Posts Tagged ‘home buyers’

Be Sure Not to Overlook These Items on a Final-Walkthrough

home inspection final walkthrough

[tweetmeme] It is an exciting time when everyone is ready to finally close the deal on your new home.

It’s guaranteed to be hectic right before closing, but you should always make time for a final walk-through. Your goal is to make sure that your home is in the same condition you expected it would be. Ideally, the sellers already have moved out. This is your last chance to check that appliances are in working condition and that agreed-upon repairs have been made. Here’s a detailed list of what not to overlook for on your final walk-through.

Make sure that:

* Repairs you’ve requested have been made. Obtain copies of paid bills and warranties.
* There are no major changes to the property since you last viewed it.
* All items that were included in the sale price — draperies, lighting fixtures, etc. — are still there.
* Screens and storm windows are in place or stored.
* All appliances are operating, such as the dishwasher, washer and dryer, oven, etc.
* Intercom, doorbell, and alarm are operational.
* Hot water heater is working.
* No plants or shrubs have been removed from the yard.
* Heating and air conditioning system is working
* Garage door opener and other remotes are available.
* Instruction books and warranties on appliances and fixtures are available.
* All personal items of the sellers and all debris have been removed. Check the basement, attic, and every room, closet, and crawlspace.

Although you’re feeling the emotions and excitement of moving into your new home, be sure to stay diligent before the deal is sealed.  If something doesn’t seem right or you have additional questions, be sure to get them addressed.  You don’t want to be left with a costly issue after you move into your house, especially when it could have been taken care of before the close of escrow.

Investing in a home can be overwhelming.  There are many important factors to consider.  The best way to feel more confident during the home buying process is to gain the necessary knowledge.  Attend a real estate seminar in your local area.

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6 Creative Ways to Afford a Home

new home buyers - family
There are still various options to consider when purchasing a home:

1. Investigate local, state, and national down payment assistance programs. These programs give qualified applicants loans or grants to cover all or part of your required down payment. National programs include the Nehemiah program, www.getdownpayment.com, and the American Dream Down Payment Fund from the Department of Housing and Urban Development, www.hud.gov.

2. Explore seller financing. In some cases, sellers may be willing to finance all or part of the purchase price of the home and let you repay them gradually, just as you would do with a mortgage.

3. Consider a shared-appreciation or shared-equity arrangement. Under this arrangement, your family, friends, or even a third-party may buy a portion of the home and share in any appreciation when the home is sold. The owner/occupant usually pays the mortgage, property taxes, and maintenance costs.

4. Ask your family for help. Perhaps a family member will loan you money for the down payment or act as a co-signer for the mortgage. Lenders often like to have a co-signer if you have little credit history.

5. Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward your down payment. And in many cases, owners will apply some of the rental amount toward the purchase price. You usually have to pay a small, nonrefundable option fee to the owner.

6. Consider a short-term second mortgage. If you can qualify for a short-term second mortgage, this would give you money to make a larger down payment. This may be possible if you’re in good financial standing, with a strong income and little other debt.

These creative strategies and more are covered in detail at our real estate seminars.  Find out your options and make sound financial decisions for you and your family.

Source: Realtor Magazine


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Private Mortgage Insurance (PMI): How does it protect you and when to cancel

private mortgage insurance

Private Mortgage Insurance (PMI) provides protection to a lender in case you default on your home loan. Unless you make a 20% downpayment on a house, you’ll most likely be required to purchase PMI. PMI premiums on a median priced home ($198,100 in 2008) can run between $50 and $100 per month, according to the Mortgage Insurance Companies of America.

PMI might be unavoidable, but it isn’t eternal. Knowing exactly when you’re entitled to cancel coverage can save you a bundle. If you own a median priced home, you’ll pocket between $600 and $1,200 for each year’s worth of premiums you can avoid. That extra cash can be used to pay down your principal instead.

When PMI is cancelled automatically

Though often maligned, PMI plays an important role. Many aspiring homeowners, especially first-time buyers, simply can’t afford to put down 20% on a house. Without the safeguard offered by PMI, lenders would be reluctant to extend mortgages to low-equity purchasers.

For many borrowers, the coverage is short-lived. The Mortgage Insurance Companies of America, the industry trade group, estimates that 90% of homeowners are done paying PMI premiums, which are tax-deductible for some, within five years.

If you purchased a house since 1999 and are still paying PMI, you probably fall under the Homeowners Protection Act (HPA) of 1998. Your lender is required to automatically cancel your insurance once you’ve paid down your mortgage to a 78% (0.78) loan-to-value ratio, or LTV. Put another way, once you have 22% equity built up. Many lenders will treat pre-HPA loans in a similar fashion. Call to confirm.

To calculate your LTV, divide the outstanding loan amount by the original price of your home. If you have a $190,000 mortgage on a house you purchased for $200,000, the LTV is 95%. You’d need to get the mortgage balance down to $156,000—78% of the original value—to qualify for automatic cancellation of PMI.

When you need to request cancellation

You don’t necessarily have to wait for automatic cancellation. When your LTV hits 80%, you can petition your lender to end its PMI requirement. The process can take several weeks. Your lender isn’t obligated to grant your request, but you’ll bolster your case if you have a good payment history.

Start by calling your lender, not the PMI provider. You’ll probably need to make a formal request in writing and pay out of pocket for an appraisal. The average cost of an appraisal is $362, according to a 2009 Bankrate.com survey. Your lender will usually select the appraiser.

Although an appraisal is conducted primarily for the benefit of the lender to confirm that your property hasn’t declined from its original value, a high appraisal can work to your advantage. As your property value increases, whether due to a general uptick in real estate prices or specific home improvements, your LTV decreases.

A way around PMI premiums

In search of a PMI loophole? Look for so-called piggyback loans, also known as 80/10/10 or 80/15/5 loans. Basically, the home lender finances 80% and immediately gives you a second loan for 10% to 15%. You put down 5% to 10%. No PMI is required.

This alternative has traditionally been available for homebuyers with minimal capital but excellent credit. In tight lending environments, however, this arrangement is harder to come by. And even when piggyback loans are available, the extra interest you usually pay on the second mortgage may actually cost more than PMI premiums. Do the math.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.

Source: Richard J. Koreto (HouseLogic.com) Koreto is a freelance writer. He has been editor of several professional financial magazines and is the author of “Run It Like a Business,” a practice management book for financial planners. He and his wife own a pre-Civil War house in Rockland County, N.Y.


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What to look for in a Home Warranty

home warranty house under umbrella

Home warranties are on the rise.  According Carla L. Davis from RealtyTimes.com, below are some of the most common questions regarding home warranties:

What is a home warranty?

A home warranty is a residential service contract giving the homeowner repair and replacement coverage for major operating systems and appliances in a home. These repairs must be due to wear and tear, and not negligence or damage.

How can you benefit from a home warranty?

Repairs to homes are inevitable. And while homeowners cross their fingers in hopes that these repairs are relatively inexpensive, what if an entire system needs replaced, and you are left staring at a bill with a few too many zeros? A home warranty can offer you some level of protection.

Your home warranty plan also provides you with a selected network of professionals from which to choose. Many homeowners prefer having a list to choose from instead of taking a guess at which repair company will be reliable.

According to the Service Contract Industry Council (SCIC), a home warranty, also called a home service contract, offers many benefits to buyers and sellers, including:

  • Repair or replacement coverage of most major appliances and home systems including heating, plumbing, and electrical;
  • Toll-free access to technical support and prequalified repair professionals;
  • Comfort for new owners and protection for sellers while their property is on the market;
  • Optional coverage for structural components such as roofs; recreational equipment such as swimming pools; etc.
  • Ability to transfer the contract from homeowner to buyer.

What are the average costs of a home warranty?

MSN Money says you will be looking to spend somewhere from $250 to $600. And then expect to spend from $25 to $75 for each service visit.

What isn’t covered?

According to The Home Warranty Review, you should make sure you get any repairs approved by your warranty company prior to calling a repair company. This will help to ensure you are reimbursed. Keep in mind that pre-existing conditions, improperly installed or mismatched equipment, and poorly maintained systems are not usually covered.

Warranties also do not cover “acts of God.” This means the pet damage, the graffiti, and the lightning strike are your own responsibility.

Keep in mind, as well, that items “outside the perimeter” of your home may also be off limits. The Review writes, “Some people are surprised to learn that the plumbing leak in the yard is not covered.”

How have home warranty changed in our current economy?

According to the SCIC director, Timonty Meenan, there was a “significant increase in home warranty contract renewals in 2009. Existing homeowners fueled the increase over the previous year, while sales by real estate professionals to home sellers and buyers held nearly steady.”

Florida broker/owner Ed Smith of RE/MAX Coastal Properties has seen a jump in home warranties sales over the past five years, noting, “buyers and sellers have come to understand the benefits of home warranties and there are plenty of customer testimonials demonstrating their value. It’s both a good marketing tool for selling and good protection policy for buyers and sellers.”

How do I choose a company?

MSN Money reporter, Liz Pulliam Westom, gives you three helpful tips.

  • Find out which government agency, if any, regulates home warranty companies in your state and check its complaint records.
  • If regulation is loose or nonexistent, pick a company that has a long track history in your state and solid financials. (If the company is public, you can ask for an annual report to see if its home warranty operations are making a profit.)
  • If someone else — the home seller or a real estate agent — is paying for the policy, insist that the warranty premium be paid in full for the term of the agreement before the sale closes. Check to be sure the amount is listed on the final escrow statement.

A final tip for anyone considering a home warranty, is to read carefully. A warranty is a contractual agreement, and like all contracts, you should know what you are signing. Warranties can vary in price and coverage depending on the company you choose, so be sure to shop around before signing on the dotted line.

Source: Carla Davis, M.A., works on the Realty Times staff as Managing Editor for our online publication. She also is Producer for the real estate news channel, seen daily on RealtyTimes.com and on video newsletters nationwide.



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Adjustable-Rate Mortgages: Do they make sense now?

adjustable rate mortgage

Adjustable-rate mortgages (ARMs) get bad press. The poster child for irresponsible borrowing, they’re the mortgage industry’s bad boys. But ARMs can be excellent loans for thrifty borrowers.

Here is a quick recap on how ARMs work:

An ARM begins with a low introductory rate that remains fixed for a specified period. Upon expiration, the interest rate periodically adjusts based on an underlying index, which goes up or down. This contrasts sharply with a fixed-rate mortgage (FRM), where the monthly payment remains consistent.

The chief advantage of an ARM is that it allows you to save money in the early years. However, it can become dangerous because historically, declining rates don’t last more than approximately five years. Therefore, payments on a 15- or 30-year ARM will generally increase over time. A plan to refinance when the introductory period ends is a terrific idea—if you can pull it off. But if you can’t, and are unable to make increased monthly payments, you may lose your home.

This unpredictability makes an ARM inherently riskier than its fixed-rate counterpart. With mortgage rates at 7.5% or less for 185 of the past 210 years, it’s a reasonable risk—except if you’re living through a period like the late 1970s and early 1980s, when interest rates hit 17%.

Is an ARM right for you today?

An ARM may be right if:

1. You plan to refinance or sell within five to seven years.

Since an ARM’s introductory interest rate is lower than its fixed-rate counterpart, you’ll save money during the loan’s first few years. The most common ARMs are 3/1, 5/1, and 7/1. The first digit indicates the number of years the introductory rate remains fixed; the second, the frequency of rate adjustments. (A 3/1 ARM has a fixed rate for three years, then adjusts annually.) If you pay off your loan, refinance, or sell before the introductory rate expires, an ARM makes sense.

Example: You borrow $300,000 to buy an investment property that you’ll fix up and resell within two years. Your options are either a 3/1 ARM that opens at 3.5% or an FRM that’s locked in at 5.5%. The ARM’s monthly payment during the first three years: $1,347.13; the FRM’s payment: $1,703.37. During the ARM’s introductory period, you’d save $356.24 monthly (about $4,275 annually). During the first two years, the aggregate savings would be about $8,550—a sizeable sum.

2. You want to pay as little as possible.

Money saved on a mortgage payment is money in your pocket. If you don’t want to pay any more than is absolutely necessary in the early years, you’re a good ARM candidate. You’ll generally save money over a 30-year fixed loan for the first seven or eight years.

3. You want to aggressively pay down your mortgage.

According to Dave Donhoff, a financial advisor at Leverage Planners in Kirkland, Wash., “An immediate ARM is good for a borrower who wants to get rid of his mortgage as quickly as possible. It’s risky because rates can change monthly, but since you’d be paying significantly less than with a fixed-rate loan, you could accumulate home equity faster by aggressively paying down your mortgage.”

Example: You have a 30-year FRM of $100,000 at 6%; the monthly payment is $500. An immediate ARM might be around 3%, or $200 per month, which is a 60% savings over the FRM. If you paid down your principal with that savings, you’d have $3,000 a year of accelerated equity accumulation.
Risk factors

Of course, it can be harder in practice. Suppose you plan to sell the property once the introductory rate expires. Your home’s value could plummet, and selling wouldn’t pay off your loan balance. Or the real estate market could stagnate, making it difficult to unload your home.

If you plan to refinance, a tight lending environment could make that challenging. If your home value drops, you may not have enough equity to refinance. Credit standards could change, making you a less-than-desirable borrower. Or rising interest rates could disqualify you for a new loan based on your monthly income and expenses.

Worst-case scenarios:

These risks could derail your plans to pay off the mortgage, so evaluate what might happen after the ARM resets. Check its periodic cap; this is the maximum amount your mortgage rate can increase at each adjustment. If this cap is 2%, your 3/1 3.5% ARM could rise to 5.5% in year four, 7.5% in year five, and so on. In year five, your payment could rise to $2,023.57, which is $320.02 more than with a Fixed Rate Mortgage (FRM). Assuming a rising ARM, you’d give back all your savings from earlier years in year seven.

These numbers could substantially differ depending on the periodic and lifetime caps associated with your specific ARM. A less aggressive mortgage with a lower periodic cap could take significantly longer to sour.

If your risk tolerance and flexibility levels are low, an FRM is a better loan for you. Ultimately, even though there can be cost savings with an ARM, you should choose the mortgage that gives you peace of mind in any market.

Find out what you qualify for and which programs are available for you – www.backyardloans.com. There is an online form you can easily submit to find out what you qualify for or just call them directly.

However, if you feel that you need some help on your credit report – go to www.backyardcreditrepair.com and find out how to fix or improve your credit score within 75 days.

Source: Barbara Eisner Bayer (HouseLogic.com): Bayer has written about mortgages and personal finance for the past 15 years for the Motley Fool, the Daily Plan-It, and Nursevillage.com, and is the former Managing Editor of Mortgageloan.com and Credit-land.com. She enjoys the flexibility of adjustable-rate products, but is temperamentally a fixed-rate kinda gal.


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Help for Home Buyers

house money

When it comes time to buy a home, you may need to strap on your thinking cap to come up with some creative ways to boost affordability. This can come in the form of assistance programs, special financing, leasing, and mortgage ideas.

Let’s take a moment to explore a few of these options:

Look Within Your Circle:

The first order of business could be to sit down with your family to see what assistance they’d be happy to offer. You may find that a father or grandmother would be more than happy to co-sign on a loan, or even offer you a loan at low, or zero, percent interest. You could also discuss a shared-appreciation or shared-equity arrangement. This is when a family member buys a portion of the prospective home, and then are able to share in its appreciative value when it is sold.

Research Buyer Assistance Programs:

The Department of Housing and Urban Development (HUD) has a link you can find on their website, which links to each state and their respective programs. You’ll find such things as programs to help fund rural housing, as well as information on Habitat for Humanity.

The Federal Housing Agency (FHA) offers many great options for potential buyers. Since 1934, the FHA has been helping buyers buy with low interest and little down. According to FHA, “your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan.” FHA even has financing options for manufactured and mobile homes.

While many downpayment assistance programs are unavailable currently due to a law that went into effect on October 1, 2008, you can still find other very helpful programs. How about the AmeriDream Building Affordable Homes Program – currently developing 106 affordable homes in Southeast Washington, DC. The Woodson Heights development is a $30 million project that is serving as a catalyst for change transforming a blighted neighborhood into a good place to call home and raise families.

As well, be sure to look into the Making Home Affordable program, which can offer you great options if you already own and are looking for ways to keep your home affordable. The Obama Administration’s Making Home Affordable Program includes opportunities to modify or refinance your mortgage to make your monthly payments more affordable. It also includes the Home Affordable Foreclosure Alternatives Program for homeowners who are interested in a short sale or deed-in-lieu of foreclosure.

Feel free to contact us for additional resources and to find out which option is right for your situation. You may contact Backyard Wealth’s resource center directly at (562) 598-9885.

Source: Carla L. Davis (RealtyTimes)


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Second Credit Checks for Home Buyers: Effective Today (June 1, 2010)

credit report clipboard

Starting June 1, Fannie Mae has a new rule going into effect which requires the lender to check for additional lines of credit, such as a new credit card or a car lease, that a borrower may have obtained that have not been reflected on the credit report over the course of the loan process. With stricter regulations mandating a further credit probe before borrowers close their mortgage, real estate experts are advising prospective home shoppers to keep their financial situation static until the deal is finalized.

In light of the new regulation, we talked to a pool of mortgage brokers, who shared tips on dodging mortgage closing debacles and streamlining the process.

Tip No. 1: Get the house before the car

Across the board, mortgage brokers say that opening new lines of credit is the easiest thing to trigger the lender’s attention, especially with the news of Fannie Mae’s mandate. For example, this means opening up a store card at Lowe’s to get a head start on buying some new appliances or paint or leasing a car to have something shiny to park in your new garage.

New credit obligations, such as as credit cards, increases a borrower’s debt-to-income ratio (the amount of debt including mortgages, car loans, student loans, credit cards versus overall income). Fannie Mae sets the maximum for the debt-to-income threshold at 45 percent of a borrower’s gross monthly income. Breaking this cap –even after pre-approval–would result in a defunct loan.

Tip No. 2: Don’t switch professions (or tax brackets)

Brokers say its not earth-shattering to change jobs in the same field, especially if you are making more money at the new place of employment, but it’s complicated when a professional is moving job classifications, for instance, from employed to self-employed, or from a salaried-position to a commission job. “Moving from an employee to a contract basis is a dagger,” says Stern, as two years of federal tax returns need to be included with a loan application. “[In this case], it could take three years to get approved for a mortgage.”

As another precaution given the nation’s high unemployment rate, Stewart says it’s becoming routine for lenders to get a verbal confirmation of a borrower’s employment status on the day of the closing.

Tip No. 3: Try not to move around big sums of money — even deposits

One broker says keeping your financial situation unchanged is not only refraining from withdrawing large sums of money, but also avoiding making big deposits of money in any of your bank accounts from pre-approval to day of closing. To qualify for a mortgage, one of the requirements is proof of all assets, including checking, savings, stocks or bonds, and if this is checked at any future point, the borrower may need to provide records of the fund’s origins.

“That’s what tight lending is these days — providing documentation,” says Jay Sondhi, a mortgage consultant in San Francisco. “What they are concerned about is that a large deposit may be borrowed money.”

Though more money in your bank account is not going to sabotage your qualifications for a loan, complying with documentation requirements and time delays may make a closing a mortgage a bigger hassle.

Tip No. 4: Monitor the balance of your credit cards

Though the credit score formula is deemed an enigma by many, the balance that’s riding on your credit cards plays
a big part in determining your credit score
. Higher scores result in borrowers being able to secure better interest rates.

With tight lending policies and stricter, more spelled-out regulations in the post-boom era, getting a mortgage has become increasingly confusing for the consumer. But keeping your finances transparent and steady will help simplify the process.

Source: Megan Mollman (AOL Real Estate)

Need to fix your Credit Score? More information here…

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