Buyers Only Realty

Archive for the ‘Info for Home Buyers’ Category

• 30 yr fixed: 4.36%
• 15 yr fixed: 3.86%
• 1 yr adj: 3.52%

(U.S. Daily Averages)

Whether you’re a buyer or a seller you want to succeed in the realty marketplace. That’s natural and reasonable, but what are the steps you need to triumph?

Negotiations are a complex matter and all transactions are unique. Both sides — buyer and seller — want to feel that the outcome favors them, or at least represents a fair balance of interests. In the usual case there is a bit of bluff, some give-and-take, and neither party gets everything they want.

So how do you develop a strong bargaining position, one which will help you get the most from a transaction? Experience shows there are five basic keys which will determine who wins at the negotiating table.

1. What Does The Market Say?

At various times we’re in a “buyer’s” market, a “seller’s” market, or a market where supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.

Because all properties are unique — it is possible to buck general trends and have more leverage than the marketplace would seem to allow. For instance, if you have a property in a desirable neighborhood with few sales, you may be able to get a better deal than elsewhere. Or, if you’re a buyer who can quickly close, that might be an important negotiating chip when dealing with an owner who just got a new job 500 miles away.

2. Who Has Leverage?

If you’re on the front page of the local paper because your business went bust — and the buyer knows it — you have less clout in the bargaining process. Alternatively, if you’re among six buyers clamoring for that one special property, forget about dictating an agreement — the owner can sit back and pick the offer which represents the highest price and best terms.

3. What Are The Details?

A lot of attention in real estate is paid to transaction prices. This surely makes sense, but the key to a good deal may be more complex.

Consider two identical properties that each sell on the same day for $275,000. The houses are the same, the sale prices are the same, but are the deals the same? Maybe not. For instance, one owner may have agreed to paint the property, replace the roof, purchase a new kitchen refrigerator, and pay the first $5,000 of the buyer’s closing costs. The second owner made no concessions.

In this example, the first house was actually sold at discount — the $275,000 purchase price less the value of the roof repairs, closing credit, and other items. If you’re a buyer, this is the deal you want. If you’re a seller, you would prefer to be the second owner and give up nothing.

4. What About Financing?

Real estate transactions involve a trade — houses for money. We know the house is there, but what about financing? There are several factors that impact the money issue:

Has the buyer been pre-qualified or pre-approved by a lender? Meeting with a lender before looking at homes does not usually guarantee that financing is absolutely, unquestionably available — a loan application can be declined because of appraisal problems, title issues, survey findings, and other reasons.

However, buyers who are “pre-qualified” or “pre-approved” (these terms do not have a standard meaning around the country) at least have some idea of their ability to finance a home and know that they are likely to qualify for certain loan programs.

The result is that pre-qualified buyers represent less risk to owners than a purchaser who has never met with a lender. If the seller accepts an offer from a buyer with unknown financial strength, it’s possible that the transaction could fail because the buyer can’t get a loan. Meanwhile, the owner may have lost the opportunity to sell to a qualified buyer.

The lower the interest rate, the larger the pool of potential buyers. More buyers equal more potential demand, good news for sellers.

Alternatively, high rates or even rising rates may drive buyers from the marketplace — and that’s not good for anyone.

It used to be that down payments were a major financing hurdle — but not anymore. For those with good credit, loans with 5 percent down or less are now widely available. In fact, 100 percent financing, mortgages with nothing down, are now being made by conventional lenders. Reduced down payment requirements are good for both buyers and sellers.

5. Who Has Expertise?

Imagine you’re in a fight. The other guy has black belts in 12 martial arts — and you don’t. Who’s going to win?

Brokers have long represented sellers, and now buyer brokerage is entirely common. In a transaction where one side has representation and the other does not, who has the advantage at the bargaining table?

- Written by Peter G. Miller

• 30 yr fixed: 4.49%
• 15 yr fixed: 3.95%
• 1 yr adj: 3.55%

(U.S. Daily Averages)

The Mortgage Bankers Association reported recently that mortgage applications decreased according to their weekly survey (ending 6/18/10). However, some banks are hiring mortgage lenders—a sign that banks are optimistic that requests for housing loans will increase.

J.P. Morgan Chase is planning to hire 1,200 loan officers, according to CNNMoney.com. Christine Holevas, a spokesperson for the bank said, “We may not be inundated with applications tomorrow, but we are confident the need will be there.” Despite any slight downturns, expected increases in the mortgage business are estimated to go from $725 billion in 2010 to $916 billion by 2013, according to the Mortgage Bankers Association.

If you’re looking to get a home loan here are a few things you should consider. If you’re self-employed the rules have changed considerably and not just for mortgages but also personal loans too. Some lending institutions are now requiring self-employed borrowers to provide documentation from assets to income and the documented income is then checked with IRS records. “It used to be nobody checked your IRS records,” says one source in the mortgage industry who agreed to be interviewed about the inside changes but could not be named.

Another big change has to do with what borrowers may have done in the past. “When Fannie Mae and Freddie Mac discover loans where the borrowers misrepresented their income, the agencies are requiring the lenders to repurchase the loan from Fannie Mae and Freddie Mac. In turn the lenders then have the option to go after the borrowers in the form of foreclosure—even if the loan is not delinquent,” says the source. There’s no statute of limitation for fraud. The source says, normally, if the loan is current, they won’t pursue the borrower. One major lending institution hired a company to go through all its stated-income loans looking to see if there was fraud. “At first they started with all the delinquent loans and then they moved into performing loans. Then they started requiring lenders to buy back all these loans which put lenders out of business. That closed down some shops,” the industry expert told me.

The problem that many self-employed borrowers have today is that they need to be able to show that their business is legitimate in order to get the loan. The typical documentation includes, but is not limited to, a Web site, CPA letter, 411 listing, and business license. And if you’re not self-employed, the rules for loans are tight as well—bigger down payments and better documentation are a must. While some lenders will allow as little as 5 percent down, most are looking for more than that. Everything you submit to a lender is now being double-checked.

Doing your part to make sure that your finances are in order prior to applying for a loan ensures a smoother process. Here are just a few helpful tips:

1. Make no major purchases such as a car prior to applying for a loan

2. Have complete documentation of your income

3. Check and clean up your credit before attempting to borrow

4. Reduce the number of outstanding credit options: close unused credit cards

5. Remain current on all your loans

For more information on protecting yourself when applying for a loan, read our article: Don’t Get Caught In Mortgage Fraud.

- Written by Phoebe Chongchua

Mortgage fraud is among the top concerns of those investing in real estate. If you get caught in a mortgage fraud scheme it can create a financially painful and emotionally distressing situation. While there are many reputable and trustworthy mortgage providers, the lengthy documents filled with legal jargon make conditions ripe for misunderstandings. So before you sign, attorneys Jonathan Kurniadi and Jeff Hogue who specialize in real estate lawsuits have this advice to protect you from mortgage fraud or mishaps due to misunderstandings.

1. Read every page of every document.

It sounds like such a trite statement but really this is where many borrowers make their biggest mistake. “Most borrowers feel pressured to quickly sign loan documents, trusting that the content of the loan documents is correct. Also, trusting that the real estate loan professional has completed the loan paperwork in such a manner that the borrowers have agreed to. But there’s no reason to feel pressured for one of the biggest purchases of the borrower’s life,” says Kurniadi of The JK Lawfirm, APC.

He suggests taking your time to completely review each page, even taking notes on portions of the document that you have questions or concerns. Also, check things that might seem obvious. One borrower signed loan documents only to find that the street address was incorrectly printed on every single page of the loan documents — getting them changed became a tedious process and required the resigning of all the loan documents.

Kurniadi says borrowers should not feel they have to sign the loan documents. He says always be prepared to walk away if it doesn’t feel comfortable. He also says non-profit HUD approved community housing counselor agencies can help review the loan application and documents. “That’s probably the quickest, cheapest, and most efficient source to have loan documents reviewed,” says Kurniadi.

2. Sign documents only after seeing that the original and the copy contain the same contents. Be sure to get your copy.

“Some borrowers do not realize that they are entitled to a copy of their loan documents. And most borrowers forget that receiving a copy is useless if they don’t make sure the contents of the original and the copy are the same before they sign the loan paperwork,” explains Kurniadi.

He says borrowers must be certain they are comparing the documents before they sign because what can happen is “The borrowers will trust that the contents of the documents are the same as the originals (that they signed),” says Kurniadi. However, if the copy of documents the borrowers receive is not the same, Kurniadi says the original documents are what obligate the borrowers not the copies.

3. Make sure there is no false or even slightly fibbed information on your loan paperwork.

It’s just not worth it to falsify information in order to push your loan through.

“Any real estate or loan professional who advises you to provide any false information on loan paperwork is putting you at risk,” cautions Kurniadi. Jeff Hogue from Hogue and Belong adds, “There is no valid reason to provide false information on the loan paperwork, and most borrowers do not realize that signing a loan application is confirming its contents are true and correct under penalty of perjury.”

And Hogue says, “If your loan broker tells you that ‘everybody does it’ or that ‘it is legal and customary’ to fib on how much you make, ask him to put that in writing for you.” You can bet that won’t be happen!

4. Check the license background of your broker.

Taking the time to review the background of your real estate agent and broker can prove to be invaluable. Make sure you do this before you ever provide any personal information or sign loan documents. Finding out if there is any pending litigation or complaints will help you decide if they are the best people to do business with.

5. Ask how much your mortgage broker is earning on your loan transactions.

Hogue says that, “Often times, this is not disclosed. It is important information because sometimes the percentage of the loan broker’s compensation will correspond to what interest rate you will pay on your loan.”

As the adage goes, better safe than sorry — read your paperwork, tedious as it may be, ask questions, and give yourself time to understand it all. You’ll be glad you did.

- Written by Phoebe Chongchua

In March, ING Direct bank commissioned Harris Interactive to conduct an online survey of 1,042 parents of children age 17 years and younger.

The survey discovered more than half, 56 percent, of those surveyed thought bouncing a check or paying a fee for having non-sufficient funds in their bank account would reduce their credit scores.

Wrong.

Credit reports typically don’t include information about checking and debit accounts, nor non-sufficient fund issues unless they somehow impact an attached credit account.

Also one in five (21 percent) thought checking their credit scores would hurt credit scores. Nearly as many (18 percent) thought accessing their credit report, would hurt their credit scores.

Wrong and wrong.

Obtaining your credit report and credit score has no bearing on your credit standing.

In fact, you should check your credit reports regularly. Every year, federal regulations allow you three free credit reports (ONLY through AnnualCreditReport.com), one each from the three credit reporting agencies, Equifax, Experian and TransUnion.

If you visit some other sound-alike, come-on web site, instead of AnnualCreditReport.com, expect to pay for credit services you may not need in exchange for that so-called “free” report.

From AnnualCreditReport.com, get the three free reports all at once if you haven’t seen them for years. Otherwise get one from a different company every four months to regularly monitor your credit report for errors, identity theft, black marks you may need to work on and other issues.

For your credit score it will cost you a nominal fee (it’s worth it) paid to each of the three credit reporting agencies.

A credit score — virtually always examined by lenders when you apply for a mortgage, credit card, car loan, other credit, even homeowners insurance and other financial accounts — is a numerical rendition of your creditworthiness.

Scores range from about 300 to about 850. The higher the number the more likely you are to get credit and the more likely you are to get cheap credit. Your score should be at 760 or above to land the best interest rate, according to FICO, a leading credit scoring system provider.

Debunking the myths

To help debunk credit score myths, misunderstandings, misdirection and to stop financial behaviors that could be passed onto future generations, ING Direct and Experian developed five tips to help parents separate fact from fiction.

Practice what you preach. Simple financial behaviors such as paying your bills on time will keep your credit in good standing and will allow you to obtain better interest rates on big asset purchases like a house or car. Lead by example.

Start early. When you kids start to ask you to buy things for them, it’s time for the “money talk.” Later, introduce more complex credit topics with stern statements like “credit is not free money.” Talk about interest rates, paying on time, paying off balances and saving money.

Make credit a family affair. Let children in on household financial discussions that reveal the true cost of necessities. Sit them at the table during budget and bill paying sessions. Explain the fallout from making poor financial decisions.

Set family financial goals. Teach children how money doesn’t grow on trees. Show them how to save for things they desire rather than accessing credit to spend money they do not have. It’s a way to encourage your children to set financial goals and work towards achieving them. Children savor things more when they put in the time and effort to purchase items with their hard earned cash.

Explain the difference. Talk to children about the differences between needs versus wants, especially at times when they want you to give into impulse buying. During grocery store visits, show kids the difference in prices between name brands and generic brands as a way to expand on this lesson.

- Written by Broderick Perkins

Selected Rates as of July 1, 2010:

• 30 yr fixed: 4.58%
• 15 yr. fixed: 4.04%
• 1 yr. adj: 3.80%

After weeks of searching for your next home, you now have it narrowed down to two great options. One offers a shorter commute, but the other offers more square footage for your growing family. How can you make the best choice?

There are several strategies you can employ in your decision making process. Above all, be confident in your decision making abilities. “The fear of making serious decisions is a new kind of fear, called decidophobia,” proclaimed by Walter Kaufmann at Princeton University in 1973. Worry and procrastination do nothing to aid the process, so buyers, be confident that you will make a sound choice.

Pro/Con list: In this case, you are deciding between two houses as your prospective home. For each house, divide a sheet of paper into two columns: pro and con. Be realistic about what the positive and negative factors would be for each purchase. Considerations could include: price, location, schools, repairs, square footage, floorplans, street noise, neighborhood value, comparables, and gut intuition.

Brainstorm scenarios: Chances are, whatever house you decided upon will be your residence for many years to come. Try and think ahead to situations that may arise in the future, and how each residence would affect those situations. Do you have aging parents that could move in? If so, then which house provides the best floorplan for this? Planning on having children? Check out ratings on local schools.

Do the math: Business executives might call this the “cost/benefit analysis.” Buying a home is a huge financial decision, and while personal preferences (e.g. location, schools, square footage) all come into play in homebuying, many purchases are based on what makes the best financial sense. Discuss numbers and neighborhood comparables with your real estate agent. One home may be a smaller dollar amount, but the other may be a better deal in the long run. Some neighborhoods are up and coming, while others have come and gone. Are either homes overpriced or underpriced for their neighborhoods? Do either homes need repairs or updates?

Priorities list: Yes, you know you want the pool, landscaping, granite counters, close proximity to work, extra bath, and the list goes on. But when push comes to shove, and it might, what items are your priority, really? For some, driving a longer commute is worth having a larger house or a cheaper price. For other buyers, the exact opposite can be true.

Change perspectives: Sometimes you simply must step out of your own shoes to see a situation clearly. There are many different ways to approach this decision. You can look at it from an emotional point of view (which home do you love), an intuitive view (what does your gut tell you), and even a devil’s advocate view (what if). Experts consider this the “Six Thinking Hats,” introduced by Edward de Bono in a book of the same title, where you put on six different hats during a decision making process. Try and see the buying process from the perspective of your spouse, your children, friends, and even your worst enemy.

Finally, be realistic in your own abilities. While the final decision rests on your capable shoulders, you should rely on the professionals that are by your side. This includes your agent, lender, attorney, and even your family. And while you are the final say, remember that you have a team to help give you information to fuel that sound decision.

- Written by Carla Hill

Mortgages are cheaper today than they’ve been in a half-century. If only most people had the job security, the credit score and the cash to qualify.

The average rate for a 30-year fixed loan sank to 4.69 percent this week, beating the low set in December and down from 4.75 percent last week, Freddie Mac said Thursday. Rates for 15-year and five-year mortgages also hit lows.

Rates are at their lowest since the mortgage company began keeping records in 1971. The last time they were any cheaper was the 1950s, when most long-term home loans lasted just 20 or 25 years.

MORE>>

Source: MyDesert.com

Many have watched the real estate market with bated breath, wondering what lies ahead. The Norris Group, a California-based company that produces an annual report on the state of real estate and predictions, provides some insight. The company recently released the Tip of the Iceberg report by Bruce Norris, an active investor, hard money lender, and real estate educator with 29 years of experience. While the report focuses on California, there are many other national predictions included. Here’s a look at what Norris is predicting in the coming eight years.

“Real estate isn’t even the first domino. Everything that happens in real estate can happen because of other things,” Norris said at a conference earlier this year. In this report, I’m looking at all those other things and finally seeing that they play a big part, if not the biggest part, in how things work out,” said Norris.

The report shows the various government programs for delinquent and financially challenged homeowners and reveals a disturbing fact. “All the delinquency trends for all the types of loans are up,” said Norris. “It doesn’t matter if it’s prime or subprime.” “The national average is 13.2 percent for total non-current (both delinquencies and foreclosures). California ranks at 15 percent, Illinois at 14 percent, Pennsylvania at 10.7 percent, and Florida, the highest, at 23.5 percent. “My friend Alex lives in Florida in Orlando and houses that were selling for $180,000 to $220,000, he’s regularly buying for $20,000 to $22,000,” said Norris.

The national average for the total non-current FHA loans (including delinquencies and foreclosures) is 17.4 percent. California is at 9.7 percent, Illinois at 21.3 percent, Pennsylvania at 15.3 percent, and Florida is at 23.8 percent.

Norris thinks this will provoke more usage of the 203(k) Mortgage by HUD (U.S. Department of Housing and Urban Development). The “Streamline (K)” Limited Repair Program permits homebuyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. “They’ll actually loan you more than the house is worth, intentionally,” said Norris. “Right now it’s only available for owner-occupants but I’m sure that’s about to change,” he said.

“All of us who thought that we were going to see REOs (real estate owned by lending institutions) all over the place for the last few years are quite surprised,” he said. “It’s because there was intervention.” But how will that intervention and the aging population impact us? The report states that having a Federal debt that is trillions of dollars (and growing) and the size of the baby boomer generation will cause big changes that affect finances and real estate. “You’re going to expect higher taxes,” he said. Norris predicts, maybe even up to 45 percent for top tax bracket in 2011 and possibly higher after that. “If we’re going to try to resolve some of our problems and pay for stuff that’s gone on in the past, I think you’re going to have to say ‘We’re going to have to pay some higher taxes.’” Norris also predicts higher unemployment, aging consumers buying less and saving more which he says will mean more burden on the government due to fewer tax revenues and greater expense for government.

Perhaps the good news is the prediction for consistently low interest rates. “This is one of the conclusions that I didn’t think I was going to come up with. I really thought that we’d probably have some scary interest rates but I just don’t think so. Without an overheated economy, I don’t see the big inflation risk for the next period of time. I see the big picture that it could be very scary but for the length of time that I’m trying to cover in this report, I’m not as afraid of it as I thought I’d be,” said Norris.

He thinks over the next eight years, interest rates will be under 8 percent “and you may have times where they are as cheap as they are now.” Norris anticipates milder price increases in real estate as well as a decline in ownership coupled with a constant inventory available. The report also points out something that buyers are already facing, “regulation of finance markets might make it harder to get finance.” He predicts the median price to increase for California to approximately $460,000 in the beginning of 2018 due to factors such as migration. And if the employment conditions improve in the state, Norris thinks migration numbers will do even better, helped in part due to retirees moving into the state. Norris expects more emphasis on housing for seniors, which seems to be a trend in many states.

“I view the next eight years as a pivotal time for us, as a country, to make sure that we don’t end with bigger problems than we’ve got,” said Norris.

The good news is that Norris predicts less volatility in the real estate market and expects increases, albeit, not as drastic as in the past.

- Written by Phoebe Chongchua