Showing posts with label purchase. Show all posts
Showing posts with label purchase. Show all posts
Thursday, July 8, 2010
7/08/2010 02:13:00 PM | Posted by
Arbor Mortgage
One of the most confusing parts of the home loan process these days is the appraisal. There have been so many changes in guidelines and legislation that you practically need an advanced degree just to figure out who is even ALLOWED to appraise your home.
Let’s start with the basics:
What is an appraisal?
An appraisal is a professional appraiser’s opinion of the current market value of a home. An appraisal performed for a mortgage transaction will often involve a physical inspection of the subject property. The appraiser will collect and analyze local real estate sales data along with your property information; including condition, prior sales information, sales contract data, and other pertinent property information. The appraiser is not a home inspector and will only be inspecting the home for the purpose of concluding an opinion of value for your lender.
Why do I need an appraisal?
Every mortgage lender requires an appraisal when lending money on real property. The most common appraisals are the full physical inspections mentioned above. The appraiser not only determines an opinion of market value, but they also inspect the property for adherence to specific loan program guidelines. For example, FHA appraisals have additional rules that conventional appraisals do not.
Who picks the appraiser?
The appraiser is always chosen by the lender. Recent legislation requires that someone not within the loan origination process (i.e. – not the loan officer) to order the appraisal. Many banks and lenders have interpreted this law in a way that causes them to use third party Appraisal Management Companies (AMC) to order their appraisals. This often raises the price (to pay the middle man) and lowers the quality of the appraisal (AMC’s generally pay appraisers less and choose outside the geographic area).
Some lenders, like Arbor Mortgage, have an internal appraisal ordering system separate from the loan originators that orders from a specified list of appraisers local to your market. Always use a lender that utilizes an internal system to order appraisals, instead of outsourcing it. Appraisals that are managed by internal systems generally have lower costs, faster turn times, and higher quality.
How long does an appraisal take?
There is no one size fits all answer for the turn-around time on an appraisal. Each appraisal has its own level of complexity that will affect the amount of time it takes to complete. For a suburban area, with a common style home, it should take 3-5 days to receive an appraisal after inspection. For more rural areas or unique properties it can take a little longer.
What happens if my appraisal is too low?
In today’s market, many appraisals are falling short of contract prices. For a home buyer, this is not the end of the world. While it will take additional work and negotiation, this can actually be a GOOD thing. The appraiser is there to make sure that the contract price is a fair price, based on comparable local sales. If recent sales in the area are much less, than the last thing you want to do is overpay. Having the appraiser come back with a lower value gives you an opportunity to negotiate a lower purchase price with seller, potentially saving you thousands.
That’s not to say that all sellers will agree to a lower price. In some cases the seller may refuse, or even ask the buyer to bring the difference. But, that is the your choice, since most contracts have an appraisal contingency that allow you to walk away from the sale if the appraisal falls short of the agreed upon sales price.
For other questions about appraisals or the home buying process, Contact Us.
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Tuesday, June 29, 2010
With the mortgage market tightening up over the last couple of years, many people think their only down payment option for a new home is 20% or more. That couldn’t be further from the truth. Surprisingly, there are many options for low down payment loans.
Zero – That’s right, $0 – down loans
Didn’t zero down loans go away with the mortgage meltdown? No way, there are still some terrific zero down programs available.
USDA Rural Development – The United States Department of Agriculture has a Rural Development loan product that is truly zero down. USDA loans come in 2 flavors – Guaranteed and Direct. The Direct program is for low income buyers and is only available through the USDA offices. The Guaranteed program is available through mortgage lenders or brokers and is for low-moderate income families purchasing in rural/semi-rural areas. Aside from not requiring a down payment, these loans have many other advantages. There is no monthly mortgage insurance, interest rates are very low, and the areas of rural eligibility are very liberal.
Thursday, June 17, 2010
The web is just abuzz today with reports that the Homebuyer Tax Credit has been extended. This is not quite true. In fact, it’s downright misleading. In the first case, the issue on the table is extending the deadline for those already in contract to still be eligible. It would not allow new buyers to take advantage of any credits. Second, it was not approved.
The original proposal, which would extend the deadline for those with executed contracts before April 30, would give until September 30, 2010 to close their loans; extending it 3 months. The Senate actually voted AGAINST it. They did, however, accept it as an Amendment to the Tax Extenders Bill. The Senate Finance Committee just has to rework the proposal, and any amendments will stand, as long as the reworked proposal is approved.
What does this mean for you? This means that if you entered contract on a home before April 30, you could have up until September 30 to close your transaction. For those waiting bank responses on short sales, this is a big relief. Those transactions typically take much longer and are out of the buyer’s hands. It does not change the deadline of April 30 for the contract date. If you don’t have a contract now, you won’t be eligible for a tax credit.
The proposal is likely to be approved with the new amendment, but the House will have to reconsider the new amendment and agree to the final version. It’s hoped that this will be resolved by July 2.
Wednesday, June 9, 2010
If you don’t know anyone in the real estate business, how do you choose a real estate agent? It doesn’t have to be a drawn out process. Try these easy steps:
- Start by asking friends or family for a personal referral. If you know someone has had a good experience with a person, chances are good you will, too. If you can’t find a personal referral, speak to your loan officer about a referral. Arbor Mortgage has a list of Preferred Real Estate Agents all over the state of Michigan. Try to interview a couple of agents to find a good fit.
Tuesday, June 1, 2010
The most stressful step for a first time home buyer is often the first one. Where do you start the home buying process? It’s not as daunting as it seems. Let’s walk through the home buying process step by step.
Step 1 – Become Pre-Approved for Financing
Many new home buyers make the mistake of looking at homes first, before becoming pre-approved for financing. They could spend countless hours finding just the right home, only to find out they don’t qualify for a home loan. For this reason, many real estate agents won’t even start working with a client until they know that they can be approved for a mortgage.
Your first phone call should always be to a trusted financing source. Many people ask, “How do I pick a lender?” Start by asking your friends and family for a referral to someone they have worked with successfully. Try getting at least 3 options, and then research those companies. Be sure to call them all on the same day for quotes when you’re ready to be pre-approved. Calling them the same day solves two problems; it ensures that you are getting “apples to apples” pricing from each (since pricing changes every day) and it ensures that your credit pulls will all be grouped together and only count as 1 mortgage pull. If you don’t have any friends or family that can refer you to someone, you can still check online or your phone book; just be sure to research the company with places like the Better Business Bureau.
Step 2 – Choose a Buyer’s Agent
Wednesday, May 12, 2010
UPDATE: 5/25 - Senate convenes today at 10:00 am for consideration of HR 4899, Emergency Supplemental Appropriations
UPDATE: 5/14 - Funds are now officially exhausted for this program and there is STILL no further guidance.
UPDATE: 5/12 - USDA recalled their announcement to continue issuing conditional commitments in the wake of fund exhaustion. Their bulletin states that new guidance will be issued within 24-48 hours of that date. Back to the waiting game!
Funds for the USDA RD Guarantee program are likely exhausted today (or will be shortly). No word on the bill in the Senate to increase funding to the program. The good news is that on May 11, 2010, the USDA National Office released a statement authorizing the issuance of Conditional Commitments for the Single Family Guaranteed Loan Program. The Commitments will be issued "subject to the availability of funds and Congressional Authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans".
UPDATE: 5/14 - Funds are now officially exhausted for this program and there is STILL no further guidance.
UPDATE: 5/12 - USDA recalled their announcement to continue issuing conditional commitments in the wake of fund exhaustion. Their bulletin states that new guidance will be issued within 24-48 hours of that date. Back to the waiting game!
Funds for the USDA RD Guarantee program are likely exhausted today (or will be shortly). No word on the bill in the Senate to increase funding to the program. The good news is that on May 11, 2010, the USDA National Office released a statement authorizing the issuance of Conditional Commitments for the Single Family Guaranteed Loan Program. The Commitments will be issued "subject to the availability of funds and Congressional Authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans".
What this means is that the Rural Development offices will continue to accept applications and issue commitments. Lenders can continue to close and fund these loans with those commitments. RD will "obligate" funds for those loans when they become available, as long as Congress authorizes the increase in funds and fees.
The big change here, of course, is the increase in Guarantee Fee to 3.5%. This was certainly expected based on the bill currently in the Senate, but now we're seeing it right from the horse's mouth - RD. Anyone who hasn't closed their RD loan yet, will be paying more for the program. It still is a small price to pay for a 0 down payment loan program with no mortgage insurance.
For more information on the USDA Rural Development loan program, Contact Us.
Wednesday, April 28, 2010
One of the best, and most under appreciated, home purchase loans today is the USDA Rural Development Section 502 Guaranteed loan. This program is a $0 down purchase loan intended for rural America. These loans are for buyers with low to moderate income that are purchasing homes that fall within the USDA’s rural maps. The maps happen to be very outdated, meaning that there are many places you or I wouldn’t consider rural, that actually qualify for 100% financing.These loans aren’t just great for buyers, but for lenders, too. The lender funds the loan, but the USDA Guarantees it up to 90% of the original loan amount – that’s far and away better than conventional mortgage insurance. Guarantee funds aren’t unlimited, though. In the past, it has taken an act of Congress each year to appropriate funds for the program.
With credit becoming tighter every day, more and more people are turning to this (used to be) little know loan product to secure $0 down financing. As a result, those congressionally appointed funds are running out faster and faster. In 2009, the program ran out of funds midyear, only to be funded again by the stimulus package. Funds are again running low and are not expected to be available past May. Many lenders stopped taking applications a month ago, in anticipation of the funds being drained, with no hope for Congress to step in.
Luckily, there has been a new bill introduced to turn the USDA into a self funded program. H.R. 5017 has already been approved by the House of Representatives, but has not yet been introduced in the Senate. The bill authorizes up to $30 billion in loans during the 2010 fiscal year. In order to make the program self-funded, the Guarantee fee, paid by the home buyer, would be increased from 2% to as much as 4%. While this is a hefty fee increase, this is one of few programs with no monthly mortgage insurance, even at 100% financing.
This bill is more important than ever, because this loan program aids an under served community. Lower income families in rural communities often have less financing options than those in urban areas. This program is also the only option for many people to secure 100% financing. Loan guidelines allow buyers to finance their closing costs and even appliance purchases up to the appraised value of the home. There is no other loan program like it.
For more information on USDA Rural Development loans, Contact Us.
Tuesday, April 6, 2010
Effective February 1, 2010, HUD has suspended the rule that prevented a buyer from obtaining FHA financing on a home which had been owned by a seller for less than 90 days. This guideline was commonly called “the anti-flip rule”. This suspension of the rule or “flipping waiver” is valid for 12 months and is a boon for real estate investors because they can now turn their flips much more quickly by opening up the huge pool of FHA buyers.
Now, this may seem like old news – it’s April already, and this has been out for 2 months. Yet, the lending canvas has been strangely silent on it. Many lenders just aren’t allowing it. They are refusing to honor the flip waivers, because they see the limited time the seller owns the home as a large risk, and possibly an easy area for fraud.
Friday, December 18, 2009
Prospective home buyers have a unique opportunity under the newly expanded government tax credit program. First time and repeat home buyers can gain up to 10% of the home’s purchase price as a refundable tax credit. First time buyers can claim up to a maximum of $8000, while repeat buyers are limited to a maximum of $6500. A refundable tax credit is a credit that can be claimed on income taxes even if the taxpayer has little to no federal income tax to offset.
Each credit has its own qualifications. Below is a list of key points to help you determine if you may qualify.
- The refundable tax credit of up to $8000 is available for first time home buyers (anyone who hasn’t owned a principal residence in the last 3 years) purchasing a primary residence before April 30, 2010. In the case where a legal sales contract has been executed by April 30, 2010, the purchase would only have to be completed by June 30, 2010.
- The refundable tax credit of up to $6500 is available for repeat home buyers who have owned a home for at least 5 consecutive out of the last 8 years. This tax credit only applies to homes sold between November 6, 2009 and April 30, 2010. In the case where a legal sales contract has been executed by April 30, 2010, the purchase would only have to be completed by June 30, 2010.
- The income limits enacted on November 6, 2009 require a single home buyer to make less than $125,000 per year and for married couples filing jointly to make less than $225,000 per year to receive the full credit.
- If you currently make more than the income limits, a partial credit may be available. See the IRS website or speak to a tax professional for more information.
- Any home type that will be used as a primary residence will qualify, but the home must be priced under $800,000 in order to claim either credit. New home builds also qualify for the credits, but the settlement must be completed by April 30, 2010.
- Purchases must be made from an uninterested third party. Purchases from relatives of the buyer or buyer’s spouse will not qualify for the credit.
- Married couples can only claim the first time home buyer credit if both spouses qualify. They may be eligible for the repeat home buyer credit, though.
- Neither tax credit has to be repaid, unless the home is sold or is no longer used as the buyer’s primary residence with the first 3 years of purchase. Qualified service members may be exempt from this requirement.
- To claim either credit, taxpayers must submit a copy of the HUD-1 settlement statement and IRS Form 5405. Home purchases made in 2010 can be claimed on an amended 2009 tax return. See a tax professional for more details.
The above information is for general use only and should not be construed as professional tax, legal or accounting advice. This information is no substitute for professional tax or legal advice and a professional should be consulted before making any decisions. This information is provided as-is and no warranties or guarantees are made as to the completeness, accuracy or timeliness of the information.
Thursday, December 17, 2009
- Not getting pre-approved for a mortgage
It’s important to know whether or not you qualify for the financing you need. If you look at homes before knowing if you’re financeable and for how much, you could end up with a lot of time wasted.
- Not using a buyer’s agent
A buyer’s agent is a real estate agent that works exclusively for the buyer, negotiating the best possible price and watching out for only your interests in any contract. What’s the best part about using a buyer’s agent? It’s free to you, since the seller pays any real estate agent commission. Arbor Mortgage provides a list of Preferred Real Estate Agents during your pre-approval.
- Not getting a home inspection
Even if the house is brand new, there is bound to be something that needs attention, so never forgo a home inspection. A good inspector will look for possible costly problems, such as mold, structural issues, and hidden damage.
- Not adding contingencies to your contract
Never enter into a contract that doesn’t have contingencies in place to protect you. There should be an inspection contingency, allowing you terminate the contract if the house isn’t inspected to your liking. There should also be a financing contingency in case any problems occur with your mortgage financing.
- Not researching the neighborhood
You may be a young married couple now with no children, but what happens when the family starts to expand? How are the schools in the neighborhood? Is it safe at night there? Visit the home at all hours of the day and find out all you can about the town amenities and public works.
Tuesday, December 15, 2009
When purchasing a home, there are many aspects to consider that may make the moving process stressful. Arrange for the following to be handled before moving, so you can be sure to have a smooth transition.
With these items arranged ahead of time, you can focus on the more important things; like planning the housewarming party!
- Notify Utilities
- Forward Mail
- Verify cell phone coverage
- Change locks
- Arrange home & lawn maintenance needs
- Test smoke detectors
- Change furnace filters
With these items arranged ahead of time, you can focus on the more important things; like planning the housewarming party!
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About Me
- Arbor Mortgage
- Arbor Mortgage is a Michigan based mortgage lender that has been providing mortgage solutions for more than a decade. Since 1998, Arbor Mortgage has helped more than 20,000 people purchase or refinance their homes. Arbor offers a variety of mortgage programs including FHA, USDA Rural Development, VA, Conventional and Alternative loans.
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