buy or sell a home? The real estate market is hot in most of the country, and low interest rates make it a great time to apply for a loan. Give us a call today to begin the process.
by jeffp | May 20, 2016 | Inside Real Estate
Homes are selling pretty quickly these days—at least when you look at the nation as a whole. According to the National Association of Realtors, properties are typically staying on the market for 59 days this spring, with about 35 percent on the market for less than a month. But real estate is local, and national averages may not accurately reflect market conditions in your area. Whether you live in a city where homes aren’t selling quickly or you’re planning to sell during the slow season, consider these homebuyer incentives to speed up the process.
- Offer buyer’s agents a larger commission
If your property has been sitting on the market for a while, buyer’s agents (real estate professionals who work on behalf of homebuyers to help them find and buy a property) may not bother to show it to their clients. Offering an additional percentage as a commission bonus may stimulate their interest.
- Pay their discount points
When a homebuyer applies for a mortgage, lenders generally offer an interest rate based on the current market as well as the option to lock in a lower rate by paying a portion of the interest upfront in the form of discount points. Each point is equal to 1 percent of the mortgage amount.
Most buyers will find an offer to pay their points more attractive than a discounted purchase price. Why? Because a rate reduction—even a small one—can save a homeowner tens of thousands of dollars over the life of the loan. Knocking a few thousand dollars off your home’s selling price will not.
- Pay their HOA dues
Whether you’re selling a condo, townhome or single-family property in a neighborhood with a Homeowners Association, offering to pay your buyer’s HOA dues (for a few months, a quarter or a year) can be an attractive incentive. Many buyers are making big dents in their savings in order to pay closing costs on their mortgage, and HOA fees may be expenses they forgot when budgeting.
- Pay their utilities
This incentive may be particularly attractive to young, first-time homebuyers who previously split the cost of gas, electricity, water, cable and Internet services with roommates. An offer to pre-pay their utilities—or a portion of these expenses—for several months while they adjust to their new mortgage payment could be just the incentive they need to get off the fence and make an offer on your property.
- Give them a credit for closing by a specific date
Once you’ve received an offer, your home is as good as sold, right? Wrong. The process can take a significant amount of time—especially if the buyers need to sell their home, ask for dozens of repairs, or are having difficulty with financing. If you want to move the closing along quickly, consider offering a credit to the buyer for closing by a specific date.
by jeffp | May 6, 2016 | Inside Real Estate
If you’re like most Americans who want to buy a home, you’re going to need a mortgage. In fact, according to CoreLogic, a real estate data company, homebuyers making cash purchases accounted for a mere 34 percent of total transactions in 2015—the lowest percentage since 2008. It’s easy to see why: the median existing-home price for all housing types nationwide is currently $210,800. And 62 percent of Americans have less than $1,000 in savings.
Of course, whether to obtain a loan or empty your savings account isn’t the only decision you’ll need to make when purchasing real estate. Should you go the mortgage route, you’ll need to calculate costs carefully in order to determine how much property you can afford and how high a mortgage payment you can comfortably take on. For the most accurate calculation, avoid making these mistakes.
- Ignoring your credit score
Before you start plugging today’s low interest rates into a mortgage calculator to estimate your potential monthly payment, take time to check your credit score. It plays an enormous home financing role. Lenders will factor it into their calculations before extending any loan offer to you. The lower your score, the higher the interest rate you’ll have to pay on the loan. The higher—or better—your score, the lower the interest rate they offer you will be. The difference in money spent or saved or the life of your mortgage can be significant.
Federal law allows you to request a free credit report from all three credit-reporting agencies every 12 months. You can also purchase your credit report—complete with credit score—directly from Equifax, Experian or TransUnion. If you find any mistakes (i.e. debts that don’t belong to you, misreported late payments or judgements, etc.) correct them before you apply for a mortgage.
- Ignoring other homeownership costs
Mortgage calculators, while useful, only help you estimate your monthly mortgage payment. But as any homeowner can tell you, buying—and owning—a home comes with additional expenses. From homeowner’s insurance (which your mortgage lender will require) and property taxes (which you much pay by law) to routine maintenance, these costs quickly add up. And don’t forget the closing costs and fees required just to process and close your loan.
- Not understanding the homebuying process
If you want to be a savvy homebuyer, take some time to learn about the process before you start searching for properties. Doing so will help you avoid time-consuming and costly surprises down the road. If you’re not much for research, your mortgage professional can help. Gather your financials and request a mortgage pre-qualification to help you determine how much you’re likely to be able to borrow and the types of loan products for which you qualify. Don’t hesitate to ask questions and request further clarification.
Are you ready to get started? We’re here to help. Give us a call to schedule your free mortgage pre-qualification today.
by jeffp | Apr 7, 2016 | Inside Real Estate
Recasting—also known as re-amortizing—is a little-used option homeowners have for reducing their monthly mortgage payments. Unlike a refinance, the loan term and interest remains unchanged by the recast. However, when they’re applied to the newly reduced principal, the amount required each month to satisfy the loan by the end of its term is lower.
You must make a lump sum payment to reduce your loan balance and request a recast. While the amount required varies depending on your lender, it could be as much as 10 percent of your remaining mortgage balance. The fees, however, are likely to be lower than those required for refinancing are—as low as $250 in some cases.
How Recasting Works: A Look at the Numbers
Let’s say you took out a $200,000 home loan 10 years ago and have been paying 5 percent interest ever since. Your monthly payments have been about $1,074, and your remaining balance is about $162,288 with 20 years remaining on your mortgage term.
Suddenly, you acquire $10,000 and decide to put it towards your mortgage. You make a lump sum payment of $10,000 and ask your lender to recast the remaining $152,288. The interest (5 percent) and remaining term (20 years) stay the same. But your new loan payment will be $1,005 a month.
In essence, you’re paying $69 less a month as a result of the recast. Over 240 months, you’ll pay $16,560 less. Minus your initial $10,000 lump sum payment, that’s total savings of $6,560.
Other Requirements
Recasting is generally restricted to fixed-rate mortgages of the convention, conforming loan variety. FHA and VA loans do not allow for recasting. Jumbo loans also tend to prohibit recasting.
The time it takes to recast a mortgage tends to be longer than that required for a refinance. It may be several months before your new payment takes effect. Additionally, you must wait 90 days after closing on your original mortgage before you can initiate a recast.
Is a Recast Right for Me?
If you just bought a new home and have yet to sell your old residence, you may want to keep a recast on the table. When you finally sell your previous property, you can take your portion of the proceeds (or equity) and use it to pay down the balance on your new mortgage. A recast will then re-amortize the remaining balance, lowering your monthly obligation.
If you aren’t planning to sell other property and just want to lower the interest rate on your current mortgage, a refinance may be a better option. However, if you’re underwater—owing more than your home is worth—or your credit is poor, consider a recast. It won’t require an appraisal or a credit check.
If your goal is to pay off your mortgage sooner, making biweekly payments could be the answer. A biweekly payment program basically leads to one extra mortgage payment each year. The number of years it will save you depends on your interest rate. However, at today’s average rates, it should allow you to pay off your home four years sooner.
Are you wondering if a refinance or a recast is the better way to lower your monthly payment? We’re here to help. Please don’t hesitate to contact us with any real estate questions.
by jeffp | Mar 24, 2016 | Inside Real Estate
According to Freddie Mac’s chief economist, mortgage interest rates should remain at historically low levels in 2016 regardless of the Federal Reserve’s decision to raise the federal funds rate (for the first time since 2006) late last year. What does that mean for you? Whether you’re ready to buy or sell a home, now could be the time to act. But before you do, consider how the three biggest homebuying trends may affect you.
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Housing inventory is likely to increase.
The Home Price Index, produced by CoreLogic, has increased 6 percent in the last year. The real estate experts predict home values will continue to go up at least 5 percent more by the end of 2016. This continued increase may encourage some homeowners who have been on the fence to decide it’s time to sell, expanding the inventory of available homes on the market.
However, that inventory may still not be enough to satisfy the number of Americans looking to buy—especially in areas with affordable property prices. If you’re planning to sell and have priced your home properly, it’s likely to go quickly. And if you’re planning to buy, you can expect plenty of competition.
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Buying will remain more affordable than renting—in most of the country.
According to real estate experts at Trulia, buying was a better deal than renting in 98 of the 100 largest markets in the nation in 2015. Although interest rates are likely to rise slightly in 2016, they expect buying will continue to edge out renting. In fact, in many metro areas, interest rates will have to reach double digits before it will make more sense to rent than to buy a home. The caveat is California. If mortgage rates go up by 4.5 percent there, renting could become a better deal than buying in the Bay Area, Ventura County and San Diego.
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Millennials buyers may become more plentiful.
For years now, real estate experts have waited with bated breath for the millennial generation to jump into the homebuying market with both feet. Unfortunately, it hasn’t happened—due at least in part to gargantuan student loan debt and continued unemployment. While it’s possible many younger adults will continue to put their purchasing plans on hold, some experts predict they’ll still account for at least a third of residential real estate transactions this year.
Contact us today for additional insight into these and other trends expected in your area this year. We’d love to share our expertise with you, whether you’re planning to buy or sell in 2016.
by jeffp | Jan 22, 2016 | Inside Real Estate
Life is full of guidelines, although some activities require more regulations than others do. For example, the official rulebook of the National Football League is over 100 pages long. The certified version of the Affordable Care Act has more than 900 pages. In contrast, buying real estate appears pretty simple; just avoid breaking these four essential home purchase rules.
1. Use a real estate agent.
Your residence may be the single biggest purchase you’ll ever make; don’t you want an experienced professional by your side? Sure, you can learn a lot about the process online, but according to the National Association of Realtors, 88 percent of homebuyers still choose to use a real estate agent or broker. There are many reasons to do so. For one, their services are generally free because the seller’s agent splits his or her commission with them. Also, a buyer’s agent can access historical price data for the area; without one, you’re definitely in danger of paying too much for the property.
2. Get a mortgage pre-approval before you make an offer.
Securing a mortgage pre-approval requires having a lender vet your credit and financials. If everything checks out, you receive a document from that states you currently qualify for a particular loan amount under the lender’s guidelines. Most pre-approvals are good for 60 to 90 days, and many real estate agents advise their clients to reject offers without one.
3. Make an earnest deposit with your offer.
It’s traditional for buyers to make a deposit—known as earnest money—when they put an offer on a home. While the amount may vary due to location or market conditions, 1 to 2 percent of the purchase price is fairly typical. Your buyer’s agent can help you determine the right amount for your particular situation. In combination with a pre-approval letter, an earnest deposit will show the seller that you’re serious about buying the home. This can be invaluable if you find yourself competing with other interested parties. Of course, you should include contingencies in your offer that will enable you to retrieve your deposit should the deal fail to go through.
4. Make your offer personal.
Yes, buyers want to sell their homes for the asking price—or even more. However, many also want to know that their property is going to a good family. They lived in—and loved—the home for years, and they naturally have a personal attachment to it. You can use this to your advantage in a competitive real estate environment. In addition to a pre-approval document and earnest money deposit, submit a handwritten letter with your offer. Talk about your family, how much they love the property, and your dreams of living there. If you can evoke the seller’s emotions and forge a personal bond, you will enhance the chances they will select your offer.
Are you ready to buy your next home? Contact your mortgage professional and real estate agent today to initiate the pre-approval process and begin the search for your perfect property.
