A survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.
1. Down Payment
The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less.
Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.
2. FICO Scores
The survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower.
The average conventional loan closed in March had a credit score of 753, while FHA mortgages closed with a 685 score. The average across all loans closed in March was 722. The graph below shows how the average FICO Score required has come down over the last 12 months and has stayed around 722 for the last six months.
If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, sit down with a professional who can help you understand your true options.
The National Association of Realtors’ (NAR) latest Existing Home Sales Report revealed that first time homebuyers made up 32% of all sales in the month of May; marking the highest share since September 2012 and up from 27% the same time last year. NAR’s Chief Economist, Lawrence Yun, cited “strong job gains among young adults, less expensive mortgage insurance and lenders offering low down payment programs,” as contributing factors to the increase in first-time buyers. Existing-home sales rose 5.1% to a seasonally adjusted rate of 5.35 million. Total housing inventory for sale remains under the 6.0 months needed for a historically normal market at a 5.1 month supply. Homes sold quickly in May, as 45% of homes sold in less than a month. May also marked the 39th consecutive month of year-over-year price gains as the median existing home price rose 7.9% above May 2014 to $228,700. Below is a chart showing the breakdown of price increases by region:
Yun went on to say,
“Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers.” “However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4 percent.”
“More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise.” If you are a homeowner considering a move this year, meet with a local real estate agent who can show you the opportunities available right now! Don’t miss out on the influx of new buyers entering the market every day.
Spring is in full force; the summer months are right around the corner. If you are debating moving up to your dream home, here are four great reasons to consider buying today instead of waiting.
1.) Buyer Demand is High & Inventory Is Low
Recent numbers show that buyer demand is at the highest peak experienced in years, and inventory for sale is at a 4.6 months supply, which is still markedly lower than the 6.0 months needed for a historically normal market. The National Association of Realtors, Chief Economist, Lawrence Yun put it this way,“Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer.” Listing your home today can greatly increase exposure to buyers who are out in force and ready to act.
2.) Prices Will Continue to Rise
The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects appreciation in home values over the next five years to be between 11.7% (most pessimistic) and 27.5% (most optimistic). The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting for your current home’s value to increase before selling could price you out of your new home if you aren’t careful.
3.) Mortgage Interest Rates Are Still Near Record Lows
As we reported last week, interest rates have remained below 4% for some time now, and are substantially lower than the rate previous generations paid when getting a mortgage. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison projecting that rates will rise over the next 12 months. An increase in rates will impact YOUR monthly mortgage payment. Even an increase of half a percentage point can put a dent in your family’s net worth. Whether you are moving up or buying your first home, your housing expense will be more a year from now if a mortgage is necessary to purchase your home.
4.) It’s Time to Move On with Your Life
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Have you always wanted to live in a certain neighborhood? Would a climate change be just what the doctor ordered? Would you like to be closer to family?
If the right thing for you and your family is to move up to your dream home this year, buying sooner rather than later could lead to substantial savings.
The top 4 reasons to own a home cited by respondents were not financial.
1. It means having a good place to raise children & provide them with a good education
From the best neighborhoods to the best school districts, even those without children at the time of purchasing their home, may have this in the back of their mind as a major reason for choosing the location of the home that they purchase.
2. You have a physical structure where you & your family feel safe
It is no surprise that having a place to call home with all that means in comfort and security is the #2 reason.
3. It allows you to have more space for your family
Whether your family is expanding, or an older family member is moving in, having a home that fits your needs is a close third on the list.
4. It gives you control over what you do with your living space, like renovations and updates
Looking to actually try one of those complicated wall treatments that you saw on Pinterest? Want to finally adopt that puppy or kitten you’ve seen online 100 times? Who’s to say that you can’t in your own home?
The 5th reason on the list, is the #1 financial reason to buy a home as seen by respondents:
5. Owning a home is a good way to build up wealth that can be passed along to my family
Either way you are paying a mortgage. Why not lock in your housing expense now with an investment that will build equity that you can borrow against in the future?
Whether you are a first time homebuyer or a move-up buyer who wants to start a new chapter in their life, now is a great time to reflect on the intangible factors that make a house a home.
QUESTION: We had to do a short sale on our home in Nevada last year, but now we have landed on our feet again and want to buy a home in our new location in Oregon. We have enough money saved up for a 20 percent down payment for a house we can afford. Is it possible for us to qualify for a mortgage?
ANSWER: It’s great that you landed on your feet and have been able to save money for a down payment on a new house. Your bigger down payment can be a compensating factor that some lenders will use to qualify you for a loan in spite of a negative credit profile that’s a likely result of the short sale.
Conventional loan guidelines established by Fannie Mae and Freddie Mac say that you must wait two years after the closing date on your short sale to finance another home, if you have 20 percent for a down payment. You would have to wait longer if you had less cash for a down payment (four years with 10 percent and seven years with less than 10 percent). So if you want a conventional loan, you’ll need to wait another year.
FHA-insured loans are available with a down payment of as little as 3.5 percent after a three-year waiting period. Veterans Administration loans, which don’t require a down payment at all, are available after a two-year waiting period.
However, the FHA recently introduced a “Back to Work – Extenuating Circumstances” program to help the many people who lost their homes during the recent housing crisis and recession. You may qualify now for this program if you lost your home due to a job loss or a drop in income or both. This temporary loan program will be available for FHA loans issued between Aug.t 15, 2013, and Sept. 30, 2016.
To qualify, you’ll have to meet standard FHA guidelines for a loan approval and a mortgage lender’s requirements. Typically, this means that your credit score must be 620 or 640 and above and your debt-to-income ratio must be 41 percent to 43 percent or less. You’ll be required to fully document your job history, income and assets.
In addition, the Back to Work program has other specific requirements. You must:
Participate in an FHA-approved housing counseling program.
Provide documentation for the “economic event” that caused the bankruptcy, which must have reduced your income by 20 percent or more for at least six months. In other words, you’ll need a W2 or tax returns or a termination letter.
Prove that you had good credit before the economic event damaged it.
Prove that you’ve fully recovered from the event by having a credit report without any late payments for at least 12 months on installment debt and without any major derogatory comments on revolving credit accounts. Your report cannot show any judgments or collections unless they’re related to medical bills or identity theft.
Consult a mortgage lender to see if you can qualify for this FHA program, but remember that FHA loans require mortgage insurance for at least 11 years, even if you make a down payment of 20 percent. You may want to consider asking a mortgage lender if any exceptions are possible for individuals who want to apply for a conventional loan after a short sale. If not, you should weigh the benefit of waiting one more year to buy a home rather than committing to years of mortgage insurance payments.
With severe drought conditions across large swatches of the west and pockets of the rest of the United States, many homeowners are looking for ways to conserve water on landscaping. But there’s no need to rip out your whole yard and replace it with gravel—unless you want to. There are plenty of other ways to create a drought-tolerant landscape while also creating a beautiful and functional space. And drought-tolerant landscaping not only saves water immediately, but will be more resilient against future droughts. Here are some ideas: Take on manageable pieces
Identify your biggest areas of water consumption. Besides lawns, the biggest areas of water use tend to be rose gardens, summer vegetables and cut flower gardens. If you’re not ready to eliminate these areas entirely, figure out how you might want to reduce their size. A rose garden, for example, could be made into a smaller group of favorite bushes. Vegetables and cut flowers can go in containers or raised beds where you will have more control over how much water they get. Mix compost into soil for better moisture retention.
Make your lawn more water-efficient
If you want to keep a lawn, consider downsizing to a smaller swatch, picking a spot where you’ll get the most use, like a play area for kids. Find low water grasses for your area. Raise the blades on your lawn mower—keeping grass longer will reduce evaporation and promote deeper root growth. Leave clippings on the grass after mowing to help retain moisture and return nutrients to the soil–extra clippings can also be tossed on the compost pile. Aerate soil with a soil aerator tool to reduce runoff and help water absorb into the soil.
Or go lawn-free
Consider replacing your lawn with an alternate ground cover. Try ornamental grasses for interesting textures, low-growing flowering plants for seasonal color or edibles like low-growing herbs or strawberries. Some cities offer financial incentives for switching to a drought-tolerant landscape or for using gray water (reused water from baths, sinks, washing machines, and other kitchen appliances.) Check your area for opportunities.
Add more areas of low-water use
Replace a section of lawn with an outdoor seating area, a sandbox for kids or a raised bed with herbs. Create intrigue by laying down paths of flagstone, pavers, gravel, mulch or other porous material. Add new focal points like a porch swing, fire pit, or a patio. Instead of water-thirsty blooms, think of other ways to incorporate color with colorful perennials, planters, chairs or bright native grasses.
Optimize your sprinkler system
Inspect your sprinkler system for leaks, broken heads or misdirected heads that water driveways, sidewalks, or the street. Make sure the system runs early in the morning or late in the day. Consider a “smart” system that will monitor the soil and automatically adjust watering as necessary. Try watering less frequently or for shorter periods. When reducing your irrigation, make changes gradually, so plants and trees have time to adjust.
If you have plants with high water needs, plant them together. Use a drip irrigation system or soaker hose to minimize run off and evaporation. Watering deeply and infrequently encourages deeper roots and more resilient plants. Take advantage of natural sources of water by putting in plants next to paths, driveways and other spots where water run off naturally occurs. Direct eave spouts into raised beds or other planted areas and consider using rainbarrels to collect rain water.
Native plants are a great choice for drought-tolerant landscaping because they won’t need much (if any) watering once established. Over time native plants have developed a natural resistance to pests and won’t require added chemicals and special care. For ideas on good native plants for your area, ask at a local nursery, look on the EPA’s listing of native and regionally appropriate plants, or contact your local extension office.
Shrubs, perennials, bulbs and trees use less water than most annuals and lawns and well-established plants use less water than newly-planted ones. Evergreens and other trees are also a good choice—they’re drought-resistant and offer shade that helps retain moisture in the rest of the yard. Cover steep areas with deep-rooted native ground covers and/or shrubs to discourage water run-off and erosion. Mulching is essential—it helps soil retain moisture and keeps weeds at bay. Use organic mulch like bark, cocoa husks, or pine needles that decompose and nourish the soil. Layer mulch about three inches deep and replace as necessary.
And don’t worry too much about the pool
New research indicates that pools use only about as much water as a lawn of the same size. And covering a pool will cut water use by 50-70 percent, making a covered pool about equal in water use to drought-tolerant landscaping.
A pet-friendly home is not just a fun and safe space for your pet, but also a space that can stand up to the kinds of things pets do to houses. Making pet-friendly choices in landscaping, design, and the materials you use will ensure that both you and your pet can enjoy your shared space together.
Opt for durable flooring – Even if your pet is perfectly well house-trained, they’re bound to have an accident or two. Choose a flooring material that’s easy to clean and won’t be damaged by accidents. Linoleum cleans easily and is naturally anti-microbial. Bamboo, cork, tile, and stone are also good picks. If you want carpet, try a modular kind, made of separate carpet squares. Buy back-up squares so if a section gets ruined, you can pop it out and replace it. Avoid wood and laminate floors. Wood is easily scratched and damaged by water and slippery laminate can cause injuries.
Choose pet-friendly materials and décor – Opt for satin paint instead of flat paint on walls. A glossier finish won’t show stains as prominently and wipes clean. Chose low VOC (volatile organic compounds) paints, especially if your pet bites or licks walls. Match the colors of throw rugs, upholstery, and other décor to your pet’s fur color to give yourself a little more leeway in how frequently you’ll be vacuuming and de-furring the furniture. Set up a feeding area in a spot where you won’t be accidentally kicking over the water bowl. Find a nearby place to store dog food, ideally in a sealed container, like a plastic bin or a metal garbage can with a lid.
Protect furniture – Choose upholstered pieces covered in tough, easily-cleaned fabrics like leather or ultrasuede. Consider washable slipcovers, throws to protect furniture, or extra-durable fabric designed especially for pet owners. Keep pets from chewing furniture by spraying with store-bought, anti-chewing spray or applying a bit of cayenne pepper to their favorite biting spots. If you need to keep a pet out of a particular area, put up baby gates and provide the pet with plenty of sturdy toys for diversion. Set up a special bed or blanket so your pet has a comfortable, cushiony place of his own.
Eliminate dangers around the house – Walk around your house and assess possible pet hazards. Move chemicals and cleaning materials to high shelves or locked cabinets. Make sure trash cans are safely secured so pets don’t get into something that could be harmful to them. (Many common household articles are toxic to pets including: coffee grounds, onions, grapes, and even nutmeg.) Latch lower cabinets with child locks if necessary and keep curtain and electrical cords out of pet reach. Put screens in upper level windows and make sure they’re intact and securely attached. Keep toilet lids closed and avoid automatic bowl cleaners. Wipe up spills in the driveway and garage immediately so pets don’t ingest poisons like antifreeze. Remove any indoor plants that are toxic to pets. You can find a list of toxic and non-toxic plants on the Humane Society’s web site (www.humanesociety.org).
Consider a pet door – If you are frequently away from home, consider putting in a pet door. Pet doors can be put in windows, doors, and walls. Smart models recognize your pet electronically and will only open for them, not for other animals. The doors can be controlled remotely and deactivated if you need the pet to stay inside. If you’re worried about the resale value of cutting a hole in the wall, consider a model that’s built into a glass sliding door. When you sell, you can replace that part of the door with a regular slider.
Create a yard for pets and people to share – Find safe, pet-friendly materials for plants and hardscape. Put in some mint or catnip for cats and a clover ground cover for dogs because it won’t yellow with urine. Outdoor cats like places to hide and things to climb and will make good use of trees and bushy areas. Dogs instinctively patrol the perimeter of the property and like running paths that follow the yard’s circumference. If your dog has already created a path, embrace it, covering it with mulch and lining with attractive plantings. Make sure your fence is in good condition with no secret ways out (including benches, large rocks, or other items that can serve as pet launching pads). Consider putting in a small eye-level panel in the fence so dog can peek out and keep a watch on things. For safety, keep sharp tools put away, keep compost bins covered, and avoid chemical like fertilizers and pesticides. Make sure plants are non-toxic and avoid plants with thorns. And pets like a lot of the same things humans like, so you’ll both be pleased if your yard has a shady spot to cool off and comfy places to sit.
You have done the hard part in the home-buying process and chosen a lender and a real estate agent to work with. You have also gone out and found the home of your dreams! Best of all, your team has done a great job of negotiating the best deal for you.
Now, as a buyer, all you have to do is sit back and wait for your loan to close … right? Wrong!!
Getting a home loan these days is a very interactive process. I am always amazed by how many clients I work with who come to me unaware of all the pitfalls they face during the loan process. To help avoid any surprises while waiting for final approval, I provide my clients with a short list of “do’s and don’ts” to follow.
Let’s start with the “do’s” …
Do keep the process moving by responding to your loan officers’ requests for documentation as soon as possible.
Do make decisions as soon as is reasonably possible.
Do convey questions or concerns you
Do continue to make all of your rent or mortgage payments on time.
Do stay current on all other existing accounts.
Do continue to work your normal work schedule with no unplanned time off.
Do continue to use your credit as normal.
Do be prepared to explain any large deposits in your bank accounts.
Do enjoy purchasing your home but remain objective throughout the process to help make decisions that are best for you.
After you have been preapproved for your mortgage you will want to refrain from the following…
Do not make any major purchases (car, boat, jewelry, furniture, appliances, etc.).
Do not apply for any new credit (even if it says you are preapproved or “xxx days same as cash”).
Do not pay off charges or collections (unless directed by your loan officer to do so).
Do not make any changes to your credit profile.
Do not change bank accounts.
Do not make unusual deposits into your bank accounts or move money around from one account to another.
Follow these simple rules and you will help to make your loan closing as smooth and hassle-free as possible! Good luck!
Considering a short sale as a Bank of America mortgage holder? Well make sure you hire an experienced, proven short-sale agent and that they are current on that lender’s process.
Below describes some new changes to B of A’s shot sale process imperative tot he successful completion of your short sale.
(Re-Printed from B of A email correspondence 07/31/2014)
The new Initiation Package assists a homeowner through the Short Sale process. Starting mid-July, homeowners will receive a short sale Initiation Package upon initiating a short sale and not being reviewed for a home retention option. Included in the package is the Borrower Election Form that will now be required before proceeding with a short sale.The short sale transaction will no longer continue and no other homeowner documentation or offers will be reviewed until the signed Borrower Election Form is received and verified by the Short Sale Specialist. As a reminder, for your agent, a valid Third-Party Authorization Form is also required and must be verified in order to proceed with the transaction.
As a homeowner, thoroughly read this package including the Homeowner Checklist. This package contains a list of financial documents that may be required to complete a short sale. B of A’s ability to evaluate the homeowner for a short sale, as well as postpone collection and foreclosure efforts, depends on their receipt of all necessary documents. Upon initiation, a Short Sale Specialist will continue to contact your agent, to discuss the next steps in the short sale process.
Initiation Package Includes:
Information on Loan Assistance Programs
Frequently Asked Questions
Important Notice to Help You Avoid Foreclosure Scams
Borrower Election Form – now required upon initiation
Request for Mortgage Assistance (RMA) form
IRS Form 4506-T
Please note: initiating directly into a short sale, through Equator, is not an option for Federal Housing Administration (FHA) investor properties. Homeowners must always discuss their situation with their Customer Relationship Manager (CRM), who can help them identify if they qualify for an exception to proceed with a short sale without doing a full home retention review.
With the positive momentum in the market, more home owners are ready to put their homes on the market and make a sale. But beware—when prices are up and inventory is down, more sellers become overconfident and careless with their sale.
Here are eight of the top ways sellers sabotage their own home sale, and tips to save the day.
1. Refusing to Make Obvious Repairs Prior to Sale.
Agents tell sellers this everyday, all day: “You will lose money if you don’t take care of repairs before the house goes on the market.” Showing a house when there are leaking faucets, cracks in the walls, water stains on the ceiling, and a busted hot water heater are all ways to turn off potential buyers.
What Sellers Need to Hear: “Shelling out the money may seem like an extravagant expense—especially if you don’t think that the repair will add much to the value of your home. Trust me—time and time buyers over estimate the cost of a repair, so they are going to try to get what they think the repair will cost, and that’s going to cost you more in big credits or discounts!”
2. Ignoring the Backyard
Everybody knows that fantastic front curb appeal sells homes, but many sellers forget what’s out back. In the summer and fall months, everyone’s attention turns to the outside spaces, where they dream of warm summer nights and outdoor entertaining.
What Sellers Need to Hear: “If you don’t maximize and capitalize on your backyard, you are missing a huge component of your warm weather living spaces. That back yard patio is not just for storage of old bikes and broken patio furniture that should have been thrown out years ago. In a buyer’s eyes, it can be the most important ‘room’ in the house. You need to stage your backyard and outdoor entertaining areas as beautifully as you would the interior of your home. Green grass, flowers and trimmed trees should be the same standard as your curb-appealed front.”
3. Hiding Problem Issues From the Buyers
Far too many agents have watched too many home sellers pay out big bucks because they didn’t “reveal it all.”
What Sellers Need to Hear: “Disclose! Disclose! Disclose! Once you have an accepted offer, sellers are required to fill out disclosure statements. If you did renovations to the house without a permit over the years, disclose. If there was a roof leak that damaged the attic two years ago, disclose. If the electrical blows every time you run the dishwasher and the microwave at the same time, disclose. You know the history of the home better than anyone, and we need to work together so that we know how to address any potential issues. The buyers will find out eventually. And if you knowingly have kept things from them, it sets the tone for an ugly and difficult closing. Not to mention that you are setting yourself up for the liability.”
4. Getting Egotistical When Negotiating
Every agent has had that seller who just simply cannot fathom that a buyer would even think to make such a low offer, but the truth is that most of the time, the buyer doesn’t mean to offend the seller. Heck, the buyer may even know that the home is outside of their price range, but they may just love it so much that they couldn’t resist making an offer. Too many sellers take negotiations personally and lose out on creating a win-win deal.
What Sellers Need to Hear: “Real estate transactions are business deals. Plain and simple. There is no room for ego here. If an offer comes in low, the mistake is to be insulted and not counter back. Always counter back and keep deals in play. Keep your ego out of the equation and put your head back into it. Remember your end goal: getting your house sold and having a smooth and successful closing.”
5. Using Lousy Photos (and Not Helping their Agent Get Great Ones)
Ninety percent of all home shoppers start their home search online, and nothing can tank a home sale like terrible listing photos. But sometimes sellers don’t understand the importance of fantastic listing pictures—and that can mean that agents need to resort to grabbing a few fast photos on a cell phone or on a rainy day. After all, the only thing worst than terrible listing photos are listings with no photos at all.
What Sellers Need to Hear: “Think back to when you were originally looking for a home. Even if you were house hunting when online wasn’t a huge thing, you probably remember that seeing a home told you more about it than any text ever could. Even in a sellers market, great photos can help draw in the best buyers—the ones who will be willing to make a big offer on this property.”
6. Holding On to Clutter and Junk
For as long as buying and selling a home has been a “thing” (so a very long time) there have been sellers that say, “Oh the house looks fine. Buyer’s will see right past all my boxes and collections of plaster cookie jars and shelves overflowing with nick-knacks.” Big mistake. Huge.
What Sellers Need to Hear: “It may sound like a good idea, but it’s not a smart approach. Believe me, I have seen homes come on the market that could have sold much faster, had the home owners spent just one weekend depersonalizing and removing all the extra things inside the home. Clutter makes your home seem smaller, ultimately eating equity and killing deals. Take inventory of all your possessions and think to yourself: should I save it, store it, sell it, or chuck it? It may seem like a solid amount of work, but one weekend of work could mean thousands of dollars come closing.”
7. Selling A House Via “For Sale by Owner” (FSBO)
When the market is hot, many people think that selling their home on their own is easily doable. “Who wouldn’t want to save on commission?” think many sellers. Despite the lure of not having to pay an agent a commission, sellers need the expertise and know-how of a professional, who can help navigate the stacks of paperwork, provide priceless neighborhood knowledge—and negotiate on the seller’s behalf.
What Sellers Need to Hear: “The numbers don’t lie: the typical FSBO home sold for $174,900, compared to $215,000 for agent-assisted home sales. There may be more to a home sale than you realize. Let me walk you through what type of service I can provide you with.”
8. Overpricing the Home
For agents, this is the one major seller mistake that we see the most frequently. It is a misstep that seems to rear its head whenever the market seems like it’s heating up.
What Sellers Need to Hear: “Yes, the market is hot. But not hot enough that you can push the envelope and price it for way more that the comps will support. Overpricing your home is dangerous —and you can end up burned in this ‘hot market.’ You run the risk that your home will sit on the market for weeks and months and become the stale listing that every home seller wants to avoid. Know the competition and set the right price—never overprice too high in hopes that someone will unknowingly overpay. Let me walk you through the data.”
There they are — the biggest selling mistakes of the season.