Home Buying......Part Deux

There are a few components that need to be thought about when looking at buying a home. These components could effect when you want to make an offer and even when you want to close on a home.


Do you have a lease agreement or a house to sell?

If you have a lease agreement it is important to check when it ends and if there is a buy out clause. Otherwise you could get stuck with an additional payment that you had not counted on. The mortgage company could count this payment against you if you bought a home while still on a lease. Blowing it off would not be a good idea either as it could end up as a collection account against you which would affect your credit and potentially the ability to obtain further credit.


When should I get pre-approved?

There really is no right answer for this but to keep it simple...do it when you decide you want to buy a new home. This way you can sit with the loan officer and see what the constraints may or may not be. You might even be able to formulate a few different options for buying. If for some reason it is determined that now is not the time, a game plan can be designed so you can plan for it in the future.


When should I start looking?

Most agents would suggest that you be pre-approved before you start to look. This way you are looking for homes that are in your range. As for when to look, I personally would start looking about 120 days before I wanted to close and move in on a property.


When do I make an offer?

Once you find that house that you want, you and your agent will sit down and focus in on making an offer on the home. The offer will be made on your constraints and of course the price, condition and listing time of the home. Many think to low ball a home. While this periodically cal work it is not the best advice to try and take with you. With home prices as low as they are right now the amount of time a house has been on the market will be a major factor on what you and your agent will determine to offer for the home. If there are multiple offers being presented your agent may suggest a few things differently then if you were the only offer. Being pre-approved will give you an advantage. be aware that how quickly you can close or if you are asking for seller concessions can play a factor on an offer being accepted. Be aware though that seller concessions are very common at the present time.


What is Prequalification?

Prequalification is simply a rough estimate of how much home you can afford.


What is Pre-Approval?

A pre-approval involves a formal application process and provides you with a formal commitment and ease of mind on how much home you can afford and what interest rate. A pre-approval can in many circumstances take a matter of minutes. The more complex the file, the more time it might take


So many different pieces to this entire puzzle that it will take a while to get it all out there....plus I get questions sent to me and ideas for topics that I need to hit along the way. Make sure to follow or like via google or facebook so you get up to date info.

Big news today is the FOMC meeting as they announced today that they see some signs of an improving economy but will continue with the present plan that they have in plan for stimulating the economy. They are prepared to change and adjust accordingly as they see signs that deem that they need to.

The Process of Home Buying.....Part 1

I thought that it would be good to talk a little more about Home Buying.....especially since things have change so much. There is a lot of information to cover so I will do it over a few different blogs.

Like I said previously; anything that you have heard about buying a home or even encountered in buying a home....forget it...the rules have changed significantly and each situation is different.

The first thing I will do is just go over some FEARS and FACTS that many may have.

Fear: I can't afford to buy a home right now.
Fact: Actually you can't afford not to buy a home right now. Home prices are at lows as are interest rates making a home that much more affordable.

Fear: I should wait until the real estate market gets better.
Fact: There is never a wrong time to buy the right home. For first time buyers, those wishing to purchase a second home or real estate investors...it doesn't get much better then now. For move up buyers you may not get what you want for the home you want to sell but your dream house is now much more affordable.

Fear: I don't have the money for the down payment.
Fact: There are a variety of way to afford the costs of a new home.

Fear: I cant afford to buy my dream home.
Fact: The best way a first time buyer will get to their dream home is to buy their first home. But as I have stated with prices and rates where they are at it could be possible now.

Quick Facts
Average net worth of renters = $4000
Average net worth of home owners = $184,000
Average annual appreciation is 5-6%
A home is a pride of ownership because it is yours
A home is where your wealth can be


Rates finished last week on a good note and we are heading in to our spring market. Typically after the Super Bowl is when things pick up for our local market but it never hurts to get a head start. Make sure you know what you can do versus what you want to do. The constraint table has changed and it is important to get the correct information and pre-approved so you can buy with ease.

Again, please give me comments or email me if you have something you want addressed and of course if you follow this or like it on face book it will help get the word out for others.

Have a great week.

Should I stay or should I go...Short Sales

This short work week has me totally goofed up. And I believe next week is one as well..at least for the schools. Maybe we should all go back to school and get more time off. Can you imagine having all that time off like we did back then..what would we do with all that free time?

So this housing market free fall has taken its toll on many and for a few different reasons. Lets start with the consumer that got some whacky loan program and knew about what they were getting in to (yes they do exist) or the consumer that did not know what they were getting in to as well. Then of course because of the economy there are those that have lost income/jobs and the most common is just the consumer that as a result has lost equity in their home.

Most likely all are experiencing the lost equity scenario but to what extent is the difference that will be forever in effect going forward. As a result foreclosures are at a high and many are at a loss of what to do. Some people just because they have lost equity in their home have stopped making payments and allowed their homes to go into foreclosure even though they can make the payments. This is one of things that is killing us for home values. So your house has lost value....welcome to the club but you can make the payments so do so please.

Lets focus on a few choices that can be made. Your first choice if you are trying to lower your payment is to refinance. For those that are upside down in equity they may be eligible for a refinance program designed for such loans. Any loan officer can check to see if they are eligible or not. If not another option is to contact the servicer of your loan and see what you can do about a modification. It can be a real pain to do this but it could easily be worth it. I did this myself and got a rate of 2% on my mortgage. If you attempt a modification you need to stay on top of the servicer and get things in timely. It took me over a year to get this done because they have so many attempting to do so.

You really want to avoid foreclosure and with the tightening of guidelines it is even harder to buy a home after one then it was a few years back. While it is not the best choice a short sale is a much better option. With a short sale you are negotiating with the lender to sell your home for $X in hopes that they will write off the rest. It is a complicated process but is the better option. While lenders are looking at this much like a foreclosure it is not as tough on your credit and in some cases you can buy a home sooner then with a foreclosure.

It goes without saying that you want to do what makes the most sense for you and that will vary based on a persons circumstances. The best thing to do though if you are in a mortgage bind is to talk to a loan officer and see if they have any suggestions. If they are good at what they do and are professional they can usually point you down the path that will benefit you the best.

Again....feel free to pass this along....ask me questions or give me comments as I really aim to try and make this blog a useful tool for all.

Go Pack!!!!!

Expectations = Simple-Fast-Hassle Free or at least Understandable

So many of us are coming off of a 3 day weekend and getting back in to the grind of it all. Why is it always so hard to get going again after having a long weekend? It really doesn't matter because we have to get back at it and do what ever it is that we do.

I have been doing this a long time...way too long when I think about it sometimes but none the less I do something that I enjoy and that provides a service to many. When I first started in the business getting a mortgage loan was worse then getting a physical. It was more intrusive and the questions that we asked were worse then any probing one might take by a doctor. By the time we were done it seemed like we knew every intimate detail about a customer. But with the privacy act this information was and still is privileged information for the purposes of obtaining a mortgage. What was really odd is that in many cases because of what we had to do we formed friendships with many of our customers and as a result if we handled them correctly they were a great source of referrals. Much like a doctor our desk side manner dictated how the process and the end result would go and if we would deal with the customer again.

Well then of course all the new fangled loan programs started to come out and it got easier and easier for a customer to not only do a loan application but have less information required to get a loan and the process became quicker and easier then before. It was so easy in fact that now look at how many mortgage companies are gone and how many homes have lost value and how many have lost their homes.

Now I am not saying that because it got easier that this is why this all happened...it was all the funky new products that required no income or no assets and of course nothing for a down payment. This resulted in a lot of greed and this resulted in the mess. There were still many good loans made during this period of time but we lost track of financial responsibility to the consumer.

With this period of time loan officers lost their desk side manner. They forgot what to ask for and how to ask for it and explain why it was needed. The customer was in total control because the loan process was so simple.

I had always prided myself in the thought of simple-fast and hassle free for the loan process; not just for the customer but for the loan officer/company as well. It has become much harder to do this now then it ever was. But if the expectations are laid out for the customer and things can be explained then the process can still be smooth. Unfortunately many customers still remember how easy it was and have a hard time with how it has become again.

That is what it comes down to these days....expectations. A good loan officer is going to lay out what is needed in detail up front and what to expect as the process flows. The hard part is that no matter how good the loan officer is they can not 100% guarantee that what they ask for will be all that is needed or that the process will flow exactly as the expectations that they lay out. Why you might ask? Because every day or business is changing and new things are added or taken away. The secondary market and the investors that buy the loans are constantly changing the rules and lenders are constantly trying to keep up with them. Add to that each individual lenders level of risk and they may have some of their own quirks. This is not done to make the consumers life miserable but to prevent further melt down for the real estate and mortgage industry. We will all admit that sometimes what makes total sense...may not matter.

What is happening now is that when the loans are sold to the secondary market....the investors are looking for reasons to not buy the loans. 5 years ago they hardly looked at them but now it is as simple as a middle initial for a customer is missing. Mortgage companies are not looking to buy back their loans as they make their money when they sell them.

So what this comes down to...is that the mortgage industry and the loan officer are just doing their jobs...the question is how well they do it is what will make the difference of your experience. he other piece is that you have to forget how that loan process went before and how easy it was. Or for the person that never had a loan before...forget what you have heard. Like I said previously every customer/loan situation is different and what is needed can and will be different.

Again the idea that I am trying to do here is to give information to those that seek it and if you have comments or questions...please do not hesitate to toss them out there as I will read them and answer them if need be. Right now I am trying to figure out how to put an actual facebook follow button on this page or else find a new way to blog that allows me to do so. So for now I will continue to email this out and post it to my facebook page. For those of you that have a gmail account you can follow via the google follow feature.

My hope is that I am able to answer some questions and shed some light on a few things...and every once in a while I might ramble about something totally useless to all of us.

Have a great week...

Who the heck is Phyllis and why is this company calling me?

So my wife says to me..."Oh I see you are blogging like Phyllis"...who the heck is Phyllis? She then tells me she is a character on a soap opera that she watches and that the lady blogs. But what she blogs is gossip and mean things about people in the town that she lives in. Oh great so I get compared to a lady soap opera character...just wonderful. At least I am not a gossip nor am I being mean about anyone.....yet.

Did you know that whenever you inquire in to credit other companies know that you did this? Many companies buy lists to find potential customers and they do this by buying lists from various sources including credit reporting agencies.

As a result they can see your recent inquiry activity when you are looking for credit. Typically when you apply for a mortgage is the big one where companies pull your name. This is why so many times a customer will receive solicitation calls from other company's when they have inquired in to or applied for a mortgage loan and other credit.

Speaking of inquires; they are one thing that many do not think of that can hurt your credit. The more inquiries you have in to acquiring credit the harder your credit score can get hit. So when you are walking through the mall don't stop and apply for a credit card just to get some free knives.

It has been a good week for interest rates as they have held steady and even moved lower in  many cases. There was a lot of economic data out this week that was friendly for interest rates. Bottom line is the economy is trying to recover but at a very slow and sluggish pace at the moment. Until we start seeing job creations out there it will be a tough haul to get things right side up again.

We have another round of playoff games this weekends and it will be interesting to see who prevails. The one game that this guy will be tuned into will be the Packer/Falcon game on Saturday night. I had to chuckle last night as a friend of mine is having a dinner party with sushi during the game. Doesn't he know it is to be wings and chips? Well lets hope the Packers win so I can start my week off right....have a great weekend everyone.

Why are my Closing Costs so high?

Well today is the big 1/11/11 and so far so good. I am not one of those that gets superstitious about things but I know that many are excited about the date thing today. What significance does it hold?

Over the years the one question that I hear over and over is "Why are my closing costs so high?" It is a very good question and actually the answer is simple.

First off remember that there are 3 main sets of numbers when buying a home; down payment, closing costs and pre-paids. Obviously when refinancing you would not have the down payment piece.

Closing costs  usually are fees that are made up of and charged by the lender, state or county, title company and 3rd party services such as the appraisal. Many of the costs are set numbers and are the same regardless of how large a loan you get. So for lower loan amounts the closing costs in comparison will seem high. In Minnesota for example, the origination fee, title insurance and county mortgage registration fees are all tied to the loan amount while the rest of the costs are set numbers or for the amount of service rendered/needed. The lender only charges a small amount of these closing costs for their services.

So when we want to do a no cost or low cost loan the interest rates can be higher for the lower loan amounts because of the set fees that do not change. This typically will be the case for a loan under $180,000.

Then you have the pre-paid items which many confuse as part of the closing costs for the loan. THESE ARE NOT CLOSING COSTS. These numbers typically will consist of per diem for the number of days that you will hold the mortgage for that given month and then setting up your escrow account. Your escrow account will normally consist of taxes and insurance that you pre pay for before they are due. The numbers that are collected for this will depend on what month that you close in. The mortgage company will collect enough to make sure that when the taxes and insurance come due again that there is enough money there to pay them and even cushion the account a couple months per lending guidelines. Since every month you are paying part of your payment towards taxes or insurance you are pre-paying for the bill that will come due. Hence the word pre-paids.

It can seem pretty basic but it can also seem very confusing and overwhelming. Make sure that you have your loan officer explain it to you so you do understand. As a matter of fact anything that may not be clear to you...ask them to explain it! One of the problems that we have at our end is that we do this every day and while it all makes sense to us (most of it) it may not make sense to the customer and they have the right to ask for explanations.

Adding even more confusion to this would be the new good faith estimate that the government created a year ago. This thing is so confusing even those of us that use it have to scratch our heads. I will talk about this topic in a later blog.

There are some truly amazing things out there that many of us can not explain and a friend of mine posted this link on facebook.....wow was all I could say;

http://www.komonews.com/sports/heroes/111892554.html

Have a Great Week!

HVCC and the Big Bad Appraiser

Well the week is coming to an end with data that is friendly for rates. All though the unemployment rate dropped today there were less jobs created for the report then expected. What does this mean? Most likely people lost their unemployment benefits and fell of the reporting cycle. As we are coming out of the Xmas holiday season I would expect to see the unemployment rate go back up as seasonal employment will have dropped off.

The Home Value Code of Conduct or HVCC as it is more commonly called in the business was created to take undue influence our of the appraisal process.

Back in the day we used to have relationships with our appraisers much like we did with relator's and we would order our appraisal's through people we got along with and gave us good service.

Unfortunately some mortgage folks and appraiser's took this a little too far by having appraisals on homes that should never have happened. They over looked issues and increased/inflated values on the homes that were part of the cause for our rapid increase in home values. Add to this the abundance of multiple offers on houses and it created a valuation frenzy.

Of course the no income, no asset, no job loans were and aid to this. I just want to know who the heck came up with those stupid loan programs?

With all of this going on there were a lot of appraisers that were really busy and a lot of new ones coming in that could not establish themselves and get business.

Then the valuation and mortgage blow up comes in to play and HVCC pops up. Now the premise of this is good but unfortunately appraiser's are all gun shy now as they want nothing to come back to haunt them and they want to make sure they cam get a steady check.

The idea now is that mortgage companies have to order their appraisal's through an appraisal management company. The management company assigns the appraisals on a random basis to an appraiser to complete. The mortgage company can not have any communication with the appraiser themselves. On a purchase the appraiser knows the sales price of the home but on a refinance they have no clue what value the customer is looking for.

Once the appraisal is complete it is sent back to the management company for review and then sent to the mortgage company and the customer. Now what we are seeing is that on a purchase where the appraiser knows the sales price they are hitting the value at least 99.999999% of the time but on a refinance they are hitting the values maybe 50% of the time.

So when the value is not hit you can dispute it with data and such but do you really think that the appraiser is going to vary their original appraisal? By doing this they would be admitting they were wrong on what they did and of course that causes concern about their ability at what they do. Heck they want to keep their jobs and get the appraisal assignments as they get paid regardless of what the value comes in at. Now the unique thing here is that because of the new management companies there are many appraisers that were not very busy in the past that suddenly are. So do they want to sacrifice the income they are making? Of course not.

So what has happened in an effort to keep appraisal's and appraisers on the up and up is that the consumer is suffering in many cases because of the new process. When the market value of a home is higher then the appraisal....we need to wonder who is right and who is wrong. When the appraiser does not know the value they may be taking the road of getting the easiest comps in the area that make sense without really looking at the differences or if there are better comps out there to compare the subject property to.

Well the weekend is ahead of us and I am sure that many of you have big plans. I get to drive with my son to his college apartment and shut all the storm windows as for some reason he does not know how to do that. And if he doesn't do it the management company will charge him $50 to do it. Seriously??? He is home on break and has to do that...just shows how the world is going.

Seriously though I could really use the help with you following this or liking it on Facebook so I can get it going more.......you are influential for me and I could use your help.

Ave a super weekend and I welcome questions so don't be afraid to ask!!

So, you want to get a mortgage...

So, you want to get a mortgage and you are a first time buyer. I am sure that everyone and their brother is giving you advice on what to do and what to expect.
Perhaps you are a seasoned home owner and are looking to refinance or buy a new or different property and remember all what you went through the last time

Well.....forget anything that anyone is telling you and forget what it was like the last time as the mortgage world has changed and is continuing to change!

First off, no 2 loan situation are alike so whatever one person goes through will not be the same as someone else. This can be affected by a variety of things including but not limited to; credit, debt, income, assets, job history and more.

Next the industry has changed so much that what a consumer may have done 3 months or even 3 years ago will be different today and even more different tomorrow. The landscape of mortgage lending has and is changing continuously and where it is headed is any ones guess.

Now toss in a few new things like HVCC which is how appraisals are handled or the new disclosure requirements and you add even more confusion and frustration for everyone. The key here for the consumer is dealing with someone that will actually explain to you what to expect or what is happening as you are going through the mortgage process.

Getting a mortgage these days is like getting a physical. Hopefully your loan officer explains everything to you as to the reasoning and expectations so that there are no surprises and you come out with a clean approval.

It is very important to ask questions if you don't understand what is happening, being told to you or given to you to read. No question is a dumb question and you have the right to have the answers you need as you are paying for the service.

For those that have not seen this yet...here is a link to potentially get your new year off on the right foot;
http://education.yahoo.net/articles/find_work-life_balance.htm?kid=1C2S5

How many of you have already failed at your resolutions for the new year?

Make sure that from a fitness standpoint that you make sure you are financially fit as well. If you have a mortgage...make sure it is the right one for you.

Last night I heard my youngest daughter ask her older sister if she wanted to watch The Notebook tonight together...and the older sister said no. The funny thing is by this time next year she will probably say yes as she will have been away to college and will actually miss her little sister. Our son was the same way and I see him so much more appreciative of his sisters when he is home from college then he was before. Don't let what you can do today slip you by as you may not have that chance again.