The SCOOP! Blog by®

What did you just pay for your new house? $250,000? That should be the value of the home, right? That’s what the lender will say your home is worth as your loan moves through the approval process, correct? Not really, no. While your sales contract states $250,000 it is generally considered to be the current market value of your property. Your real estate agent put together an offer with a combination of reviewing the prices of similar homes in the area along with the highest price you should pay. That’s market value. But a lender takes a slightly different approach. The lender uses the value of an appraisal, not your sales contract.

When you visit a neighborhood you’ll see that while the homes there are similar, they’re not all exactly alike. Some may have matured trees. The home next to it does not, but is two stories instead of one. The next home has a swimming pool, while the next has four bedrooms instead of three. These homes are similar, but not the same. It’s the appraiser’s job to pore through recent sales data of homes in this neighborhood to arrive at a final market value.

The appraiser will take a copy of your sales contract and do some homework, looking for recent sales. Most loan programs ask that all properties used to compare your property be within a one-mile radius. Such sales, called “comps,” should also be within a certain time frame, typically within 90 days but if there are no such sales, the timeline can be extended up to six months. There should be at least three such sales listed in the appraisal.

The appraiser will note the sales price of the comps and make note of any measurable differences between those properties and yours. If, for example, you have a fireplace and the others do not, then the value of your property can be adjusted upward. A newly remodeled kitchen can also affect value. Of course, square footage of the property is a factor and so is the size of the lot. There are other adjustments that can be made and those adjustments will be listed in your appraisal.

One final note, you pay for the appraisal but it’s the lender’s name that will appear on the front of the appraisal, not yours. However, you have a right to receive a copy of that appraisal within three business days of completion, whether or not the sale ultimately closes.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 21st, 2018 9:51 AM

FHA loans allow down payments as low as 3.5% if your credit score is at least 580. For buyers with lower credit scores, down to 500, a 10% down payment is required.

It’s a big roadblock on the path to homeownership: the down payment. FHA loans offer low down payments and accounted for about 13% of all home loans in 2016, according to government data.


That may not seem like a huge percentage, but about 80% of FHA loans are made to first-time home buyers. That meant 730,000 new homeowners last year, according to an analysis by Genworth, a mortgage insurance provider.


Here’s how much an FHA down payment will cost you — and how you can get an FHA-backed low-down-payment mortgage.


How much is an FHA loan down payment?


An FHA loan can mean a down payment as low as 3.5%. On a $300,000 home, that would be $10,500. Compare that with the traditional 20% down payment that most lenders prefer, which would come out to $60,000. Big difference. And that’s before closing costs and other buying-a-home expenses.


To get the minimum FHA down payment deal, you’ll need a credit score of 580 or better. If you fall in the FICO range of 500 to 579, you will be required to put 10% down. To see where you stand, get your credit score and run your numbers on an FHA mortgage payment calculator.


But FHA loans come with a price tag: mortgage insurance premiums. You’ll pay an upfront fee and ongoing monthly premiums.


Beyond FHA: Low-down-payment alternatives


Many banks, credit unions and online mortgage lenders offer FHA loans. But for borrowers with higher credit scores, FHA loans aren’t the only low-down-payment mortgages around. Fannie Mae- and Freddie Mac-backed mortgages  — which are considered “conforming” loans — are popular with lenders because they don’t carry the regulations and restrictions of FHA-backed mortgages.


“While FHA loans still serve their purpose for some buyers, folks with [credit] scores above 720 usually find conforming loans a better option, especially now, since they can put as little as 3% to 5% down,” Ted Rood, a senior loan officer in St. Louis with 15 years of experience, tells NerdWallet.


You will also pay for mortgage insurance on these conforming-loans — also called conventional mortgage — programs that let you borrow up to 97% of the home’s value, he says. But with a Fannie- or Freddie-backed loan, you may be able to cancel it after you reach 20% equity in your home. By contrast, FHA mortgage insurance is most often charged for the life of the loan.


FHA loans are still the most sought-out option for first-time home buyers, particularly for buyers with credit that is less than perfect. But if you have good credit, Fannie- and Freddie-backed loans open up new possibilities for qualified borrowers who just can’t quite get over that 20% down hurdle.


Source: To view the original article click here

Posted by Jackie A. Graves, President on August 20th, 2018 8:18 AM

Today’s conventional loans allow 3% down payments. You’ll need a higher credit score than with FHA loans but get a break on mortgage insurance.


For years, the Federal Housing Administration was the king of the low-down-payment mortgage mountain. Now, Fannie Mae and Freddie Mac, the government-sponsored enterprises that provide capital to the mortgage market, are designing loan products for hopeful home buyers with skinny savings accounts.

With Fannie Mae’s HomeReady and Freddie Mac’s Home Possible, a 3% down payment — or what lenders refer to as 97% loan-to-value, or LTV — is available on so-called conventional loans. Conventional loans are the loan products most often issued by lenders.

Fannie Mae HomeReady

Jonathan Lawless, vice president for product development and affordable housing at Fannie Mae, says today’s low-down-payment FHA loans can be “expensive," with upfront and ongoing mortgage insurance premiums that last for the life of the loan. So Fannie Mae decided to build a competitive low-down-payment loan product of its own.

There are income limits wrapped into the HomeReady program, except in designated low-income neighborhoods. Fannie’s standard 97 LTV loan doesn’t have such restrictions, if at least one borrower is a first-time home buyer.

Though the FHA is known for its relaxed lending requirements — including a credit score minimum of 580 — Fannie’s HomeReady has a little wiggle room of its own. It allows parents to be co-borrowers — without residing in the home — and payments from a rental property can be considered as an income source. Borrowers can also have up to a 50% debt-to-income ratio and a FICO score as low as 620.


But just clearing the DTI and credit score hurdles will not gain you approval. Lawless says Fannie Mae looks to eliminate “risk layering” — multiple factors that work against the borrower’s creditworthiness. A low credit score would be one. Add a high DTI and you have two strikes against you.

It needs to be one or the other.

“It would never be possible to do a [97 LTV loan] with a 620 FICO and a 50 [DTI],” Lawless tells NerdWallet. “You’re going to need compensating factors.”

That could mean more cash in the bank, a higher income — or ultimately more than a 3% down payment.

Freddie Mac Home Possible

Freddie Mac has its own 97 LTV program, Home Possible. The program assists low- to moderate-income borrowers with loans made for certain low-income areas. Repeat buyers may also qualify.

While Home Possible will continue to be Freddie Mac’s “flagship” affordable mortgage product, Patricia Harmon, senior product manager at Freddie Mac, says there’s even more flexibility in a new program called HomeOne.

At least one borrower must be a first-time home buyer, but there are no income limits or geographic restrictions. And Harmon echoes Lawless’ caution regarding underwriting guidelines.

“If a borrower has a 640 credit score, that’s not an automatic approval, nor is it an automatic decline. It would depend on a lot of other characteristics that borrower has,” Harmon says. “The higher the credit score, the lower the debt, the more cash reserves in place — the higher the probability of being approved.”

Options when 3% down is a challenge

“Even though 3% sounds small, as home prices are rising, it’s becoming a bigger and bigger amount and harder and harder to save for,” Lawless says.

Fannie Mae and Freddie Mac are attempting to chip away at that barrier as well, allowing crowdsourced down payments, considering Airbnb income and even lease-to-own programs.


CMG Financial, a lender based in San Ramon, California, has created, where prospective home buyers can tap the collective pockets of their social network.

“They can basically ask their family, friends, associates, colleagues, Facebook friends to give them five bucks here and there” toward a down payment, Lawless says.


Meanwhile, Seattle-based Loftium allows prospective home buyers to rent out a room in their future home to help seed their down payment.

In exchange for a future share of the rent from your room on Airbnb, Loftium will forecast the income and give you a percentage of that upfront, which you can then apply to your down payment.

The borrower will need to kick in 1% of the total down payment; Fannie Mae allows the other 2% to come from Loftium, Lawless says.


There’s even a lease-to-own initiative that Fannie Mae is testing.

“You start as a renter, but you also have the opportunity to buy [the home] at a fixed price in the years in the future,” Lawless says.

Not every lender participates in these pilot programs, even with the endorsement of Fannie or Freddie. By talking to a few lenders, you can get an idea if they allow these new down-payment-building test programs.

If the testing goes well, Lawless says, these options could officially become part of Fannie Mae’s loan programs.

“We’ve largely seen Freddie change their programs to match the programs that we have in place,” Lawless adds.

More eligible properties could help

Access to mortgage funding, even with low down payments, still doesn’t solve the problem of a lack of available housing. Conventional financing is also looking to help address this issue.

Fixer-upper funding wrapped into a home purchase mortgage — also with 3% down payments — may be one answer. Lawless says Fannie’s renovation loan program has been “clunky” in the past, but has been recently updated and modified to be easier to use.

And Fannie’s MH Advantage program, to finance manufactured housing, also offers 97 LTV financing.

Are conventional 97 LTV loans better than FHA?

FHA-backed loans are still drawing the lion’s share of first-time home buyers, yet 2017 mortgage numbers were down 4% compared to 2016. Meanwhile, the number of conventional loans for first-timers was up 18% for the same period, according to the Genworth Mortgage Insurance First-Time Homebuyer Report.

Does Michael Fratantoni, chief economist for the Mortgage Bankers Association, believe these 3% down conventional loan programs are having a significant positive impact on the first-time home buyer market?

“Yes, particularly for lenders who remain wary regarding False Claims Act exposure, conventional 97 loans are gaining traction,” Fratantoni tells NerdWallet. The False Claims Act triggered a flood of lawsuits by the U.S. Department of Justice against lenders accused of fraud in the underwriting of FHA loans as part of the housing crash a decade ago.

As a result, many lenders began to shy away from FHA loans and welcomed the low-down-payment conventional mortgage programs.

“However, these loans remain more expensive than FHA loans for borrowers with less-than-perfect credit,” Fratantoni says. “All-in costs — mortgage payment and mortgage insurance — are less for FHA loans than conventional loans if a borrower’s credit score is roughly 700 or lower.”

Discuss your low-down-payment loan options, FHA and conventional, with three or more lenders, compare fees and mortgage insurance costs, and find out what works best for your situation.

Source: To view the original article click here   

Posted by Jackie A. Graves, President on August 19th, 2018 8:29 AM

What are the 'Five Cs Of Credit'

The five C's of credit is a system used by lenders to gauge the creditworthiness of potential borrowers. The system weighs five characteristics of the borrower and conditions of the loan, attempting to estimate the chance of default. The five C's of credit are character, capacity, capital, collateral and conditions.

BREAKING DOWN 'Five Cs Of Credit'

The five C's of credit method of evaluating a borrower incorporates both qualitative and quantitative measures. Lenders look at a borrower's credit reports, credit score, income statements and other documents relevant to the borrower's financial situation, and they also consider information about the loan itself.


Sometimes called credit history, the first C refers to a borrower's reputation or track record for repaying debts. This information appears on the borrower's credit reports. Generated by the three major credit bureaus – Experian, TransUnion and Equifax – credit reports contain detailed information about how much an applicant has borrowed in the past and whether he has repaid his loans on time. These reports also contain information on collection accounts, judgments, liens and bankruptcies, and they retain most information for seven years. The Fair Isaac Corporation (FICO) uses this information to create a credit score, a tool lenders use to get a quick snapshot of creditworthiness before looking at credit reports.


Capacity measures a borrower's ability to repay a loan by comparing income against recurring debts and assessing the borrower's debt-to-income (DTI) ratio. In addition to examining income, lenders look at the length of time an applicant has been at his job and job stability.


Lenders also consider any capital the borrower puts toward a potential investment. A large contribution by the borrower decreases the chance of default. For example, borrowers who have a down payment for a home typically find it easier to get a mortgage. Even special mortgages designed to make homeownership accessible to more people, such as loans guaranteed by the Federal Housing Authority (FHA) and the Veterans Administration (VA), require borrowers to put between 2 and 3.5% down on their homes. Down payments indicate the borrower's level of seriousness, which can make lenders more comfortable in extending credit.


Collateral can help a borrower secure loans. It gives the lender the assurance that if the borrower defaults on the loan, the lender can repossess the collateral. For example, car loans are secured by cars, and mortgages are secured by homes.


The conditions of the loan, such as its interest rate and amount of principal, influence the lender's desire to finance the borrower. Conditions refer to how a borrower intends to use the money. For example, if a borrower applies for a car loan or a home improvement loan, a lender may be more likely to approve those loans because of their specific purpose, rather than a signature loan that could be used for anything.

For more on the five C's, find out why banks use the five C's of credit to determine a borrower's creditworthiness.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 18th, 2018 9:01 AM

Rising home prices across the U.S. have boosted homeowners’ equity to record-setting levels. That means you can convert your home’s increased value into cash. Seems like a no-brainer, right?

Well, there’s more to the story. Many homeowners are reluctant to use home equity loans to tap their homes like an ATM. And while they have valid reasons for being cautious, homeowners who are short on cash could be missing out on some benefits.

As equity surges, HELOCs lose popularity

Americans’ tappable equity — the amount they’re able to draw in cash from increased home values — jumped by $380 billion (7 percent) in the first quarter to $5.8 trillion, according to the latest Mortgage Monitor Report from Black Knight, a real estate and mortgage data analytics firm. That’s the largest growth in a single quarter since 2005.

In the past 12 months, the average homeowner with a mortgage gained $14,700 in usable equity and has $113,900 overall.

Against this meteoric rise in values, the share of total equity Americans have pulled from their homes hit a four-year low in first quarter 2018. Homeowners with mortgages withdrew $63 billion in equity using a cash-out refinance or a home equity line of credit, or HELOC, in the first quarter. That’s a 7 percent decline from the fourth quarter and up 1.1 percent from a year ago, Black Knight found.

What’s more: Even though rising rates on first-lien mortgages usually spurs more HELOC lending because people don’t want to refinance out of lower-rate loans, the volume of equity taken out with a HELOC fell to a two-year low, according to the report.

Homeowners still see their homes, which is often their largest investment, as a source of cash. Cash-out refinances spiked 5 percent to 70 percent of total refinance transactions in the past year. Black Knight found that nearly half of homeowners who opted for a cash-out refinance increased their interest rate in the process.

The preference of cash-out refinancing over a HELOC seems counterintuitive for a short-term cash need. Homeowners who need money quickly could benefit from a HELOC if they use it the right way — and understand what they’re getting into, experts say.

Rising rates, lingering fears stifle HELOC growth

HELOCs have waned in popularity in recent years. For starters, a rise in short-term interest rates is off-putting for potential borrowers because HELOCs come with variable interest rates. Mortgage rates have been largely on the upswing, making it more expensive to borrow.

Another ding for HELOCs: the new tax law that removes the mortgage interest deduction for loans that aren’t used for home improvement projects. If you plan to use a HELOC for other purposes, the loss of that tax benefit makes HELOCs less appealing, especially compared with other alternatives, says Greg McBride, CFA, chief financial analyst with

“For consumers with strong credit profiles, there are mid-single digit interest rates available on unsecured personal loans,” McBride points out. With a personal loan, “a borrower can have funds in hand within 72 hours, presenting a convenient alternative at comparable interest cost.”

Scars left behind by the housing crash have stifled HELOC growth in a post-recession recovery, says Mary Jane Corzel, senior vice president, retail credit center at Bryn Mawr Trust in Bryn Mawr, Pennsylvania.

“Before the crash, people used HELOCs for everything,” Corzel says. “When the housing market crashed, they were underwater. There is muscle memory among borrowers who were caught in a bad situation then, and may have recovered and have equity now. People are more conservative today than they were before.”

Understanding how HELOCs work

Much of consumers’ fears may stem from misunderstanding how HELOCs work and who should use one. A HELOC is a bit like a credit card where you get a line of credit for a set timeframe, usually up to 10 years, called the “draw period.” During this time, you can withdraw money as you need it.

“Instead of letting you borrow one lump sum, like a mortgage, HELOCs only require you to pay for the money you need, providing you with a flexible safety net for unexpected costs,” says Jon Giles, TD Bank’s senior vice president, home equity.

Courtesy of Black Knight

You can choose from an interest-only draw period, or one where you pay interest and principal, which pays off the loan faster. As you pay down the principal, your credit revolves and you can use it again until the line expires. You then enter the repayment period, which can last up to 20 years. You’ll pay back the remaining balance, as well as any interest still owed.

A HELOC has a variable interest rate that is tied to a benchmark interest rate, such as The Wall Street Journal Prime Rate. As the prime rate fluctuates, so does your HELOC interest rate. That means your payments can go up or down, too, depending on the interest rate and how much you owe. Some lenders even offer a fixed-rate HELOC option.

When interest rates climb, HELOCs tend to be more popular compared with the costs of a complete cash-out refinance, says John Pataky, executive vice president and chief consumer and commercial banking executive at TIAA Bank. With a cash-out refi, you may have to pay off a first mortgage with a lower interest rate, replacing it with a higher rate for the life of the loan.

“It’s a much better financial outcome to leave the lower mortgage rate in place, and end up with a blended-rate situation that’s much lower than what the cash-out refinance would yield,” Pataky says.

Assessing risk and your financial discipline

A HELOC can be used for anything, though deductibility may be limited. The most common needs someone might use a HELOC for include:
  • Funding home improvements that add value to your home
  • Paying college expenses
  • Consolidating high-interest credit card debt
  • Buying a second property or vacation home
  • Paying off emergency expenses (i.e., a major surgery)

If you have a good read on your income flow throughout the year and are adept at managing money, the variable interest on a HELOC won’t be as shocking, Corzel says. If you earn most of your income from commissions or bonuses and know you’ll earn more during certain quarters, you can better time your interest payments to match those income surges, she adds.

A HELOC isn’t without risks. The biggest downside is if you run into financial trouble and can’t repay your loan, you could lose your home. Just like a traditional mortgage, a HELOC comes with servicing fees, terms and interest. Lenders will look at your income, employment, assets, credit and financial history, and order a property appraisal to determine your home’s value, Pataky says.

Not everyone who has substantial equity in their homes should tap it. Using a HELOC to fund vacations, buy a car, or extravagant purchases is a sign you’re living beyond your means, McBride says.

Using any home equity product that puts your home on the line requires strict discipline and sticking to a repayment schedule, McBride says. Homeowners who don’t have control over their spending or debt and use their home as a piggy bank may dig themselves a deeper hole with a HELOC.

“If the credit card debt came from a pattern of overspending that hasn’t been cured, then [a HELOC] is a bad idea,” McBride says. “But if it resulted from a one-time, unforeseen event, such as medical expenses or prolonged unemployment, then using a fixed-rate home equity loan to minimize the finance charges and have a definitive payoff date can be a good move. The revolving, open-ended nature of HELOCs could invite additional borrowing and drag out the repayment even further.”

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 17th, 2018 10:16 AM

1. What does a mortgage broker do?

A professional mortgage broker originates, negotiates, and processes residential mortgage loans on behalf of their clients.

2. What are the benefits of using a mortgage broker?

A mortgage broker represents your interests rather than the interests of a lending institution. They act not only as your loan officer, but as a knowledgeable consultant and problem solver. Mortgage brokers have access to a wide range of mortgage products, a broker is able to offer you the greatest value in terms of interest rate, repayment amounts, and loan products. Mortgage brokers will interview you to identify your needs and your short and long term goals. Many situations demand more than the simple use of a 30 year, 15 year, or adjustable rate mortgage (ARM), so innovative mortgage strategies and sophisticated solutions are the advantage of working with an experienced mortgage broker.

3. How do I ensure that I've chosen the right mortgage broker?

The greater the broker's experience and lender network, the better your opportunity to obtain the loan product and the interest rate that best suits your needs. Be sure to read their reviews online and see how long they have been in the business before selecting your broker.

4. What documents should I be prepared with when meeting with a mortgage broker?

A mortgage broker will need to review all your financial information, such as: w2's, tax returns, paystubs, bank statements, as well as various other documents that pertain to your individual circumstances.

5. What kinds of loans are available?

A mortgage broker most likely has access to every product the market has to offer. Most mortgage brokers are approved with multiple lenders to ensure they can offer every product available.

a. What are major differences to be aware of?

With a mortgage broker, you only need one application, rather than completing forms for each individual lender. Your mortgage broker can provide a formal comparison of any loans recommended, guiding you to the information that accurately portrays cost differences, with current rates, points, and closing costs for each loan reflected

6. Costs associated with working with a mortgage broker over a bank?

A mortgage broker is offered loans on a wholesale basis from lenders, and therefore can offer the best rates available in the market, typically making the total loan cost lower for the client.

7. How long does the process take from start to closing on a home?

An "A paper" borrower with good credit can close as fast at 15-21 days.

8. What setbacks should I be aware of?

The market is hot right now so be prepared to compete with other buyers in the marketplace and come in with a strong offer.

9. Are there any incentives for first time buyers? (Lower down payment percentage, etc.)

Yes, there are several down payment assistance programs available for first time home buyers. Some programs will cover your down payment and closing costs.

10. Is there anything else I should be considering when choosing a broker and committing to a loan?

My honest advice would be to get more than one quote. More often than not, borrowers are not shopping around, they are going with the lender that their realtor refers to them and not shopping at all. Get two or three quotes before making a decision.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 16th, 2018 4:28 PM

Here’s a look at what they expect from potential borrowers.


To qualify you for the best rate, lenders will see if you pass muster in three main areas. Note that you may be able to offset weakness in one category with strength in another.


Are you a good credit risk? One of the first things lenders do is pull your credit score. The most common is the FICO score, which will be based on data from one of the three major credit bureaus (Equifax, Experian and TransUnion). Lenders use the lower of two scores, the middle of three or the average of all scores. If you have a co-borrower, they compare your scores and use the lower of the two or average them. Your debt-to-income ratio and your down payment determine the minimum required credit score for a mortgage.


Can you handle the payments? To measure “capacity,” lenders scrutinize your (and your spouse’s) job and income history and prospects, debt-to-income ratios, and savings and assets. Lenders will also look at your proposed ratio of monthly housing expenses to income. Housing expenses include loan principal and interest, real estate taxes, and hazard insurance (PITI), plus mortgage insurance and homeowners-association dues. Housing expenses generally shouldn’t exceed 25% to 28% of your gross monthly income.


Lenders also figure your maximum debt-to-income ratio (total monthly debt payments divided by gross monthly income). That number and your down payment determine the minimum required credit score; if it’s 36% or less, Fannie Mae sets a minimum credit score of 620 with a down payment of 25% or more, and 680 with less than 25% down. To push the debt-to-income ratio to 45%, you’ll need a credit score of at least 640 with a down payment of 25% or more, and 700 with less than 25% down. Standards get tougher as you layer on more risk—say, with an adjustable-rate mortgage or investment property.


Does the value of the home justify the loan you want? “Collateral” is typically measured as loan-to-value ratio: the amount of the loan divided by the appraised value of the home you want to finance. If you could borrow all of the money, the LTV ratio would be 100%. But lenders will demand a down payment of at least 3%. That way, you have a stake that you stand to lose if you default on your loan.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 15th, 2018 2:41 PM

Need a mortgage co-signer? This may indeed be the case if you've found that perfect house, only to have lenders inform you that you don't qualify for a mortgage.

Enter the co-signer.

What does having a co-signer mean for you as a home buyer, and what are the benefits and risks? Read on!

Why a buyer might need a mortgage co-signer

That property you're eyeing may be just out of your price range, or perhaps you have either a poor or no credit history. Even if you know how to scrimp and save to make your monthly mortgage payments, the bank doesn't know how well you pinch pennies. And being a financial institution, it needs a guarantee that the money it lends a potentially risky borrower will be paid back. And that's where a co-signer comes in.

What is co-signing exactly?

When you apply for a mortgage, you become what's known as the "occupying borrower." A co-signer—usually a relative or friend—is someone who typically doesn't live at the property (aka a "nonoccupant co-borrower." This person physically co-signs the mortgage or deed of trust note with you, adding the security of their income and credit history against the loan.

Both parties then become co-credit applicants, taking on the financial risk of the mortgage together. That also means the co-signer essentially owns the home right along with you, whether they live in it or not.

How debt-to-income ratio is calculated with a co-signer

Mortgage approval (and how large a mortgage you can get) hinges on your debt-to-income (DTI) ratio, which is essentially how much money you have coming in (income) compared with going out (aka your debts, including college loans, car loans, and otherwise).

So how is the DTI ratio calculated with a co-signer? In this case, it is usually calculated by combining your income with that of your co-signer, which should hopefully boost your overall DTI to a number the bank will approve.

Just keep in mind that lenders will also examine your co-signer's debts, and factor that into the picture as well to create what's called a "blended debt-to-income ratio." So make sure you choose a mortgage co-signer with high income and little debt to help offset your own numbers.

What is a co-signer's liability?

A co-signer is a person who is taking on the financial risk of buying a home right along with you. If something unforeseen happens and you're no longer able to make mortgage payments, the co-signer will be contacted to pay up.

"When co-signing a loan, the risk falls on the co-signer," says Ray Rodriguez, regional sales manager at TD Bank. If anything happens to the occupying borrower that affects their financial health—think loss of job or severe medical problems—"the co-signer is responsible for the payments."

And if you fall behind on your loan, the full amount of the mortgage payments are reported on both of your credit reports, according to Rodriguez. Those late payments also "get reported on the co-signer's credit report and could drop their credit score, impacting their ability to obtain new loans for an auto or mortgage of their own."

Whom you shouldn't ask to co-sign your loan

Co-signers should be people rooting for you to pay off the loan without a hitch, not someone with an interest in owning the house—a possibility if they take over paying off the property. The co-signers to avoid are those who could make a buck by facilitating this real estate transaction—think the home seller or the builder/developer.

Warning: A co-signer doesn't solve everything

Sure, a co-signer's income can offset certain weaknesses in the occupant borrower’s loan application. But no co-signer can wipe away significant hiccups in your credit history. And before you put a co-signer at risk, make sure you as the occupant borrower truly have the ability and willingness to make the mortgage payments and maintain homeownership. In other words, don't take your co-signer for granted, and lean on them only in the worst-case scenario.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 14th, 2018 7:29 PM

What is 'In Escrow'

In escrow is a temporary condition of an item such as money or a piece of property that has been transferred to a third party with the intentions of delivery to a grantee as part of a binding agreement. Valuables in escrow are generally delivered  by an escrow agent to a grantee upon satisfaction of outlined terms.


Escrowed items are most commonly found in real estate transactions. Property, cash and the title to the property are often held in escrow until all specified conditions are met and transfer of ownership can occur. Lawyers will most commonly act as escrow agents in such situations.

What Happens While Real Estate Is In Escrow

While property is held in escrow, the buyer cannot take possession of or occupy the space. Real estate deals must clear a series of stages during the escrow process. An appraisal of the property must be conducted if it has not already been done. There may be issues with the transaction if the appraised value of the property is lower than the agreed upon purchase price.

Lenders will not disburse financing that is above an appraised value regardless of what deal price the parties committed to. The buyer could try to find funding to cover the missing portion of the agreed purchase price for the property. If they cannot make up the difference while the real estate is in escrow, the transaction might be terminated.

Other issues can arise while a property is in escrow. The buyer could have difficulty securing necessary insurance and other policies needed to complete the transaction. Even if a title search was performed, there may be liens and other claims attached to the property that surface. The buyer may have wanted the property for a use that does not match current zoning regulations. The seller might seek a variance while the property is in escrow to allow the buyer to proceed with their intended plans upon taking full ownership of the real estate.

The purchase might have included guarantees that the seller would address needed repairs to the property. This could include the removal of landscape features such as trees or the reconstruction of part of a building. If the seller does not make good on those promises while the property is in escrow, then the deal might be ended.

The intent of keeping property in escrow is to give assurance to all parties that the mutual responsibilities outlined in the agreed upon contract will be fulfilled.

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 13th, 2018 6:58 AM

Just because some folks can afford to buy a home in today’s competitive market doesn’t mean they can afford to overpay.

As housing prices climb, it’s even more important to make sure that your investment is a smart one. It’s not every day you sign up for a 30-year $363,300 loan. Which, incidentally, is the average cost of a new home in the United States as of June 2018, according to the Census Bureau.

And prices are climbing. Home prices rose 7.1 percent year over year from May 2017, according to CoreLogic, with few signs of plateauing even as interest rates tick up.

There’s no guarantee that the house you buy today is priced reasonably or will increase or even retain its value. The best anyone can do is to use the tools and information available to make an educated guess. For buyers, this means talking to your agent and doing some research.

Here are a few indicators that can help you determine whether the house you want to buy will retain its value.

1. Pay attention to how long the home has been on the market

One sign that a home may be overpriced: if it’s on the market longer than average.

Ask your agent to pull statistics on the house you’re eyeing. How long has it been listed? Is that longer than average for homes in the neighborhood? In that price range? For the type of house? Has the house been on the market previously and the listing removed?

“The stats will vary depending on price, property type and even geography. What’s important is to understand what’s average for the property you’re looking at. High-priced homes, typically ranging from $750,000 to $1,000,000, will sit on the market longer than less-expensive property,” says Terra Spino, with EXP Realty in Santa Maria, California.

2. The house is nice, the neighborhood not so much

Generally, homes depreciate over time while land increases in value. The idea here is that your home suffers wear and tear, whereas land does not. A brand new home in a so-so neighborhood might be worth less in a few years than a comparable older home in a great neighborhood.

Consider that homes bought near poorer school districts suffered a 22 percent location discount when compared with all homes in the same county, according to a report by

Evaluate the features of the area where the prospective home is located. Look at growth opportunities, such as new businesses and mixed-use developments.

“Today’s buyers want to live in walkable neighborhoods. That has value that will probably last,”  says Kelly Lavengood, realtor/broker with FC Tucker Company in Indianapolis. “Answer questions like: is the area primed for additional growth?”

Additionally, look for features including nearby mass transit, high-rated schools, and amenities such as parks and popular public spaces.

3. Valuation tools point in the wrong direction

Online valuation tools, also known as automated valuation model, or AVM, are easy ways for buyers to get an idea of how much property is worth.

These tools use information from property transfers, taxes, and past sales to crunch the numbers to estimate a property’s value. This is a good starting point, but not always an accurate picture, says Lavengood. Experienced agents who know the area can put a finer point on home values than online tools.

“Find an agent who is familiar with the area. Real estate is very market specific, so what’s good for one neighborhood might not be good for another,” says Lavengood. “Property values on websites are not always accurate.”

4. The inspection sets off warning bells

Once your bid on a home is accepted, a home inspection will give you additional clues as to market value. Be sure to hire an inspector with experience who comes with excellent recommendations.

A good inspector will also know their limits, meaning if something outside of their expertise demands attention, they will recommend the right type of expert to review the problem.

“Be cognizant of potential inspection issues. Everything’s fixable–it’s just a matter of at what cost and whose cost,” says Lavengood. “You want to make sure you’re not getting into a situation where you can’t afford repairs and it impacts your ability to sell.”

Source: To view the original article click here

Posted by Jackie A. Graves, President on August 12th, 2018 8:50 AM


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