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Mortgage rates have escalated recently. The 30-year fixed-rate average, the most popular mortgage product on the market, is nearing 5 percent, according to the latest Freddie Mac data. The last time the 30-year fixed was that high was 2011.


Indications are that they will continue to move higher, leaving many homeowners and buyers wondering what rising rates mean for them. I spoke to Craig Strent, CEO of Rockville-based Apex Home Loans, to ask him for some practical advice for anyone considering buying a home or refinancing a mortgage. Our conversation has been edited for clarity and length.


Q: Mortgage rates are higher than they’ve been in seven years. Did I miss my chance to get a low rate?


Strent: No. Rates are not at historic lows anymore, but they’re still historically low in general. And if you’ve been in your home for a while, you might still be overpaying. When people talk about quote-unquote rates they’re referring to the 30-year fixed, which is essentially the most expensive mortgage you can get. You may not need a 30-year fixed.


Rates in general are up, but maybe your rates wouldn't be up. For example, maybe you bought your first home five or six years ago and your family is now expanding and you're thinking about moving in the next three to five years. Well maybe it's time to come out of that 30-year fixed and go into something like a 5/1 [adjustable rate mortgage].

People talk about this word “rates.” But rates typically means the 30-year fixed. Historically the 30-year fixed has been 7, 8, 9 percent depending on the year. Just remember 6 percent was a gift in ’06, 7 percent was awesome in the ‘90s and 9 percent was unimaginably good in the ‘80s. Don’t forget 5 [percent] is not 5 [percent]. The rate is not the rate because you’re deducting the interest. So the actual cost is lower.

Q: Why are mortgage rates rising?

Strent: I’m not an economist but basically the recent jump in rates is because of low unemployment, which is indicative of a strong job market, which is indicative of a strong economy. A strong economy generally results in higher rates. What I often say to people is mortgage rates like small doses of bad economic news. When we get small doses of bad economic news, rates go down. When the economy is roaring, money often comes out of bonds into stocks and rates move in the opposite direction. Last week was a little messy because of the jobs report, the lowest unemployment in 49 years, and rates really did bounce up. It doesn’t always move in lockstep but generally speaking a strong economy means rates will be rising.

Q: This is an unfair question because I’m asking you to look into a crystal ball and tell me how high the rates are going to go.

Strent: If I knew that. .?.?. The last time we saw short-term rates rise over a few years, long-term rates [mortgage rates] actually stayed stable. The truth is I’m not going to even try to answer how they’re going to go other than to say macro economically as the economy does better, rates tend to rise.

Q: All these people have been sitting on the sidelines trying to time their refinance. Did they miss their chance?

Strent: Ok, so .?. .

Q: You may have already answered this question in your first response.

Strent: I did. I don’t think you missed your chance to refinance. If you’ve been in your home for a while and you have not refinanced yet, you could probably still save money by doing so, depending on what your plans for the house are.

Q: How can I get the best interest rate for my mortgage?

Strent: The first thing I would say to people is that we make our mortgage payments in dollars, not in rates. The question you want to be asking yourself is how can I get the lowest cost for the time in which I’m going to live in the house. A lot of first-time buyers live in the house five to seven years and they take 30-year fixed-rate mortgages. So by definition they’re overpaying because you’re taking a 30-year fixed and that’s the most expensive mortgage. You’re paying a premium. If you’re only using the money for five, seven, eight, nine years, then you just overpaid. You paid for 20 years of fixed-rate protection that you didn’t need, and nobody likes to overpay for anything, particularly a mortgage.

I would reposition it to say the lowest cost versus the lowest rate, and then align your mortgage not with the time in which you're going to live in the house but with the time in which you're going to need the mortgage. If you're paying [private mortgage insurance] or you're going to take two loans, you may wind up refinancing when you have some appreciation. Match the mortgage type up for the period in which you need the mortgage.

You should tell your readers that right now there are a lot of options. There's five, seven, 10 and 15 ARMs. The 15-year ARM is becoming more and more popular. It is not the 15-year fixed. But [an adjustable rate] mortgage has a rate that cannot change for five, seven, 10 or 15 years. Most 30-year fixed-rate mortgages do not even make it to year 15. A 15/1 ARM, which is a 30-year mortgage with a fixed rate for the first 15 years, with no balloon but it can change after 15 years. Those are typically priced about a quarter-percent better than a 30-year and they're worth looking at.

Q: A lot of home buyers are scared of ARMs because of what happened during the housing crisis. How are ARMs today different than the ones back then?

Strent: I love this question. The people who got in trouble with ARMs, for the most part, had interest-only ARMs. They weren’t paying any principal. They didn’t have equity. They put zero to very little down and then their home value went the other way. That option no longer exists. You can’t even get in trouble that way if you wanted to. Now, can you get in trouble on an ARM? Sure, you could. But generally speaking people who can get the best types of ARMs generally have some equity in their home. Now the only thing that can be dangerous about an ARM is the rate adjusting to payments you cannot afford. But that should be moot. Because if you said I’m going to live in this house seven years and then I’m moving, I would say let’s get you a 7/1 ARM or even a 10/1 ARM.

The rate should be fixed for the entire period of time you live there and you should be done with the mortgage before you even have the adjustment. If you’re worried about ARMs, opt for an ARM where the rate is fixed for a period of time that is longer than you believe you’ll live in the home.

Q: Do I need a really good credit score to get a good rate?

Strent: This is one of the biggest myths. You don’t need a great score to qualify for a mortgage these days. But the better the score, the better the rate.

If can digress a little, one of the things I wanted to go into is what I think is the biggest myth out there right now, that you need a big down payment. Well, it’s just not true. D.C. Open Doors is a zero-down program. You’ve got FHA at 3½ percent down, and Fannie Mae and Freddie Mac conventional are 3 percent down now. VA is zero down. There are so many programs out there that require very little money down and a lot of these can be done with some damaged credit.

Q: How many first-time buyers put down 20 percent?

Strent: It’s rare. It’s more like 3 to 10 [percent] down. And what people also need to know is that PMI, private mortgage insurance, has become much more affordable in recent years. [If you put] less than 20 percent down, you have to deal with [PMI] in some way, meaning you either have to take two mortgages or pay a higher rate or pay PMI. But what I would say to your readers is the monthly carrying cost of PMI has decreased. If you’re buying with less than 20 percent down, from a financing standpoint, it’s not as expensive as it used to be. There’s a lot of creative ways to pay PMI these days. It used to be you just paid it monthly. Now you can opt for a higher rate. You can finance it on top of the loan. You could buy it out in a lump sum. You could split the premium. You could pay part of it upfront and in a reduced monthly amount. They’ve gotten really creative with PMI.

Credit guidelines have loosened to allow people to get into homes for the first time with smaller down payments, and a little more flexible credit guidelines are currently in existence. Where there is not much change and where it is still pretty tight — and it should be — is debt-to-income ratio, which I would translate as your ability to repay. So, if you’re not putting a lot down and your credit’s good but not excellent and if you can demonstrate your ability to repay, you can get a loan.

Q: Will higher mortgage rates help bring down housing prices?

Strent: So there are two parts to this. In the short term, it might actually push them higher because those people that have been waiting to buy or been shopping for a while they may feel some pressure to get in before rates go up further. And then you have sort of an influx of offers that could, short term, push values up especially going into the fourth quarter where there’s less inventory that could exacerbate it even more.

Longer term, I don't think it's going to have that much pressure in terms of bringing down home prices because we're already short on inventory in general in our region. So I don't really think it's going to have that much of an impact.

Rates are only one factor in the decision to buy. Buying because rates are here or there is not the right [decision] if your plans are longer term, meaning you’re going to live there at least five years or more. The proper way to make a buying decision is to do a detailed rent-versus-own analysis and see what the cost of renting for you is over time versus the cost of homeownership. Every single one of your readers who is thinking about buying should have a rent-versus-own analysis specific to them, their income, their tax bracket, their plan, because there’s no broad answer for everybody.

Source: To view the original article click here

Posted by Jackie A. Graves, President on October 15th, 2018 7:43 PM
And used a VA loan, which has more restrictions than a conventional one.

Name: Jena and Mark Boomhower, both 36

City: Battle Ground, Wash.

Year of Home Purchase: 2018

Sale Price: $412,000

Home style: 2014 modern Craftsman single-family home

Profession: Jena is a medical technician; Mark is a supervisor for TSA

Mark and Jena Boomhower’s 1,400-square-foot starter home was just right when their daughters, Tanahleigh and Adalyn, were tots. But as the girls got older, Mark and Jena realized they needed a bigger house and yard. They wanted a two-story farther from the city, but there were a few challenges.

First, they had to figure out how to buy a house before selling their current house. Second challenge: Buying a house with a VA loan. VA loans offer competitive interest rates and don’t always require a down payment or private mortgage insurance. But VA loans limit what buyers are allowed to pay in closing costs, and sellers don’t necessarily have to pay them, either. Closing costs become a big part of the negotiation. Here’s their story.

When did you realize you needed more square footage?

Mark: When Tanahleigh started having her friends over. If they all wanted to watch TV in the living room, we had to go to another room. I would go hang out in the garage. Jena would hang out in the kitchen. We were like, “OK, we’re stepping on each other in this little house.”

So what’s the first thing you did to escape your exile in the garage?

Mark: I called our agent and told him our plan: that we wanted to buy a new house but not until we sold our current house. And that we wouldn’t sell our current house until we had one to move into because we didn’t want to spend weeks or months in a hotel with two kids and a dog. And we wanted to buy with a VA loan. Our agent said that our stipulations were tough but that it could be done.

You faced a seller’s market. Houses were going fast. What did you do first: shop for a new house or list your old one?

Mark: We started looking at houses. We looked at three or four. The last one we looked at, I don’t think Jena stopped smiling after we walked through the front door.

Jena: Yes. It was perfect.

How perfect was it?

Mark: So perfect that we put an offer on it, even though our old house wasn’t even listed.

This all sounds so simple. Did they take the offer?

Mark: No.

Jena: They countered at a higher price. They were asking $409,000. We offered $400,000 with $10,000 in closing costs. They came back at $418,000 with $10,000 in closing costs. They raised the price to cover closing costs.

Mark: We thought it was ridiculous.

Jena: We walked away.

Oh no, those VA loans and their non-allowable fees! It was your perfect house! 

Jena: We went through the whole weekend and couldn’t get the house off our minds.

Mark: We talked to our agent, Dale Chumbley. We talked with our lender. We realized we would have to pay a higher price for the house and less of the closing costs, or a lower price for the house and more of the closing costs.

Jena: We went with paying more for the house and less of the closing costs. So we made another offer: $410,000 + $7,000 closing costs. We wanted to walk away with the most bucks in our pocket, so we went with them paying more of the closing costs.

Did this offer go better?

Jena: Yes. They countered with $412,000 plus $7,000 in closing costs.

Mark: We weren’t going to lose the house over $2,000. Jena crunched the numbers, and it would add less than $50 a month to our payment. So we took the offer.

Great! You got the house! But you still had to sell your house. With the same agent, right?

Jena: Right. Our offer was contingent on us selling our old house in 30 days. And once the seller accepted our offer, we had 48 hours to get our house on the market.

Mark: So we had two days to get our house ready to sell. We picked up, cleaned up, threw things out. It was a tornado of excitement and anxiety. But we got it done and were ready for showings.

The clock was ticking. You had 30 days to sell. How did it go?

Mark: We weren’t getting many showings, even though it was a seller’s market. We had just two people come by the first week. We were in full-blown panic mode. We were worried because we could lose the new house while we waited for our house to sell. [Under regional MLS rules], if someone came by with a better offer for the new house during the 30 days, the seller could accept it. So we were worried.

Jena: After about two and a half weeks, we finally got an offer — a little under what we were asking, but they were buying with a VA loan, too, so we took a lower price and they paid closing costs the VA wouldn’t cover.

On what day of the 30-day period did your old house sell?

Jena: Day 24.

You did that with a week to spare!

Mark: Everything had to be perfect for this to work. It seemed like an ordeal to us. Our agent said it went really smooth. He said he’d never seen a transaction line up like ours did. We wouldn’t have stayed sane through it all without him telling us it would work out and telling us what we should do.

What’s your advice to a home buyer facing a similar situation?

Jena: Be patient.

Mark: Make sure you have a competent agent, one you can trust.

Jena: The agent we worked with, Dale, sold us our first house.

Mark: He became a family friend. He bought, I’m not kidding, hundreds of boxes of Girl Scout cookies from my daughter.

Jena: We totally trusted him and everything he said.


Source: To view the original article click here

Posted by Jackie A. Graves, President on October 14th, 2018 4:33 PM

First-time home-buyer advice: Ask a lot of questions.

Names: Anthony Tucker, 32, and Sammy Kallay, 31

City: Richardson, Texas, a suburb of Dallas

Year of home purchase: 2018

Sale price: $252,000

Home style: 46-year old ranch

Professions: He’s an IT business consultant; she’s a nurse.

When Anthony Tucker, and his wife, Sammy Kallay, had their first child, they knew it was time to buy their first house. Like so many new parents, they wanted the works for their son, Okiyan — safe neighborhood, good schools, nice yard. But their budget wasn’t limitless, and their knowledge of real estate was zilch.

They weren’t about to buy their first home without advice. So the Dallas-area couple started by finding the resources they needed for a crash course in home buying.

What’s the first thing you did once you decided it was time to be a homeowner?

Anthony: We didn’t know how much we needed to save. We didn’t understand the market. We didn’t understand the [real estate] terms. We needed some guidance. We talked to a friend, and they told us we should call the REALTOR®, Eloise Martin, who had helped them buy their first house.

What did your agent do to help you get on the path?

Anthony: She sent us to a lender who told us how much we needed to save and how much we would need to put down. He ran our credit scores and told me I needed to pay the balance on my Discover card to make my credit rating better. He explained escrow, points, and PMI.

How long did it take you to save enough for a down payment, and how did you do it?

Anthony: Three or four months. We had some money in the bank, but we needed more. It took a couple of months to get enough. We didn’t eat out. We didn’t buy so many things. I got a new job that paid more, so that helped.

OK, the money’s in the bank. You’re ready to shop. What was that like?

Anthony: I told [our agent] our budget and the neighborhoods we wanted to be in. She got us into a search that sent us notifications every time there was a house that had what we wanted. She would go with us to see the house and point out things to look for.

She would tell us if we needed contractors to check out plumbing or electrical things, and she had a network of contractors who could come to the house. That paid off when we were making the final decision.

How so?

Anthony: The house we ended up buying, [the sellers] had made an extension that made a problem with the foundation. We paid a structural engineer to look at it first, before we made an offer. He said in the long run, we might need to put up a supporting wall. What that did was give us leverage to come back to the seller and ask, “Can you lower the price?”

Did they lower the price?

Anthony: Yes. The price was $267,000. We negotiated with them. We paid $252,000. It was a worthy reduction because, according to the engineer, it will only cost us $3,000 to build that foundation wall.

How many houses did you look at before buying?

Sammy: Three. We bought the third house we looked at.

Good grief! That’s lightning fast. How long did you look?

Sammy: One weekend.

A weekend? Wow. Was it stressful to buy in a super-fast market like Dallas?

Sammy: I know! I was expecting it to be really stressful. But it went really great. [Our agent] sent us houses that fit what we wanted, so we didn’t look at houses that were not what we were looking for.

Anthony: We wanted to put in a bid on another house, but because there were so many bids on that house, we thought it better not to. We only made an offer on the one where we had a reason to ask for a lower price.

How did you know that third house was The One?

Sammy: As soon as I saw the picture, I said, “Oooh, this is a really nice house.” As soon as we came in and saw it, that was it. We knew that was the house. It would work with a family. It had a really nice flow.

What’s your favorite thing about your house?

Sammy: For me, it’s about my son. It’s open and has enough space for him to crawl around. I can see him wherever he is.

Anthony: It’s secure. I like being able to drive into the garage and close the door and go straight into the house. I like the fence around the yard. It’s a safe place for our son.

What’s your advice for first-time home buyers?

Anthony: Find a good agent. [Ours] was critical. Don’t be shy about asking questions.

Sammy: If you don’t know anything about the home-buying process, you need somebody who knows what they’re doing. [Our agent] made the process really, really easy. I don’t think we would have been able to do it ourselves.


Source: To view the original article click here

Posted by Jackie A. Graves, President on October 13th, 2018 9:30 PM

"House-rich, cash-poor" sounds like the title of a country song. After all, how can someone be rich and poor at the same time, unless they're fighting some poetic struggle in a twangy ballad? Well, it all comes down to how much you have tied up in your home, compared with how much you have in your pocket.

'House-rich, cash-poor' explained in real numbers

Being house-rich and cash-poor means you have more equity locked into the value of your home than you have in liquid assets.

Leon Goldfeld, co-founder of the New York–based real estate brokerage startup Yoreevo, breaks down how the house-rich, cash-poor scenario can play out:

  • You have a debt-to-income ratio higher than 40%, which means your homeownership expenses take up over 40% of your income. (As a general rule, it's best to not spend more than 30% of your income on living expenses.)
  • Your home equity makes up more than 80% of your total net worth.
  • You have less than six months in cash reserves to cover your total monthly expenses if the need arises.

Is it bad to be house-rich and cash-poor?

As a real estate professional in St. Petersburg, FL, Patricia Vosburgh advises her clients not to become house-rich and cash-poor due to her first-hand experience in the 1980s.

"I can tell you it's not a great place to be," she says. "The slightest financial hiccup in your life can become an issue."

For instance, if you run into large medical bills or a costly home repair, you may not have the money to pay for it. Beyond that, being house-rich and cash-poor can lead to a downturn in your quality of life.

"You're working constantly to hold onto the asset and not really enjoying the benefits of homeownership," says Vosburgh.

How common is it to be house-rich and cash-poor?

These days, it's a bit of a mixed bag: Thanks to a healthy economy, low unemployment, and stricter lending requirements put in place after 2008, many homeowners are house-rich, meaning they have good equity in their home. Yet many of these same homeowners are also cash-poor, lacking the reserves necessary to see them through life's ups and downs.

"First-time buyers are saving up lots of money for the down payment—usually between 5% to 20%," says Cedric Stewart, a residential and commercial sales consultant at Keller Williams in the Washington, DC, area. "But they often don't leave any money for the 'what if' fund, such as emergency home maintenance."

Another group vulnerable to becoming house-rich and cash-poor are buyers looking to trade up their current home.

"These buyers take the money from the sale of their current home and plunk it all down on the next one," explains Stewart. That's a risky move, he says, since it leaves you no financial wiggle room for whatever financial curveballs may come your way.

The bottom line: A buyer should never leave themselves cash-poor, says Ralph DiBugnara, vice president at Residential Home Funding.

"If it’s going to cost you every bit of savings just to acquire the house, you may not be ready for that specific home," he says.

How you can avoid it

Deeply understand your finances before you buy a home, recommends Goldfeld. For starters, try entering your income and debts into a mortgage calculator to figure out what price you can afford on a home. Speak to a lender to find out how large a home loan you qualify for, too.

These moves will help you figure out what your monthly expenses would be if you had to pay for that mortgage. Take note: Even if you qualify for a large mortgage, you don’t want to get yourself into a position where every little expense is difficult to pay for.

So make sure you have at least a year of whatever your recurring monthly payments would be in reserve and shoot for a debt-to-income ratio under 30%. Then set a reasonable budget for the purchase price of a home. Look for a healthy balance between investing in a new home and creating your ideal quality of life after the home is bought. (It's plain common sense to hold enough cash back to have a financial cushion in case of an emergency.)

Another option is to get a home warranty to cover any unexpected home expenses.

"I tell all my buyers to ask for one from the seller or pay for it themselves," says Vosburgh.

Source: To view the original article click here

Posted by Jackie A. Graves, President on October 12th, 2018 5:34 PM

The tightening of mortgage-lending standards since the financial crisis has made the goal of home ownership tougher for the average borrower. And despite their modest cost, it can be even harder to qualify for a mortgage for a manufactured home. Fewer banks are in the business of providing loans for manufactured homes – otherwise known as mobile homes – which are built off-site and affixed to a permanent chassis. As a result, would-be homeowners simply don’t have as many financing options.

Fortunately, those interested in a manufactured home have some options if they don’t meet the standard for a conventional mortgage. One alternative is a Federal Housing Administration loan, which can be used to cover the home itself, a suitable lot on which to build it or both.

With an FHA mortgage, the government insures a loan made to you by a private lender. So if you default on your payments, the lender has the assurance that Uncle Sam will reimburse it for all or part of its losses.

The good news is that FHA-approved mortgage providers are willing to take on borrowers who have a slightly higher risk profile. But there is a catch. Homeowners fund the insurance benefit by paying both an upfront premium and an annual premium on top of their normal loan amount, making these loans a bit more expensive than other loans. But if a government-insured loan is your only way of moving into a new home, the extra cost may be worth it. 

The Requirements   

Not every mobile home will meet the standards for an FHA loan. The home has to be built after June 15, 1976. So even if you modify an older structure to meet current regulations, you won’t be able to get a loan through the program.

Moreover, the residence must adhere to Model Manufactured Home Installation (MMHI) standards and comply with local and state guidelines. A red label on the exterior of each transportable section indicates that it meets MMHI requirements. The manufactured home floor space must be at least 400 square feet and be classified as real estate, meaning it has a permanent foundation. 

The government maintains certain standards relating to borrower eligibility as well. You must have sufficient money to make the down payment and prove that you have enough funds left over after other expenses to handle the monthly mortgage. Also, you must use the mobile home as your primary residence.

About FHA loans

Most mobile homes are sold through local retailers and dealers, which are typically good sources of referrals for both conventional and FHA mortgage providers.

As with other FHA mortgages, there are caps on the loan amount for manufactured homes. Currently, the most you can borrow is 93,000 for the home and lot combination. However, in some high-cost areas, you can borrow up to 85% of the cost the home and land. If you’re not sure whether your area falls into this category, call the U.S. Department of Housing and Urban Development Manufactured Housing Headquarters at (800) 927-2891.

The maximum loan duration is 20 years for a mobile home or a single-section home and lot combination and 15 years when financing just a lot. Mortgages that cover a multi-section manufactured home together with the lot can last up to 25 years.

Understanding Your Options

If you have questions about the FHA program, the Department of Housing and Urban Development operates a voice-assisted hotline that can refer you to local counseling organizations. These housing agencies can help you better understand your options. The 24-hour HUD clearinghouse can be reached at (800) 569-4287 or you can search online for a HUD housing counseling agency 

Keep in mind that the FHA isn’t your only option for government-insured loans. The Veterans Administration and the Department of Agriculture’s Rural Housing Service also provide mortgages to eligible borrowers. In some cases, these may represent a better path for those looking to buy a manufactured home, so it’s worth doing your research.

The Bottom Line

With low down payments and less stringent credit standards than other loan programs, an FHA mortgage can be an attractive choice for mobile home buyers. Just be ready to pay a little extra each month to enjoy those benefits.

Source: To view the original article click here


Posted by Jackie A. Graves, President on October 11th, 2018 9:58 AM

Do you dream of buying your own home, but stop short when faced with getting together the down payment? It's time to shift your mindset: You can do this.

First, it's important to know that 20% down is not required. In fact, the average down payment for first–time homebuyers in 2017 was 5%, and 10% for repeat buyers, according to the National Association of REALTORS®

Second, look to build your nest egg and reach your homebuying goal with these tips.

Explore Programs:

  • Reach out to a housing counselor or lender to ask them about state and local down payment assistance programs.

  • Visit the U.S. Department of Housing and Urban Development's directory of state, county, local, and municipal programs to find out what kind of help is available in your area.

  • Find out if you may be eligible for down payment assistance programs through the Down Payment Resource® tool

Save in Key Areas:

  • Consider downsizing to a less expensive apartment or renegotiating your current rental lease for a two– to three–year term at a fixed rate so you aren't seeing annual increases while you save. You are an asset to your landlord if you pay your bills on time and maintain the property. It's worth it to him or her to keep you in place.

  •  Pay your loans on time and in full. Zero interest and zero late fees mean more savings for you nest egg. Try to renegotiate any credit card, car loan, school loan balances to a lower interest rates that could help you pay off balances faster. Both will help improve your credit score.

  • Shop around to reduce major monthly expenses. Can you lower your cell phone package? Can you take public transit instead of buying that new car?

  • Identify key areas where you tend to shop big and shop medium instead. This isn't about becoming a monk, it's about controlling spending. Instead of paying for a gym membership, ride your bike, run or swim at the YMCA. Learn to love drip coffee instead of buying espresso.

  • When you receive infusions of money like your tax refund or cash gifts — sock it away in a CD or money market account to earn a bit more. Every little bit helps!

Keep Your Eyes on the Prize:

  • Review all accounts and finances regularly and squirrel away whatever you can to reach your goal. Also, track your savings progress — whether it's a hand–drawn temperature gauge on the refrigerator, or an app on your cell phone.

Learn more about buying a home at My Home by Freddie Mac®.

Source: To view the original article click here

Posted by Jackie A. Graves, President on October 10th, 2018 12:01 PM

What are some questions to ask a home inspector after he's finished the inspection? Because, let's face it, just staring at that hefty report highlighting every flaw in your future dream home can send many buyers into a full-blown panic!

Know the right questions to ask a home inspector afterward, though, and this can help put that report into perspective. Here are the big ones to hit.

'I don't understand [such and such], what does it mean?'

Just so you know what to expect, here's how it will go down: A day or two after the inspection, you should receive the inspector's report. It will be a detailed list of every flaw in the house, often along with pictures of some of the problem areas and more elaboration.

Hopefully you also attended the actual inspection and could ask questions then; if so, the report should contain no surprises. It should contain what you talked about at the inspection, with pictures and perhaps a bit more detail. If there's anything major you don't remember from the inspection in the report, don't be afraid to ask about it.

'Is this a major or a minor problem?'

Keep in mind, most problems in the house will likely be minor and not outright deal breakers. Still, you'll want your home inspector to help you separate the wheat from the chaff and point out any doozies. So ask him if there are any problems serious enough to keep you from moving forward with the house.

Keep in mind that ultimately it's up to you and your real estate agent to determine how to address any issues.

"The inspector can't tell you, 'Make sure the seller pays for this,' so be sure you understand what needs to be done," says Frank Lesh, executive director of the American Society of Home Inspectors.

'Should I call in another expert for a follow-up inspection?'

Expect to have to call in other experts at this point to look over major issues and assign a dollar figure to fixing them. If your inspector flags your electrical box as looking iffy, for example, you may need to have an electrician come take a look and tell you what exactly is wrong and what the cost would be to fix it. The same goes for any apparent problems with the heating or air conditioning, roof, or foundation. An HVAC repair person, roofer, or engineer will need to examine your house and provide a bid to repair the problem.

Why is this so important? This bid is what your real estate agent will take to the seller if you decide to ask for a concession instead of having the seller do the fix for you. Your inspector can't give you these figures, but he can probably give you a sense of whether it's necessary to call somebody in.

'Is there anything I'll need to do once I move in?'

Wait, you're still not done! It's easy to forget the inspector's report in the whirlwind of closing and moving, but there are almost always suggestions for things that need doing in the first two to three months of occupancy.

Lesh says he sometimes gets panicked calls from homeowners whose houses he inspected three months after they've moved in. Although he'd noted certain issues in his report, the buyers neglected the report entirely—and paid for it later.

"I had a couple call and tell me they had seepage in the basement," Lesh says. "I pulled up their report and asked if they'd reconnected the downspout extension like I recommended. Nope. Well, there's your problem!"

Everything you didn't ask the seller to fix? That's your to-do list. Isn't owning a home fun?

Source: To view the original article click here

Posted by Jackie A. Graves, President on October 9th, 2018 4:36 PM

So, you've locked in your mortgage rate at the perfect time and you're planning on putting 15% down on your dream home. You may even have a little money left over for updates.

Then you get your Loan Estimate; it shows your expected monthly principal and interest payments, but just like they say on late night infomercials: "But wait, there's more!"


In addition to principal and interest, your monthly mortgage payment may also include an escrow payment and private mortgage insurance (PMI) payment. So, what are these extra payments?

Escrow Payments: If your lender set up an escrow account for your mortgage, each month you'll make an escrow payment to cover your property taxes and homeowners insurance. Your lender will deposit this amount into your escrow account and will pay for both items on your behalf when they are due.

Private Mortgage Insurance: If you made a down payment of less than 20%, PMI will be part of your monthly mortgage payment. While the cost of PMI varies, you can expect to pay between $30 and $70 per month for every $100,000 borrowed. You'll have to pay PMI until you've built up more than 20% equity in your home.

While paying into an escrow account and PMI may initially cause sticker shock for first time borrowers, they are important components of the homebuying process for many owners. Escrow accounts give borrowers peace of mind that their taxes and insurance will be paid in full and on time. Regularly scheduled monthly escrow payments are also a good option for many homeowners because they eliminate the surprise of large annual or semi–annual payments when property taxes or insurance premiums are due.

PMI enables potential homeowners who may be unable to afford a 20% down payment to buy a home and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.

You don't necessarily have to pay escrow or PMI for the life of your loan. You may have the option to cancel your escrow payments to your lender once you have built up at least 20% equity in your home and are current on your payments. If you decide to go this route, just remember that you'll be responsible for paying your taxes and insurance in full and on time. And if you are current on your mortgage payments, PMI will automatically terminate on the date when your principal balance is scheduled to reach 78% of the original value of your home. You can also request that your lender cancel your PMI if you have made additional payments or if rising home values have increased your home equity to more than 20%.

The bottom line: Study your Loan Estimate carefully to make sure you understand all the costs involved in taking out a mortgage.

Source: To view the original article click here

Posted by Jackie A. Graves, President on October 8th, 2018 11:29 AM

What are some questions to ask a home inspector? If you're buying a house, you know that your home inspector will check it out and make sure it's in decent shape. So if you want to get to know your home beyond its pretty facade, you should pepper your inspector with questions—a whole lot of them, in fact!

But when you ask those questions is as important as what you ask. Namely, you should attend your home inspection and ask him right then and there. The reason: Rather than trying to decipher your inspector's (very technical) report, it's much easier for this pro to actually show you what's going on with the house.

To help you get this essential show-and-tell session rolling, here are a few questions to ask a home inspector that will help you size up a house yourself, and keep it in good condition for as long as you hang your hat there.


1. 'What does that mean?'

During the inspection, your inspector will go slowly through the entire house, checking everything to ensure there are no signs of a problem, says Frank Lesh, executive Director of the American Society of Home Inspectors. He'll point out things to you that aren't as they should be.

Don't be afraid to ask any questions about what he's telling you, and make sure you understand the issue and why it matters.

For example: If the inspector says something like, "Looks like you've got some rotten boards here," it's smart to ask him to explain what that means for the overall house—how difficult it is to repair, and how much it will cost.

Just keep in mind that your inspector can't tell you whether or not to buy the house, or how much you should ask the seller to fix (though your real estate agent should be able to help with that).

2. 'Is this a big deal or a minor issue?'

For most people, buying a house is the biggest purchase they'll ever make. It's normal to start feeling panicky when your inspector is telling you the house has a foundation problem, a roof in need of repair, or electrical that isn't up to code. Don't freak out—just ask the inspector whether he thinks the issue is a big deal. You'll be surprised to hear that most houses have similar issues and that they're not deal breakers, even if they sound major.

And if it is major? Well, that's why you're having the inspection done. You can address it with the seller or just walk away.

3. 'What's that water spot on the ceiling, and is it a problem?'

Don't be shy about pointing out things that look off to you and asking if they're OK. Odds are, if there's something weird, your inspector has noted it and is going to check it out thoroughly. For example, if there's a water spot on the ceiling, maybe he needs to check it from the floor above to know if it's an issue. If something is bothering you about the house, make sure to address it.

Ideally your inspector will ask you if there's anything you're specifically concerned about before he starts. Make sure to tell him if this is your first home, or if you're worried about the house's age, or anything at all that strikes you as a possible negative.

4. 'I've never owned a house with an HVAC/boiler/basement. How do I maintain this thing?'

Flaws aside, this is your golden opportunity to have an expert show you how to take care of your house.

"Inspectors are used to explaining basic things to people. If you have a question, ask it," says Lesh. "Don't expect your inspector to teach you how to build a clock, but we are happy to explain how things work."

5. 'What are your biggest concerns about the property?'

At the end of the inspection, the inspector should give you a broad-strokes summary of what he found. You'll get a written report later, but this is a great moment to get clarity on what the inspector thinks are the house's biggest issues, and whether or not they require further investigation.

Often, you'll need to call in another expert—a plumber, electrician, roofer, or HVAC professional—to take a look at anything the inspector flagged. You should walk away from inspection day with a mental punch list of things that need to be addressed by either the seller or another expert.

In some states, there's a limited amount of time for these negotiations to happen, so you and your agent may want to hit the ground running. Your official report will have more detail, but you should know what's on it by the time you leave the home that day.

Source: To view the original article click here

Posted by Jackie A. Graves, President on October 7th, 2018 11:31 AM

What is a recast mortgage? While it sounds more like a fishing trip than a financing tool, it's actually where you pay off a lump sum of your principal (that's the money you owe), then have your lender "recast" or reamortize the rest so you can lower your monthly payments.

Recast mortgages are rare, at least compared with the more typical way homeowners reduce their mortgage payments by refinancing. Nonetheless, it's well worth considering in certain circumstances.

Here's everything you need to know to decide whether a recast or refinance is right for you.

What is a recast mortgage?

To make the idea of a recast simpler, imagine your Aunt Susan has died and left you $10,000, or you get a bonus at work. Sure, you could put that money in a CD or other investment, or spring for a kitchen remodel. However, if lowering your monthly mortgage payments sounds far sweeter, then a recast is the way to go.

"Recasting your mortgage is a great option if you want to lower your monthly payments and have the funds to make a lump sum payment to your lender," says Randall Yates, founder and CEO of The Lenders Network.

The process of recasting is fairly simple: You head to your bank, fork over your money, and pay a small fee to recast your mortgage.

From there, your lender will use that money you've offered up to pay off your principal. It's as if you've made a bigger down payment on your loan. If, say, you'd originally put down $50,000 and borrowed $200,000 to pay for a $250,000 house, after a recast, you've now put down $60,000 and owe only $190,000 (actually a bit less, if you've been paying your mortgage for a while already).

So now that you owe less, your lender will recalculate monthly payments over the life of your loan. For instance, if you owe $200,000 on a 30-year fixed loan with 5% interest, your monthly payment is $1,397. Recast so you owe only $190,000, your monthly payment will dip to $1,343, giving you an extra $54 a month (crunch your own numbers and see how much you'll save with an online mortgage calculator).

Refinancing vs. recasting a mortgage: What's the difference?

When you refinance a mortgage, your loan is actually closed, then reopened as a new loan with new terms (length of loan and/or interest rate). Refinancing also comes with a bunch of steps, including a home appraisal and related fees. As a result, a refinance also takes time to finish (typically 30 to 45 days).

A recast, in contrast, is much simpler: Your loan life, terms, and interest rate remain as is; the only thing that changes is you get to make lower monthly payments.

"Mortgage recasting is a much simpler process than refinancing," says Yates. "There is no income verification or credit check needed. The entire recasting process can be completed in less than 30 days."

A recast is also different from merely sending in a lump sum to prepay your mortgage early. In those cases, your monthly payments remain the same. You will just finish off paying your mortgage earlier.

Requirements for a recast mortgage

Mortgage recasting is not available to all. Here are a few requirements for a recast:

  • You must have a conventional loan. "Government-backed loans such as FHA or VA loans are not eligible for recasting," says Yates.
  • Your bank must offer recasting. Most larger banks like Wells Fargo or Bank of America offer a recast, but smaller local banks or credit unions may not offer the option.
  • You must have enough money. Most lenders require a minimum $5,000 payment to recast a loan. As such, recasting can be a good option only with large lump sums, rather than smaller amounts arriving via paychecks if, say, you got a raise at work.

Recast or refinance? How to decide

If you are eligible for a recast, there are still some questions you should ask to determine whether a recast or refinance is right for you:

  • The cost: With a refinance, you are looking at a whole lot of fees. These include an appraisal fee of around $300 to $500 and closing costsbetween $1,800 and $4,000 depending on your credit score. If you're depositing $10,000, refinance fees could take upward of $4,500, leaving only $5,500 to be applied to your loan.
  • Interest rates: "If present interest rates are lower than when the loan was opened, it often makes sense to refinance," says Matt Hackett, operations manager of EquityNow. However, if present interest rates are higher, then a recast is more favorable since you get to keep your original lower rate. "In an environment where rates are on the rise for the first time in several years, mortgage recasts will most likely become a more popular option," says Tammi Lindley, senior loan officer at the Lindley Team at Mortgage Express.
  • How long you plan to live there: If you sell your house within five years, a refinance may not be practical and a recast may be a better option.

Pros of a recast mortgage

  • Reduces monthly payments and principal
  • Easier than a refinance
  • Low fees
  • Less paperwork
  • No appraisal required
  • You keep your original loan and interest rate
  • No credit check
  • You don't have to stay in home a certain amount of time to recoup refinance fees
  • You can do it more than once, whenever you receive lump sums above $5,000

Cons of a recast mortgage

  • Offered only by mostly larger banks
  • Available on loans from institutions such as Fannie Mae or Freddie Mac (not FHA or VA)
  • Doesnt reduce the interest rate
  • Doesnt shorten overall mortgage term
  • Liquid cash reduced and tied up in equity

Source: To view the original article click here

Posted by Jackie A. Graves, President on October 6th, 2018 1:42 PM


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