Great article from Bill Nickerson
As much as things change in the mortgage industry, many things stay the same. If you are applying for a Home Loan with less than 20% down, did you know that you can still receive gift funds from several different sources? Did you know the seller can give up to 6% of the sales price to the buyer to be applied towards closing costs? It can never hurt to ask your family, the sellers as well as your employer when purchasing a home.
As each mortgage program comes with its own set of guidelines, Gift funds to be used towards the purchase of a home are allowed from a family member, domestic partner, borrower’s employer, a charitable organization, governmental agency, or public entity that has a program to provide home ownership assistance to low and moderate income families or first time homebuyers. In some cases, a close friend with a clearly defined and documented interest in the borrower. A gift letter is required. Transfer of the gift funds must be documented. The file must document that the gift funds were from an acceptable source and were indeed the donor’s own funds.
When you submit an offer to purchase a home, it is common to ask if the seller will give a credit back to be applied to closing costs. Depending upon the specific type of mortgage product you apply for, the sellers can give up to 6% of the sales price toward actual closing costs, prepaid expenses, discount points and other financing concessions. Also included in seller contributions are interest rate buy downs and payment of Up Front Mortgage Insurance Premium (UFMIP). Each dollar exceeding the 6% must be treated as an inducement to purchase. In other words, if any monies are left over after paying the closing costs and pre-paid items, they must be returned to the seller. A buyer can not walk away from the Closing table with extra funds.
I have included a printable flyer that shows you the amounts that are allowable as seller concessions to be used for closing costs.
If you have any questions about Gift Funds or Seller Concessions, feel free to call or email me anytime. I can be reached at 978-273-3227 or email me at firstname.lastname@example.org
Credit scores play a big role in determining whether you’ll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:
Check for errors in your credit report.
Thanks to an act of Congress, you can download one free credit report each year at annualcreditreport.com. If you find any errors, correct them immediately.
Pay down credit card bills.
If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.
Don’t charge your credit cards to the max.
Pay down as much as you can every month.
Wait 12 months after credit difficulties to apply for a mortgage.
You’re penalized less severely for problems after a year.
Don’t order items for your new home on credit.
Wait until after your home loan is approved to charge appliances and furniture, as that will add to your debt.
Don’t open new credit card accounts.
If you’re applying for a mortgage, having too much available credit can lower your score.
Shop for mortgage rates all at once.
Having too many credit applications can lower your score. However, multiple inquiries about your credit score from the same type of lender are counted as one if submitted over a short period of time.
Avoid finance companies.
Even if you pay off their loan on time, the interest is high and it may be considered a sign of poor credit management.
If you’ve been sitting on the fence about selling your home, it might just be time to hop off. Now. To put it in other terms: 2017 is poised to be the year of the home seller, real estate experts say. So what are you waiting for?
“Sellers have been in the driver’s seat for the last two years, but this year is shaping up to be even better for several reasons,” says Jonathan Smoke, chief economist of realtor.com®. “Nothing is bad for sellers today.”
A combination of factors is coming together to make 2017 a prime seller’s market for most of the nation. Here’s what’s driving it:
Reason No. 1: Mortgage rates are still low
It’s all about rates, baby. Low mortgage rates translate to lower monthly costs. Lower costs entice buyers, which is good for sellers.
Although mortgage rates have been ticking up since mid-October to slightly over 4%, the rates for a 30-year fixed mortgage—the most popular home loan—are still hovering near 30-year lows. For now.
“We expect them to hold at this (4%) level for a while and continue to adjust up,” says Danielle Hale, managing director of housing research for the National Association of Realtors®. “Mortgage rates rarely move in a straight line. They could be in the 4.6% to 4.8% range by the end of the year.”
What does that have to do with home sellers? Well, potential buyers who are armed with that knowledge might hustle to close on a home before a rate hike.
What if you’re nowhere near ready to put your house on the market? That’s OK. Even if rates nudge up by the end of 2017, they’re still expected to be low enough to seduce buyers. The tipping point is when rates reach 5%, experts say. That’s when they could put the brakes on the robust real estate market.
“If they go above 5%, we’re going to see home prices come down,” says Trevor Levin, a real estate agent with Nourmand & Associates in Los Angeles.
Reason No. 2: Inventory is shrinking
Remember in Econ 101, when you learned that low supply and high demand lead to rising prices? The same is true—in spades—for residential real estate. When inventory shrinks, available homes become more valuable. As Martha Stewart would say, that’s a good thing for sellers.
Let’s put it in perspective: In 2007, just before the housing crash, existing home inventory peaked at 4.04 million homes for sale, according to NAR data. Fast-forward to November 2016: There were only 1.85 million homes for sale, 9.3% lower than the year before—and a whopping 54% lower than the 2007 peak.
“Quite simply, sellers this year have the least competition,” Smoke says.
And get this: Not only are there fewer homes for sale, but the time those homes have spent on the market has decreased year over year as well. If priced correctly, the typical home should move quickly, Smoke says. And that’s another boon for sellers.
“Many potential sellers don’t want to think about having to prep a home for showings and deal with an indefinite period of having to keep things in perfect shape,” he says. “Fast-moving inventory limits that pain.”
Reason No. 3: Home prices are rising
Lower inventory and greater demand have pushed up home prices. The median existing-home price in November 2016 was $234,900, up 6.8% from November 2015, when it was $220,000, according to the NAR. And that’s no fluke. That was the 57th consecutive month of year-over-year gains.
Higher prices particularly benefit the seller whose property value plunged during the recession, sometimes to less than he owed. Thanks to rising prices, many homeowners whose property was underwater can now sell without suffering a big loss.
“2017 will be a rare ‘balanced market’ for buyers, because even though mortgage rates are edging up, many sellers have recovered enough equity to be able to afford to sell,” says Colby Sambrotto, president and CEO of USRealty.com.
Reason No. 4: Job markets are strengthening
As unemployment decreases and wages (finally) increase, consumer confidence will climb. Increased confidence will spur buyers to jump into the market—which is, you guessed it—more good news for sellers.
These pieces of the puzzle create a “virtuous cycle,” Smoke says. It’s not a term he coined, but it’s one he hasn’t had a chance to use in many years.
“These things are all connected,” Smoke says. “If people are confident, they’re more likely to buy big-ticket items like houses and cars. And then they spend more money on other things. It reinforces the economy, creating a virtuous cycle.”
The only ‘bad’ news for sellers
If you sell your home today, you mostly likely will buy another. Then, all the economic factors that worked in your favor as a seller will work against you as a buyer.
Sellers have a few options. You can rent for a while, and hope that prices come down in the future. But whatever you save on the price of a house you could surrender when mortgage rates climb to 6%—as predicted for 2019 and 2020, Smoke says.
The take-home lesson: Don’t wait, because mortgage rates won’t.
“There are opportunities for a seller-turned-buyer who wants to downsize in this market,” Smoke says. “You can lock in financing rates that you’ll never see again, and very likely make the trade-off work.”
Even a first-time homebuyer can become an informed shopper, i.e. someone who understands the ins and outs of the housing market.
In fact, some of the best ways to become informed as you move along the homebuying process include:
1. Determine How Much Money You’ll Need. How much money do you have to spend on a home? Find out by getting pre-approved for a mortgage and establishing a homebuying budget.
Pre-approval for a mortgage may help you speed up your journey from homebuyer to homeowner.
And with the right homebuying budget, you’ll be able to narrow your home search to residences that fall within a set price range. Plus, you’ll be able to avoid the dangers associated with overspending for a home, along with the risk of falling behind on mortgage payments down the line.
In addition, try to determine how much you’ll need to cover the down payment, closing costs and other fees you may encounter during the homebuying process. By doing so, you’ll be prepared to manage your expenses and ensure you have enough money to purchase your dream home.
2. Evaluate a Wide Range of Houses. Although you might fall in love with the first house you view, it is important to keep in mind that the real estate market is filled with a variety of exceptional residences. Therefore, if you spend some time attending open houses and home showings, you may be better equipped to find the right home quickly.
For homebuyers, it usually is a great idea to create a list of must-haves for your house. This list will allow you to search for residences that fit specific criteria.
Furthermore, don’t forget that an informed homebuyer frequently asks questions as he or she assesses a residence. There is no such thing as a bad question to ask during an open house or home showing, and ensuring all of your concerns and queries are addressed is paramount in your quest to find the right home at the right price.
3. Collaborate with a Friendly, Experienced Real Estate Agent. When it comes to finding your dream home, who says you need to navigate the homebuying process alone? Instead, find a friendly, experienced real estate agent to guide you along the homebuying journey, and you can reap the benefits provided by a housing market expert.
Your real estate agent will serve as a key contributor in your efforts to discover your ideal home quickly and effortlessly and will help take guesswork out of the homebuying process, too.
Moreover, your real estate agent will be able to set up home showings, keep you up to date about new real estate listings in various cities and towns and provide comprehensive insights and resources into the housing market. As a result, this professional will make it simple for you to move along the homebuying process and guarantee you’re satisfied with the end results.
Be an informed homebuyer – use the aforementioned tips, and you should have no trouble purchasing your dream residence.
We’ve all heard the expression ‘let the buyer beware’, and no where is that more true than in the purchase of a home. Whether purchasing a brand new home in the suburbs, a downtown high-rise condo, or a 100 year-old lake side cottage, a home inspection by a trained professional will not only provide a clear picture of the condition of the property, but could save you thousands of dollars.
What is a Home Inspection?
A home inspection is a detailed examination of a residence and the immediate exterior area that identifies both health and safety concerns and system or structural problems that might require repair or replacement. The report is usually broken down into categories such as electrical, plumbing, roof, HVAC, foundation, etc. Within each category, the items inspected are identified and commented on by the inspector. So for instance, when examining a furnace, the inspector may note that it is only 10 years old and functioning properly, but he might also note that it should be serviced. He would then make the recommendation in his report that servicing take place.
It should be noted that most home inspectors are generalists, and often suggest further evaluation by a licensed contractor in a specialized area. Most home inspectors do not climb up on your roof to inspect every valley, nor do they test wells or attempt to explain cracked walls. Their job is to report any anomaly that might, in the worst case, be a symptom of a larger problem, such as water stains in the attic.
The length of time required to complete the inspection will vary according to the type of home, the size, and the age. These factors will also help determine the price. A 20 -30 year old, 2000 square ft. home with three bedrooms, two baths will probably take about 2.5 – 3 hours to inspect and condo inspections are generally completed in a shorter inspection period. If ordering a home inspection as a buyer it is recommended that you be present, along with your agent, so that the most important findings can be discussed with the inspector. It is also somewhat easier if the seller is not present and all rooms are accessible.
How to Choose a Home Inspector
Many home inspectors come from some type of background in the trades, or are licensed contractors. It is also desirable that they have specific training from an accredited inspection training program and are members of one of the professional inspection organizations. In Massachusetts licensing is required.
It is also a good idea to inquire about the format of the report itself. For any item that an inspector comments on, it is useful if there is an accompanying photo included in the report that specifically identifies the problem. Without a photo, you may be scratching your head a month from now asking, ”Which pipe is he referring to?” Hand written reports are becoming a thing of the past. A well organized report created through a computer generated software program that is saved as a pdf is the new industry standard. This is a report that is legible and can be easily saved for future reference or sent to the listing agent or a contractor for comments or quotes.
If you’re unsure about where to begin your search for an inspector, ask your agent for one or more recommendations.
What Does the Seller Have to Repair?
Unless you are purchasing a brand new home with a builder’s warranty, the answer is, not much. If you are purchasing with a VA or FHA loan, there may be some items that your lender will require to be in working order prior to close of escrow. That being said however, it isn’t always the responsibility of the seller to fix those items and repairs may be a matter of negotiation.
One thing to keep in mind when you first see the inspection report is that no home is perfect, especially a re-sale home, and over time the number of flaws generally increases. The inspection report is not a laundry list to hand to the seller with a request to repair everything. Rather it is a reference guide that provides a broad picture of the condition of your home and helps you prioritize repairs and improvements.
The process of determining what to ask the seller to repair should start with what you are paying for the home and how many repairs are necessary. If you are paying top dollar for the home you are in a better position to expect the seller to make repairs or cover the costs of repairs. On the other hand, if you got a steal of a deal on the home, or purchased a foreclosure or REO it is unlikely that repairs will be made or a credit provided.
Another thing to consider is whether or not you had knowledge of the needed repair prior to writing your offer. If it is obvious to even an untrained eye that the roof needs to be replaced that should have been taken into account when writing your offer and it is unlikely the seller will cover that cost. However, if as a result of the home inspection you discover that the entire HVAC system is inoperable, that is likely not something you knew prior to writing an offer. That would be an expensive repair and one that you might ask the seller to make, or provide as a credit.
Repairs are negotiable, but when asking for seller repairs or credits it is in everyone’s best interests to be reasonable. Ask for the big ticket repairs if appropriate and just figure that you’ll take care of the smaller items like a broken outlet cover or a torn window screen.
A home inspection is always important for even an experienced investor. Not everything is immediately apparent on a walk through. Think of it this way: A home inspection is rather like being able to fast forward in a marriage by five years and learn all about your spouse before the wedding day! Certainly not an opportunity to be missed.