Posts Tagged ‘buyer’

Tales of a Home Buyer – part 3

May 20, 2011

Written by Shawn DeVries

Not long after, that call did come.  A friend of a family member was selling her parent’s home and was looking to her contacts first for potential buyers.  Fortunately, besides just looking online and in papers, I had told my family and friends that I was shopping for a house.  I also told them what I was looking for and to keep their eyes open for me.  When those big steps in life come up, it is important to enlist the help of those who know you best.

The sellers were selling the property by themselves without a realtor. (A For Sale By Owner.)  Had I not been employed by a lender I probably would not have considered this prospect.  I wondered how much experience they had in selling a home.  I wondered if they had any help lined up to handle this transaction. Yet, while I had some serious concerns I also figured that at this point I was only looking at the place.  So off I went. 

Remember that houses have personalities all their own?  This one was warm and inviting.  This place had character and charm.  This house could easily become my home.  I let them know I was interested but left myself an out.  With spring break coming I would be out of town.  So we made arrangements to talk again after my vacation and that if any other offers came in they would call me to see if I really wanted the place.

During my vacation I could not get that house out of my mind.  By the time my short hiatus was done, I had the place re-carpeted with new laminate flooring, fresh paint and my furniture all neatly placed inside.  This was all in my head of course, but I was hooked.  Again we set an appointment to meet and I made them an offer.  While they remained cool and asked for time to deliberate I was given a good feeling when I left. 

They called first thing the next morning to ask where to fax the signed agreement.  I was screaming with excitement!  I had found a house.  (I was actually screaming inside since I was at work, but I was still really, really excited.)  Now the real work began.

What is a Buyer’s Agent?

May 4, 2010

There are two general types of agency involved with the purchase of a home, the listing agent and the selling agent.  The listing agent is the realtor who has listed the property as being for sale.  The selling agent is the realtor who actually sells the home to the buyer.  In both of these instances, the realtor is ultimately working to sell the home.  This is after all, how they make a living.  However, you can make one simple step to ensure a realtor is working for you the buyer.  Get a buyer’s agent.

A buyer’s agent is a realtor that works exclusively for the buyer.  But there they are also so much more than that.  Only members of the National Association of Realtors can claim the title of Realtor.  And only members of the Real Estate Buyers Agency Council can call themselves an ABR (Accredited Buyers Representative).  An ABR has gone through intensive, specialized training in the process of buying a home. These agents hold to a code of ethics that hold the professional to high standard of conduct.

Having an ABR buyer’s agent work for you can lower your risk of losing money throughout the buying process.  He or she will make recommendations that will assure that you are buying a home that is safe, environmentally sound and priced fairly according to the current marketplace. 

Don’t be surprised if you are asked to sign a contract of commitment for a set period of time to work exclusively with this particular ABR buyer’s agent.  This can actually be a very good thing.  A Realtor does not get paid until the sale of your home closes.  This means your agent is focused on helping you meet your goals, or they won’t get paid.  Now consider that Realtors have information on homes in the marketplace that you the buyer do not, such as the latest homes for sale and price changes.  As a committed client, you will have access to that information first. 

Once you find that dream home, you will want a professional on your side helping you negotiate the finer points of the transaction; handling the forms, contracts and paperwork that needs to be processed; and dealing with any challenges that come along the way.  Don’t let the purchase of your dream home turn into a nightmare.  Work with a professional, Accredited Buyers Representative.  You’ll be glad you did.

What’s the Difference?

February 16, 2010

What’s the difference between a Short Sale, Foreclosure and HUD Home?

Some time ago, we posted a series of articles on different terminology related to home purchases that can often create confusion.  This post covers three more – Short Sales, Foreclosures and HUD Homes.  The current housing market has more homes available that are not the traditional transaction.  Here are just three you may want to know about.

A Short Sale is a home that is being sold by the current owner where the selling price is less than the current balance owed on the mortgage.  Many times there are outlying factors that force a short sale, such as relocation for a job change or a homeowner who has fallen behind in payments and is trying to salvage some equity or avoid foreclosure.  The advantage of purchasing a home in short sale is that you can get the home for its true market value, and not an artificially inflated price. 

The primary disadvantage to purchasing a short sale home can be the time involved.  In many cases, the bank is unaware of the seller’s intentions to sell the home, therefore once the bank receives the offer they must spend a great deal of time investigating the details.  This process can take months.  Unless you have written a deadline to your offer being accepted, you could be locked into this transaction until it is either approved or denied by the bank.  In some cases, the bank can pre-approve a short sale, but keep it mind it has been approved for a specific price.  Any other offer must be resubmitted and approved by the bank.

A Foreclosure sale means that the bank has full possession of the home and is the seller you will be negotiating with.  A foreclosure purchase is most like a traditional home purchase out of these three examples.  The biggest advantage of foreclosure sales is that you are dealing with a seller who has no emotional ties to the property.  It is simply a matter of recovering as much of their money as possible.  The second advantage is that you can purchase a home at a value much below market value.  You are free to negotiate price and seller concessions, but keep in mind the bank has based the selling price on a recent appraisal done to determine value.  The final selling price boils down to how desperate the bank is to sell the property.  So while you can offer a lower price, don’t be insulting.

The disadvantage of foreclosure homes is that they generally require repairs before you can assume occupancy.  The seller (the bank) also has more control of the sales process and can back out for any reason, such as an amended contract with a condition they find unacceptable.  Start by writing a sales contract that you understand, protects your interest and with terms you can agree with.  By reading your contract carefully and in detail you can generally avoid most areas of contention.

A HUD Home is an FHA owned property where the home is made available to individual, owner occupied buyers for the first 10 days it is on the market.  After these initial 10 days, all bids are reviewed at one time.  If no offers are accepted investment buyers can then place bids on the property.  Again the advantage of these types of sales is the ability to get the home for a price under the typical market value. 

The biggest disadvantage to a HUD home is that the asking price is set at an “as is” appraised value.  Any bid for more than this amount must be paid in cash at close by the buyer.  If your sales price is higher than the asking price, you can only mortgage the asking price less your down payment.  Be prepared to move quickly if you have your eye on a HUD home; if the repairs are at a minimum these homes will move quickly.  Generally homes purchased by investors require significant improvements to bring them back to acceptable safety standards.

Don’t be afraid of these types of transactions, just do your homework and work with licensed professionals who have experience with these types of purchases.  They can help you navigate the process successfully.

The Rules are Changing

January 25, 2010

Over the past couple of years requirements for obtaining a mortgage loan have become tougher to say the least.  For example, no longer can you simply just tell your lender what you earn – you need to prove it.  Your credit scores also need to be very good or excellent to be approved.  Just having a pulse no longer works either.

The plus side of tighter regulations is that consumers are more prepared to purchase a home.  They have worked to maintain a strong credit score; they have money to not only use as a down payment, but also funds available in reserve for after the sale.  Lenders themselves are also doing their homework.  They are paying much more attention to what is in the best interest of the borrower, and not just the bottom line.   Lenders that have not are no longer in business.

So what changes are being proposed this time?  The most significant changes are an increase in the minimum credit score, an increase in the upfront mortgage insurance premium, and a decrease in the amount a seller can contribute to a buyer’s costs. 

For most borrowers, the increase in the minimum credit score has already happened in effect because of what individual lenders will allow.  According to FHA policies, borrowers are required to have a minimum FICO credit score of 580 to qualify for the minimum down payment requirement of 3.5%.  Most lenders however, have a much higher requirement, most at a 620 score or better in order to qualify for a loan.  If you find a lender that will still accept the lower minimum score, be prepared to pay higher fees or accept a higher interest rate.

The increase in the upfront mortgage insurance premium is a significant change.  Until now, when a borrower has less than 20% invested into the home, mortgage insurance is required.  This insurance is to protect the lender in the event of a foreclosure.  FHA is a self-funded government agency that has been able to support itself from the monies raised from these premiums.  However, with the recent increase in foreclosures, the agency has had its reserves fall below the minimum level set by Congress.  FHA hopes that increasing the premium from 1.75% to 2.25% of the total loan amount will resolve this problem.  Unfortunately this means that the borrower of a $100,000 house will have the upfront premium increase from $1,750 to $2,250, or $500 more.  This change will become effective sometime this spring and for now only affects the upfront premium, not the monthly mortgage insurance premium.

The final change is a decrease in what a seller can contribute toward the buyer in a purchase transaction.  Until now, a seller could pay for up to 6% of the buyers closing costs.  This will now decrease to a 3% maximum.  This too will affect the amount of money a buyer will need to invest into a purchase transaction.  This change is expected to be effective in the early summer.

All this means that if you have been thinking about purchasing a home, ‘now’ is becoming a better and better time to do so.  Especially when you consider the extended home buyers credit that offers up to $8,000 for first-time buyers and up to $6,500 for other buyers who meet the qualifications.  If you need to wait though, don’t panic.  Simply be prepared to be more prepared when buying that home you have your eye on.

What’s the Difference? (Part 1)

December 31, 2009

(Part 1 of 3 posts on terminology that can often create confusion)

Don’t you just hate it when someone you are talking with starts throwing words around that you don’t fully understand?  We certainly don’t want that!  It is important that anyone involved in the purchase or refinance of a home understand the terminology used.  Especially when you consider this information involves not only your personal finances, but also something with high emotional ties – your home.

This series of posts will compare two similar terms but with very different meanings and implications that are used throughout the mortgage process.  This information will hopefully be valuable and not just industry jargon to pepper your conversation.  But either way, we thought you might want to know.

Part 1 – What’s the difference between a “pre-qualification” and a “pre-approval”?

Regardless of which term you are referring to, both words describe a lender’s review of your personal information in order to secure a home loan.  The process is typically used when a borrower is preparing to purchase a home.  (Incidentally, it is highly advised to take this step before you shop for a home, rather than shopping for a loan after you find your dream home.)

The significant differences are:  the amount of effort a lender puts into helping you determine how much house you can afford; and in how much documentation you provide a lender.  A pre-qualification means you have had a casual conversation with a lender and have verbally discussed your financial situation for purchasing a home.  You will only talk about your credit, income and possibly size of down payment.  You are given an opinion of your ability to secure a loan based on a hypothetical situation.

A pre-approval means you have provided actual documentation to verify your income and assets, have had a full credit report run, have discussed various loan options available and have a good idea of how much house you can afford.  You will also know how your home may be financed and what the payments can look like.  In a word, you are an informed buyer.

Gaining a pre-approval has significant advantages to both the buyer and to the seller.  As a buyer you know how to shop, can make an offer with a high degree of confidence and know that you have financing lined up.  Taking this simple step also gives you huge bargaining power over a pre-qualified buyer since your offer is more financially sound.  As a seller you know a pre-approved buyer is serious, prepared to make you a quality offer and you don’t have to worry if the deal is going to fall through.

If you are considering purchasing a home, call one of our Home Loan Specialists today (866-98-AWARE) and let us help you with a pre-approval so you can shop with confidence to purchase your dream home.

Coming soon – Part 2 – What’s the difference between a “pre-paid expense” and a “closing cost”?