The SCOOP! Blog by ChangeMyRate.com®

When you’re in the market for a new home, it can be tempting to stretch your budget in order to buy a place that has all the features you want. But doing so could cause money trouble for you and your family.

Emily Holbrook, director of personal markets at Northwestern Mutual, says homebuyers can get into trouble by borrowing too much. “Some people have unrealistic expectations about what they can afford,” she said. “They have a vision in their heads of their dream home, and they don’t understand all the hidden costs of homeownership that they need to factor into their budget.”

Holbrook believes it’s critical that buyers spend time figuring out what they can truly afford to make sure that they don’t end up in over their heads. “When you become cash strapped by borrowing too much, it can make people feel trapped since they often have to cut back on hobbies, travel or other things that matter to them.

Here are some things to consider before making an offer on your dream house:

How to Determine the True Costs of Homeownership

When Holbrook was shopping for her first home, she calculated the cost of her mortgage and assumed that the expense of owning a home would be close to the amount she was already paying in rent. But once she added in all the other expenses involved in homeownership, the monthly cost nearly doubled.

“New homeowners don’t always understand the hidden costs that come along with owning a home,” said Holbrook. “They don’t factor in things like home repairs, maintenance, homeowners’ association or condo fees, utilities, property taxes, private mortgage insurance, home insurance and all sorts of other costs.”

Not taking these costs into account meant that Holbrook might have taken on a mortgage that would have significantly stretched her budget. That’s why she believes it’s critical that you sit down with a calculator and add up all the costs in order to get a true idea of how much homeownership will cost you.

The Amount You’re Approved to Borrow May Not Be What You Can Afford

A lot of people mistakenly believe that if they’re approved for a certain mortgage amount, then they can afford to borrow it. But that’s not true, says Holbrook.

“What a bank may feel comfortable lending you might be very different from what you can actually afford,” she said. “Lenders don’t know all of your expenses. They’re looking only at the types of expenses that are going to show up in your credit report. They don’t know what kind of daycare expenses you have, if you’re paying private school tuition or whether you’re supporting aging parents.”

Lenders also don’t know about your other goals or financial priorities, like whether you want to start a business in a few years or you’re saving to send your kids to college. “You’re the one that has to make the mortgage payments,” Holbrook said. “You have to make sure you feel comfortable with those payments.”

How much you should borrow on your home is an individual choice. You might make the same amount as your friend; but if you have different expenses, goals or priorities, then the ideal amount to borrow could be completely different.

Even common advice, like spending no more than 25 to 30 percent of net income on housing costs, might not apply to you if it doesn’t fit with your current and future lifestyle and goals. Since buying a home is a long-term investment, make sure that the costs will fit your financial situation in 10 or even 30 years’ time.

If you’re unsure how much you can afford, Holbrook suggests that you sit down with a financial professional who can go over your financial situation and help determine how much to spend.

Feel Confident in Your Choice

Shopping for and buying a home is often a stressful and busy time, but taking the time to think about mortgage affordability and ensuring that you don’t end up borrowing too much will set your family up for future success.

“Being house poor,” said Holbrook, “can lead to a great deal of conflict in the household and the inability to do many things as a family that you enjoy.” But when people borrow the right amount, they end up feeling confident rather than stressed, according to Holbrook. “They feel assured that they can achieve all their financial goals – not just their goal of homeownership,” she said.

The Northwestern MutualVoice Team is a group of professionals who share insights and opinions from experts and industry leaders across the enterprise. Our vision is to inspire others to take action and plan for their financial future through topics ranging from financial planning, retirement planning and distribution strategies, wealth accumulation and preservation, to leadership, philanthropy and innovation.

 

To view the original article click here

Posted by Jackie A. Graves, President on June 23rd, 2017 5:39 AM

On closing day, all parties will sign the papers officially sealing the deal, and ownership of the property will be transferred to you. It's your opportunity to make any last-minute changes to the transaction.

It starts the day before

The day before closing, gather all the paperwork you have received throughout the homebuying process: Loan Estimate, contract, proof of title search and insurance if necessary, flood certification, proof of homeowners insurance and mortgage insurance, home appraisal, inspection reports and Closing Disclosure. You might need to refer to these documents at closing.

Most home-sale contracts entitle you to a walk-through inspection of the property 24 hours before closing. This is to ensure that the seller has vacated the property and left it in the condition specified in the sale contract.


If there are any major problems, you can ask to delay the closing or request that the seller deposit money into an escrow account to cover the necessary


Your roles on closing day

At closing, your participation will involve a couple of steps:

  • Sign legal documents. This falls into two categories: the agreement between you and your lender regarding the terms and conditions of the mortgage, and the agreement between you and the seller transferring ownership of the property. Be sure to read all documents carefully before signing them, and do not sign forms with blank lines or spaces.
  • Pay closing costs and escrow items. There are numerous fees associated with getting a mortgage and transferring property ownership. Usually, the borrower pays these fees with a check at closing. Some fees can be added to the loan balance, or the borrower can pay a higher interest rate and have the lender pay the fees.

Present at closing

Closing procedures vary from state to state and even county to county, but the following parties will generally be present at the closing or settlement meeting:

  • Closing agent, who might work for the lender or the title company.
  • Attorney: The closing agent might be an attorney representing you or the lender. Both sides may have attorneys. It's always a good idea to have an attorney present who represents you and only you.
  • Title company representative, who provides written evidence of the ownership of the property.
  • Home seller.
  • Seller's real estate agent.
  • You, also known as the mortgagor.
  • Lender, also known as the mortgagee.

The closing agent conducts the settlement meeting and makes sure that all documents are signed and recorded and that closing fees and escrow payments are paid and properly distributed.

Closing documents

You will receive the following important documents:

Once you've reviewed and signed all closing documents, the house keys are yours and you will have successfully bought your new home!


By Holden Lewis - To view the original article click here

Posted by Jackie A. Graves, President on June 21st, 2017 5:28 AM

No matter which side of the transaction you're on, you don't want to give up more than you have to.

After months of searching for the perfect home, making some offers, and maybe even competing with other buyers, you finally have a deal on your dream home. It took some negotiations, but you and the seller have come to terms.

Or have you?

Too often, getting a signed contract and putting your money into escrow is the beginning of what can become yet another round of negotiations. Here are five things every home buyer and seller should know about last-minute negotiations or credits.

Buyers may ask for credits based on property inspections.

Usually, a real estate contract either provides for a property inspection, or buyers inspect before signing. Depending on the property and the issues, a buyer might also have a particular type of inspection for the sewer line, septic, pool or roof.

These inspections can bring to light issues that the buyer couldn’t possibly have known about before making an offer. Once inspected, the buyer may still be interested in pursuing the sale. But given the needed repairs they will probably want to re-negotiate the price by asking for credits or a reduction in the purchase price.

Sellers should consider having a property inspection before listing.

The goal is to avoid negotiations once you’re under contract, because they’re not going to be in your favor. If you know the roof is near the end of its life or the furnace breaks from time to time, let it be known upfront, because rarely can you “sneak” something past the buyer.

You might even go as far as having your property inspected before listing the home. This way, you can address any issues, and make the inspection report available to buyers. They can come up with their best offer upfront, knowing what they’re getting.

If you have an inspection report or are otherwise assured your property is in great shape, you could even ask for an “as-is” clause in the contract. Although it’s not necessarily enforceable, it will send a strong message to the buyers that you aren’t open to more negotiation.

Sellers may try to avoid giving credits by having work done before escrow closes.

After inspections, the seller might agree to have work done before the closing. Or the seller may require that a payment is given directly to a contractor for the purpose of performing the specific, required work and nothing else.

These agreements help protect the seller, because buyers sometimes ask for credits just to help offset the closing costs — and never intends to do the repair work.

It also protects the seller if initial estimates for needed work turn out to have been overstated.

Buyers who ask for credits just to get the price down may be taking a chance.

Sometimes the buyer concedes on the purchase price thinking they can come back after the property inspection and ask for an additional concession.

The buyer may even feel empowered now that they’ve completed a series of inspections and are just weeks away from closing. The seller isn’t going to go back to the drawing board with a new buyer over a few more dollars, right?

Actually, they might. If it’s a strong buyer’s market, there’s a good chance the buyer can pull it off, but if it’s more of a neutral or a seller’s market, the seller may call your bluff. They’re assuming that you’re the one who, having invested all this time and money on inspections and an appraisal, isn’t going to walk away over a few dollars.

Buyers nearly always ask for credits, so sellers should give themselves some cushion.

You should also leave some additional room for negotiation when you’re in escrow. Always assume the buyer will ask for minor repair work — they nearly always do, even if there are no major issues. If you leave some cushion for yourself, you’ll feel better about the deal, and you’ll have protected yourself against the inevitable.

Conversely, the last thing you want is to be blindsided by a buyer asking for a few thousand dollars credit — just when you think the deal is finally done.

By Brendon Desimone - To view the original article click here

Posted by Jackie A. Graves, President on June 20th, 2017 7:23 AM

Buying a home can be a smart financial move, but if you're not careful, you could end up getting burned in the process. Here are four mortgage misconceptions you should be aware of -- and the truth behind each of them.

 

1. Your credit score doesn't matter as long as you're approved

 

Though you don't need perfect credit to get a mortgage, the higher your score, the more favorable a rate you'll snag. Unfortunately, some borrowers don't realize that, if they apply for a mortgage when their credit isn't great, they'll get stuck with a less-than-stellar rate for as long as they hang onto their loans.

 

Here's an example using today's rates. If you were to take out a $300,000, 30-year fixed loan and had a credit score of 760 or above, you'd snag a 3.608% annual percentage rate (APR), and an associated monthly payment of $1,365. With a 650 credit score, on the other hand, you'd qualify for a 4.651% APR, and that would come with a $1,547 monthly payment.

 

All told, in this scenario, you'll end up paying $65,520 extra for your mortgage if your credit isn't great when you apply, so it often pays to wait until you're able to boost your score.

 

2. You're safe to get a mortgage where the monthly payment is 30% of your income

 

Most financial experts agree that your housing payment shouldn't exceed 30% of your income. So if you get a mortgage where the payment equals 30% of your take-home pay, you might think you're golden.

 

Not so fast, though. While your actual mortgage payment might constitute the bulk of your monthly housing expense, that 30% figure is actually meant to encompass your peripheral costs of homeownership, like your property taxes and homeowner's insurance, as well. Max out that threshold on your mortgage payment alone and you'll leave yourself with dangerously little wiggle room in your monthly budget.

 

3. You don't need to put down 20%

 

Technically speaking, you don't need to make a 20% down payment to buy a home. But if you fail to come up with 20% of your home's purchase price at the time you sign your mortgage, you'll have to pay in the form of private mortgage insurance (PMI).

 

Private mortgage insurance is a premium that's added to your monthly mortgage payment when you don't manage to put 20% down. PMI will typically equal 0.5% to 1% of your loan's value, which means that if you're looking at a $300,000 mortgage with 1% PMI, you'll be charged an extra $250 a month. If you're already stretching your budget to afford your home, those additional payments might push you over the edge -- which is why it often makes sense to hold off on buying until you've saved enough to cover 20% of your home's cost.

 

4. A 30-year mortgage is best

 

Just because the 30-year fixed mortgage is the most common option for financing a home purchase doesn't mean it's the best choice for you. In fact, if you can afford a larger monthly payment, getting a 15-year loan instead of a 30-year loan could shave thousands of dollars off your total cost.

 

Imagine you're looking at a $300,000 mortgage. A 15-year loan might come with a 4% APR based on your credit, while a 30-year loan might come with a 5% APR. Your monthly payments under that 30-year loan will be smaller, but if you can handle the larger payments, you'll save $180,000 over the life of your loan, all thanks to your lower interest rate coupled with a shorter repayment period.

 

Along these lines, if you're not planning to stay in your home very long and are eligible for an extremely low rate, it might pay to sign up for an adjustable-rate mortgage (ARM). Say you expect to stay in your home for the next 6 to 7 years. Signing up for the popular 5/1 ARM will allow you to lock in a competitive rate for the next five years, after which time, you'll only be taking your chances for another year or two as your rate resets. There are different mortgage options to consider outside the classic 30-year fixed, so it pays to play around with different financing scenarios and see which one makes the most sense for you.

 

 

By Maurie Backman - To view the original article click here 

Posted by Jackie A. Graves, President on June 19th, 2017 3:48 AM

What is an FHA loan?

Less rigorous lending standards and lower down-payment requirements make FHA loans popular with mortgage borrowers.

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.

Why people get FHA loans

Because of that insurance, lenders can -- and do -- offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements. The FHA is an agency within the U.S. Department of Housing and Urban Development.

Here are seven facts that borrowers should know about FHA loans.

PeopleImages/Getty Images

Less-than-perfect credit is OK

Minimum credit scores for FHA loans depend on the type of loan the borrower needs. To get a mortgage with a down payment as low as 3.5 percent, the borrower needs a credit score of 580 or higher.

Those with credit scores between 500 and 579 must make down payments of at least 10 percent.

People with credit scores under 500 generally are ineligible for FHA loans. The FHA will make allowances under certain circumstances for applicants who have what it calls "nontraditional credit history or insufficient credit" if they meet requirements. Ask your FHA lender or an FHA loan specialist if you qualify.

Eric Audras/Getty Images

Minimum down payment is 3.5 percent

For most borrowers, the FHA requires a down payment of just 3.5 percent of the purchase price of the home. That's a "huge attraction," says Dennis Geist, senior director of compliance and fair lending at Treliant Risk Advisors and formerly a vice president of government programs for another lender. In late 2014, Fannie Mae and Freddie Mac reduced minimum down payments to 3 percent from 10 percent, but such loans have limited availability.

FHA borrowers can use their own savings to make the down payment. But other allowed sources of cash include a gift from a family member or a grant from a state or local government down-payment assistance program.

Eastfenceimage/Shutterstock.com

Closing costs may be covered

The FHA allows home sellers, builders and lenders to pay some of the borrower's closing costs, such as an appraisal, credit report or title expenses. For example, a builder might offer to pay closing costs as an incentive for the borrower to buy a new home.

Lenders typically charge a higher interest rate on the loan if they agree to pay closing costs. Borrowers can compare loan estimates from competing lenders to figure out which option makes the most sense.

JGI/Jamie Grill/Getty Images

Lender must be FHA-approved

Because the FHA is not a lender, but rather an insurer, borrowers need to get their loan through an FHA-approved lender (as opposed to directly from the FHA). Not all FHA-approved lenders offer the same interest rate and costs -- even on the same FHA loan.

Costs, services and underwriting standards will vary among lenders or mortgage brokers, so it's important for borrowers to shop around.

Jakub Krechowicz / Fotolia

Two-part mortgage insurance

Two mortgage insurance premiums are required on all FHA loans: The upfront premium is 1.75 percent of the loan amount -- $1,750 for a $100,000 loan. This upfront premium is paid when the borrower gets the loan. It can be financed as part of the loan amount.

The second is called the annual premium, although it is paid monthly. It varies based on the length of the loan, the loan amount and the initial loan-to-value ratio, or LTV. The following premiums are for loans of $625,500 or less.

Annual premiums for FHA loans

  • 30-year loan, down payment (or equity) of less than 5 percent: 0.85 percent

  • 30-year loan, down payment (or equity) of 5 percent or more: 0.80 percent

  • 15-year loan, down payment (or equity) of less than 10 percent: 0.70 percent

  • 15-year loan, down payment (or equity) of 10 percent or more: 0.45 percent

Image Source/Getty Images

You can borrow cash for repairs

The FHA has a special loan product for borrowers who need extra cash to make repairs to their homes. The chief advantage of this type of loan, called a 203(k), is that the loan amount is not based on the current appraised value of the home, but on the projected value after the repairs are completed.

A so-called "streamlined" 203(k) allows the borrower to finance up to $35,000 for nonstructural repairs, such as painting and replacing cabinets or fixtures.

mother image/redshorts/Getty Images

Financial hardship relief allowed

Of course, FHA insurance isn't supposed to be an easy out for borrowers who are unhappy about their mortgage payments.

But loan servicers can offer some relief to borrowers who have an FHA-insured loan, have suffered a serious financial hardship or are struggling to make their payments. That relief might be in the form of a temporary period of forbearance, a loan modification that would lower the interest rate or extend the payback period or a deferral of part of the loan balance at no interest.


By Marcie Geffner - To view the original article click here

Posted by Jackie A. Graves, President on June 18th, 2017 10:31 AM

Had it with rentals and roommates and think it's about time you took advantage of low mortgage rates and became a first-time homebuyer? To make that happen, just follow this simple step-by-step plan.

1. Check the selling prices of comparable homes in your area

Do a quick search of actual multiple listing service, or MLS, listings in your area on a number of websites, including the National Association of Realtors.

2. Find out what your total monthly housing cost would be,

Include taxes and home insurance in your cost. In some areas, what you'll pay for your taxes and insurance escrow can almost double your mortgage payment.

Compare mortgage rates now to find the right loan for you.

To get an idea of what insurance will cost you, pick a property in the area where you want to live and make a call to an insurance agent for an estimate. You won't be obligated to buy the policy, but you'll have a good idea of what you'll pay if you decide to buy. To estimate what you'll pay in taxes, check your property appraiser's website. Just remember that exemptions and the intricacies of local tax law can create differences between what a homeowner is currently paying and what you can expect to pay as a new homeowner.

3. Find out how much you'll likely pay in closing costs.

The upfront cost of settling on your home shouldn't be overlooked. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items like homeowners insurance or homeowners association fees. Check out Bankrate.com's annual closing cost survey to see what closing costs average in your state.

4. Look at your budget and determine how a house fits into it.

Fannie Mae recommends that buyers spend no more than 28 percent of their income on housing. Push past 30 percent and you risk becoming house-poor.

5. Talk to reputable Realtors in your area about the real estate climate.

Do they believe prices will continue falling or do they think your area has hit bottom or will rise soon?

6. Look at the big picture.

While buying a house is a great way to build wealth, maintaining your investment can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there's no landlord to turn to, and these costs can quickly drain your bank account.

7. Prepare for the hunt

If the numbers make sense for you, making these additional moves at the very beginning of the purchase process can save you time, money and aggravation.

8. Examine your credit.

Blemished credit or the inability to make a substantial down payment can put the kibosh on your homeownership plans. That's why it pays to look at your creditworthiness early in the homebuying process. Get your free annual credit report and examine it for errors and unresolved issues. If you find mistakes, contact the credit reporting bureau to make sure they are corrected. It's also a good idea to get your FICO credit score, which will cost you a small fee.

9. Get your docs in a row.

Collect pay stubs, bank account statements, W-2s, tax returns for the past two years, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. Have all of that paperwork ready for the lender. It may seem like a lot, but in this age of tight credit, don't be surprised if your lender wants a lot of documentation.

10. Find lenders and get preapproved.

Getting preapproved for a mortgage helps you bargain from a position of strength when you are house hunting. The institution where you bank and a local credit union are good places to start your search.Use Bankrate's mortgage rates tool to find lenders offering the best rates in your area. Applying to multiple lenders in the same month helps increase your chances of getting a loan approved at the best rate possible without dinging your credit score too much.

11. If at first you don't succeed, try, try ... the government?

If you can't find a bank willing to lend to you — and in the current tight credit market, it's possible you won't — consider getting an FHA loan. The Federal Housing Administration has a program that insures the mortgages of many first-time homebuyers. As a result of this guarantee, lenders who might otherwise feel queasy about your qualifications will be more inclined to lend to you. As a bonus, the FHA requires a down payment of only 3.5 percent from first-time homebuyers.


By Claes Bell, CFA - To view the original article click here

Posted by Jackie A. Graves, President on June 17th, 2017 9:01 AM

Are you looking to take the plunge into homeownership? Chances are, you've already crunched the numbers and gone over the pros and cons of buying your own home.

 

Looking to add more things to your pros list? We're here to help. We're talking about the journey of homeownership for an entire month. Below are five things that should be at the top of everyone's list.

  1. Homeownership can help you build equity over time. This is the big one. Owning your own home can be a great way to create equity for the future and provide stability and security for you and your family.
  2. Your monthly payments will remain stable. Speaking of stability, with fixed–rate mortgages, your monthly principal and interest payments will stay the same for the entire period of the loan. This will make it easier to plan and budget.
  3. You may have some tax benefits. You may also be able to deduct the interest on your mortgage and property taxes. These tax savings may offset a portion of the cost of owning your home.
  4. You can take pride of ownership. One of the best things about owning your own home is that you'll have a place that is uniquely "yours" that you can customize — from paint colors to remodeling projects.
  5. Homeownership improves your community. And last but certainly not least, you may find yourself becoming more involved in the community. Homeowners are more likely to support local businesses, thereby improving the local economy — and communities with high homeownership rates naturally attract more homeowners.

Courtesy of Freddie Mac - To view the original article click here

Posted by Jackie A. Graves, President on June 16th, 2017 5:40 AM

Americans refinancing their mortgages are taking cash out in the process at levels not seen since the financial crisis.

Nearly half of borrowers who refinanced their homes in the first quarter chose the cash-out option, according to data released this week by Freddie Mac. That is the highest level since the fourth quarter of 2008.

The cash-out level is still well below the almost 90% peak hit in the run-up to the housing meltdown. But it is up sharply from the post-crisis nadir of 12% in the second quarter of 2012.

In a cash-out refi, a borrower refinances an existing mortgage with a new one, typically at a lower borrowing cost, that has a higher principal balance than the existing one. This allows the homeowner to pay off the old mortgage and still have cash left over for other uses.

The growing popularity of cash-out refis has helped buoy refinance activity. After booming for several years, demand for refinance mortgages had begun to slow as the Federal Reserve began increasing short-term interest rates and longer-term bond yields moved higher.

Mortgage rates remain low by historical standards, though. The average rate for a fixed, 30-year mortgage was 3.95%, Freddie Mac reported this week.

Meanwhile, rising home prices have helped increase the equity homeowners have in their houses. This allows more people to refinance to capture the benefit of lower mortgage rates.

And borrowers whose homes are rising in value are often more likely to be interested in refinancing for cash. For example, in Denver and Dallas, where home prices have jumped, more than half of refinancers opted for cash last year, according to Freddie Mac.

To some housing-market observers, the fact that more homeowners are tapping their homes for cash represents a healthy confidence in the economy. It comes against a backdrop of continued gains in employment.

At the same time, the increasing use of cash-out refis causes some concern since, in the run-up to the financial crisis, borrowers used their homes like veritable ATMs.

Len Kiefer, Freddie Mac’s deputy chief economist, says this time has been different. Borrowers now are subject to stricter standards when they get a loan or refinance a mortgage. There is also less money at stake now than a decade ago.

Cash-out refis in the first quarter represented about $14 billion in net home equity compared with more than $80 billion in each of three straight quarters in 2006. On an annual basis, total home equity cashed out in 2016 was $61 billion, according to Freddie Mac, versus $321 billion in 2006.

And despite the recent increase in users, the proportion of refinancers opting for cash is much lower than in pre-crisis days, when it peaked at nearly 90% in mid-2006.

What’s more, consumer balance sheets are far stronger than they were a decade ago. Mortgage debt-service payments as a percentage of disposable personal income fell to 4.4% in the fourth quarter of 2016, according to Federal Reserve data. That is the lowest level since early 1980.

“People have been using cash-out for years,” Mr. Kiefer said. “From a personal-finance standpoint, it can make a lot of sense.”

One example is a borrower using the cash from a refinance to consolidate credit-card debt that has far higher yields. That in many cases can produce a big savings in debt-servicing costs by replacing debt that has double-digit interest rates with a loan that has a rate in the low single digits.

 

By Stefanos Chen - To view the original article click here

Posted by Jackie A. Graves, President on June 15th, 2017 7:17 AM

So you're ready to take the leap from renter to homeowner -- but where exactly do you start?

 

Many first-time homebuyers across the country are facing brutally competitive markets that favor sellers. That means buyers need to bring their A game to snag a pad of their own. Especially if you're a newbie.

 

The road to homeownership can be long and daunting, but here's where experts say you should start.

 

Check your bank balance

How much have you saved for a down payment? Nothing? You might want to start there.

 

Lenders usually like to see a 20% down payment before they'll give you a loan. But it's not a requirement. There are also a bunch of low down payment loans available, including government-backed FHA loans that only require a 3.5% down payment.

 

Either way, you're gonna need some cash.

 

So now's the time to start evaluating your spending habits and finding areas to cut back and sock that savings away.

 

Note that anything less than 20% down means you'll pay more every month -- not only will you be borrowing more money, but you'll also likely be charged private mortgage insurance fees on top of your mortgage payments. Smaller down payments also make it tougher to compete in a hot real estate market filled with all-cash buyers who often win out in bidding wars.

 

Know your number

Lenders use a three-digit number called a credit score to decide whether to lend you money, so you need to know what yours is before you start house-hunting.

 

The higher your score, the more likely you are to get to get a loan and a lower interest rate.

 

There are three major credit reporting companies, and federal law mandates they each give one free report, once a year. You can check your reports for free here. You can also order your credit score while you review your report, though there could be fees. Many credit card companies offer free credit scores, so check with your bank first.

 

Be sure to review the reports carefully and get any mistakes fixed. If your score isn't where you want it to be, start taking steps to fix it.

 

Along with your credit score, lenders also review your debt-to-income ratio (monthly debts divided by monthly income). Many lenders want to see this number no higher than 43%.

 

Check in with your bank

House hunting is fun, but it helps to know how much home you can afford before you start looking. If you're not sure, asking the bank what they're willing to lend you is a good place to start.

 

"Too many first-time clients will fall in love with a home before they are qualified and they try to back into it," said Bob McLaughlin, senior vice president and director of mortgage at Bryn Mawr Trust. "Get the qualification first."

 

To get pre-qualified, lenders will take a quick look at your financial picture and come up with a ballpark figure of how much you can afford to borrow.

 

Some buyers choose to go one step further and get pre-approved for a loan to help them better compete against other bidders. This review process is more involved and results in an approved loan amount.

 

Be prepared to hand over a stack of paperwork that will likely include at least one month of pay stubs, two years of tax returns and two months of banks statements from all your accounts.

 

Check in with yourself

Just because you got approved for a loan, doesn't mean you should spend that much.

 

"On paper you might be able to afford a $2,500 monthly payment," said McLaughlin. "But it might be better to go with what you feel your budget can hold."

 

When figuring out what you can afford, add up your mandatory expenses like student loan and car payments, health care costs, groceries, cell phone and utility bills. But don't forget to factor in the extra money you need for fun things like entertainment, shopping and travel.

 

Getting saddled with a huge mortgage payment can leave you "house poor" -- or unable to spend money on other things you enjoy because you're struggling to afford housing.

 

Start researching

Now comes the fun part: house hunting.

 

First start looking at online listings where you want to live to get an idea of what homes cost and figure out what you can expect to get within your budget.

 

It helps to make a list of which features you definitely want the home to have, and which ones would be nice, but aren't deal breakers.

 

Find a trusted adviser

Now it's time to get up close and personal with some actual homes. You don't have to have a real estate agent to visit and make offers on a home, but having a professional in your cornercan help make navigating the process easier. And since they're usually paid for by the seller's commissions after a sale, you shouldn't have to pay for their services.

 

Experts recommend asking friends and family members to recommend somebody they've worked with personally, and then interviewing them.

 

By Kathryn Vasel - To view the original article click here

 

Posted by Jackie A. Graves, President on June 14th, 2017 6:08 AM

Removing contingencies from your offer can easily backfire. In fact, there are a few you'll want to keep -- no matter what.

In hot real estate markets like San Francisco or New York, buyers often have to go the extra mile to make their offer stand out. Some buyers offer sizeable down payments, others write strategic offer letters, some even drop cookies at the door.

And in markets where multiple offers are the norm, it’s not uncommon to waive contingencies, which give buyers the right to back out of contracts under certain circumstances.

But not so fast. . .While removing a contingency could result in a faster transaction and be attractive to a seller, you could find yourself paying for the removal of unnoticed black mold in the attic or absorbing the cost of a lower valued appraisal. On the other hand, if you tie up a contract with too many “what ifs,” the seller is more likely to reject your offer due to contract delays, risks, or potential costs it forces them to incur.

Some contingencies are more important than others to include. Purchase agreement contingencies are related to the final cost of a transaction and protect buyers from the largest unexpected fees. And then there are tier-two contingencies, like a homeowners association clause that can help you pull out of a transaction if there are unanticipated rules (like not being able to paint your house a certain color).

The bottom line: Keep your offer shielded from the unpredictable and you’ll be able to walk away from the deal without losing any money. But in a hot market with multiple offers, consider removing the less important ones. Here are four important contingencies to keep in your offer, and arguably the most important one below.

4 Important Contingencies You Should Never Remove

·         Inspection contingency

A home inspection contingency — strongly recommended by most real estate agents — specifies that you will get a licensed home inspector to check the property within a specified period (typically seven days) after you sign the purchase agreement. Once the inspection is complete, you’re allowed to request that the seller makes repairs, and it’s up to you to decide what repairs you request. The seller then has the option to make the repairs or counter. If an agreement can’t be reached, buyers can back out of their purchase with their earnest money deposit intact.

·         Financing contingency

This clause states that your offer on the property is contingent on being able to secure financing. The main goal of a financing contingency is to ensure that if you can’t obtain a loan, you’ll be able to get your earnest money deposit back. The clause specifies that you have a certain number of days within which to get your mortgage approved by your lender. Many lenders recommend homebuyers allow for up to 14 days.

·         House-sale contingency

Many buyers need the equity in their current home to purchase a new one. This contingency means that if the sale of a buyer’s current home falls through, so will the sale of the home the buyer wants to purchase. Including a prior-sale contingency in the contract for your new home provides an opportunity to withdraw the offer if your existing home does not sell by a certain date. If you need to sell an existing home before you buy a new one, it’s certainly an option to consider; however, be warned that it’s also one that has been known to scare away sellers.

·         We saved the most important for last: The appraisal contingency

This contingency is arguably the most important because it could save you up to tens of thousands of dollars. Typically, when you buy a house, you put in an offer, and if the seller accepts it, your lender orders an appraisal. But if the appraisal comes in lower than the price you agreed to pay, you’ll have some decisions to make — mainly how to make up the difference in the home price and the loan amount. You’ll have more options if you’ve included an appraisal contingency. Such a contingency usually stipulates that the appraisal must come in within 5% or 10% of the sale price, or sometimes even at or above the sale price. You can try to negotiate with the seller to meet you halfway, but with this contingency, it’s your call to determine whether you’re overpaying for the property and want to back out.

By Sam Brannan - To view the original article click here

Posted by Jackie Graves, President on June 13th, 2017 5:03 AM

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