Got Student Loans?

portside.com

Got student loans? There's quite a bit of that going around. But that doesn't mean you can't purchase a home. Prior to 2008 first time home buyers occupied almost 40% of the market. Due to the recession, that percentage has gone down, into the low 30's.  Student loans is one of the reasons given for that large decrease. And student loans sure can eat up a chunk of change, no doubt about that.

  But having student loans doesn't necessarily mean you can't purchase a home.

 If your loans are in deferment, while that is not a bad thing, it doesn't help when you are qualifying for a loan. Your student loan payments have to be taken into account whether you are actively paying them or not. 

  So keep in mind that student loan payments are a factor in the debt ratio.  
  
  Purchasing a home, like any large financial decision requires some planning. If you are considering purchasing a home and you have student loan debt, now might not be a good time to buy a luxury car for instance. The best way to determine how much house you can buy is to visit your lender for a pre-home buying consultation. Your loan originator can go over your debt and income and come up with a plan so you may be able to purchase a home in the future. It might be that some consumer debt will need to be paid down in order to afford the home you wish to buy. Or perhaps you might need to re-amortize your student loans into a longer repayment period. 
  
  Or perhaps the best thing is throw as many resources at your student loans as possible for a few years to get them paid down. There is no one size fits all answer - but if you wish to own a home and begin building equity and net worth, it is certainly worth the time to investigate.

No Tire Kickers Please

Serious buyers-if you are a seller that is what it is all about. Today's Friday Funny underscores the fact that homes aren't put on the market for decorating ideas. Sellers want one thing: They want their home shown to folks who not only truly desire to buy what they are offering, but also have the means to do so. What constitutes a serious buyer?
The first sign of a serious buyer is one who has is pre-approved by their lender. They have made that call and gone over their financial situation as well as having done a credit check to determine their price range as well as their credit eligibility to buy. Looking at these two elements also assists the lender and agent determine which loan product suits that buyer's needs. Many sellers won't even show a home if the buyer hasn't taken this first important step.
Another important facet of a serious buyer is one who is willing to offer a purchase price that is in line with the neighborhood market. Sure, every one likes to think they are getting a good deal but particularly in a hot market like ours, a low ball offer won't be considered when multiple offers are flying in. As I used to ask the buyers I worked with back in my real estate agent days, "Do you want to write an offer or do you want to buy a house?" There is a big difference.

belmontrealestateblog.com

Buying in a Hot Market

  My most recent post mentioned that our area had achieved a rare feat-being included in the top 20 hottest markets in the U.S. If you are a seller that is great news! If your home is priced right you should experience a shorter market time and if you are really lucky you may even receive multiple offers. But what does this mean if you are a buyer? 

It means that you, Mr. or Ms Buyer need to have your financial ducks in a row. It means you don't make an offer until you have visited your lender to know your price range, the type of loan product you are going to use, as well as any credit issues that could slow down the process. It means that your down payment should already be in the bank or the source of your down payment should already be identified. It means if you need to ask your seller to assist you with closing costs, you have an idea of what those are.

I understand that the most exciting part of buying a house is looking at properties. However, if you haven't done your homework on the financial end, you may lose the opportunity to submit an offer on a home you love. In the type of market we are currently experiencing, sellers won't bother with buyers who can not produce a pre-approval letter.

Who should you call for a pre-approval? There are obviously many choices ranging from your local bank to large lending institutions that are national in scope, to online possibilities. Interest rates and closing costs vary from locality to locality. It is important that you have done your lender shopping prior to selecting the home you are going to buy. Here is a bit of truth-it is about more than the interest rate. Most lenders are going to be within about 1/8th of each other on interest rates. If you find one that has a large difference in rate from everyone else, there is something you don't know yet. Maybe it is a different loan program or perhaps there are fees known as discount points attached to the rate. Be sure you know all the facts. It is also important that you are able to speak personally with the same person throughout your transaction. A mortgage loan file is complex. It contains all the financial quirks and specifics of each borrower. It isn't something that someone who is unfamiliar with the file can just jump into and give you good information. As automated as some lending can be, person to person contact produces the best results.

Let's say you want to write an offer, but the price is at the top end of your affordability. You really want to know the payment before you commit. But you can't reach anyone at your online lender. In this market, waiting a day for a return call could cost you the house.

Mortgage Banks such as Hallmark specialize in mortgages and customer service. We aren't worried about your checking account, or your credit card or selling you services other than mortgages. Be prepared to buy in this hot market-while financing is the boring part of the process, it is also critical to your successful offer.

CLOSING COSTS? WHAT THE HECK?

ruggedgrp.com

What?! i need more money than just for my down payment? I hear that frequently. Yes. Yes you do. The money you need to purchase a home is for two different things: down payment and closing costs. Closing costs are the fees that you are required to pay the lender for services that are needed to close the transaction. What services you might ask. Here are the basic items that constitute closing costs:

Underwriting and processing - lender required

Appraisal and credit report - lender required

Tax transcript fees -lender required

Title Fees-which include a title exam, closing fee, and issuance of an owner's policy -required to be sure the title can be passed free and clear to you, as well as insure you in the case of a claim against the title in the future.

Recording Fees-required by the county of the property and the lender

There is also a subset of costs known as pre-paids. 12 months of home owner's insurance paid in full, interest on the loan to the end of the month, and a cushion for taxes and insurance known as your "escrow account" so that there will be enough money to pay these items a year from now when they come due.

These are the basic fees. Lending fees normally run $1900-$2000. The pre-paids depend totally on the cost of your taxes and home owner's insurance. Title fees are minimally going to run in the $500-$700 range depending on the size of the loan.

In addition there can be others such as termite inspection fees, well and septic test fees and if you choose to "buy down" your interest rate to a lower rate there is a cost.

The good news is you can often ask the seller to pay part or all of the closing costs. Up to 3% of the purchase price on conventional mortgages or up to 6% on government loans. In addition on VA loans there are some costs - $1000-$1200 that the veteran is not allowed to pay, so the seller normally does pay them or in some cases the lender does.

And there are two 100% loan types out there VA and USDA as well as the Indiana Housing down payment assistance which do not require a down payment, so monies saved can go for closing costs alone, or partial closing costs with seller concessions.

While it is possible to obtain mortgage financing without much out of pocket expense, I think it would not be entirely truthful to give someone the idea that they can get into a home with absolutely no out of pocket expense. Between inspections and earnest money I would plan for a minimum of $1000 out of pocket if you qualify for one of the no money down programs.

What Does Equity Mean to You?

blog.smarthomeequity.com

Today I want to talk a bit about home equity. For many new and would be buyers this term may be unfamiliar. Home equity can equal savings-savings you don't even think about. To keep it simple, equity in your home is the difference between what the house is worth and what you owe on it.

Let's say you buy a house for $100,000. You put 5% down ($5000). This would mean your equity is $5000 the day you close on the house...unless...your house appraises for $115,000 during the sale process. Then your equity is $$20,000; the difference between what the house is worth and what you owe.
Well that's nice, you say. No one wants to pay more than a house is worth, but what does that mean to me? Let's attack that question in a couple different ways. If you are a smart buyer you will purchase a home in a neighborhood in which there is demand. Perhaps it is because of the local schools, or maybe the physical characteristics of the lots in the neighborhood. Perhaps the location is close to shopping and amenities. It is financially advantageous to purchase one of the lower priced homes in an area that is growing in demand and value.

Since Americans only remain in a home on average 5-7 years. chances are that you will wish to sell that property sooner rather than later. Job transfers, growing families, more income, all contribute to the reasons people put their homes on the market. If you have bought into a neighborhood that has increased demand, your home should be worth more than what you paid for it, therefore, your value is up. You have been making payments all this time, so what you owe is down. Meaning you will have more money to put down on your next home or stash away in savings if you aren't buying again right away.

Perhaps you have no intention of moving, but your family has grown over the past seven or eight years and you need more space. Your home that you paid $150,000 for has increased in value to $175,000. Chances are there is some cash you could take out of the house between what you owe and what it is worth refinancing or using a home equity loan to add on or improve the home.

At Hallmark we have a loan that does just that, our Toolbox loan. Using the toolbox you can access the equity in your home up to 95% of the value for improvements. This product can even be used on a purchase to update a home you wish to buy assuming the home is worth enough to support the loan. Equity can be used for other things as well: to finance a portion of retirement if you sell once you retire, to access to send a child to college, or in some cases it might make sense to pay off debt.

So the next time someone is talking about equity in a home-what they a

Getting In Your Own Way

ninchanese.com

We all want a smooth mortgage process.If you ask around I am sure you will find multiple stories of mortgage processing horrors. There are some doozies out there. I know I hear them. However, there are things you can do to keep what began as a positive experience from turning into a nightmare. So take note-ignore these items at your peril.

1) Discuss loan options with your lender. Do your comparative shopping up front before you find a house. Decide where you want to apply for your loan. Jumping ship with the pressure of the clock running up to a closing date is not recommended. If you exceed the expiration on your contract date there is nothing but the seller's good will that will extend the contract. Think about it-maybe he has a better offer if yours falls through.

2) Don't forget to tell your lender about child support payments, loans not on your credit report, upcoming job changes or litigation that may be occurring. These can affect the outcome of the approval.

3) Give your lender the email address you check most frequently. If you don't use your email-say so. Most lenders communicate using email unless informed not to do so. Many documents are time sensitive and will be emailed unless instructed otherwise.

4) If you take a vacation while your loan is processing leave contact information. Failure to be able to reach you can cause delays.

5) Offer to supply documentation for your file prior to writing an offer. A loan file can't be submitted without all the appropriate financial documentation. We don't ask for documents because we like fat files-we ask for what we need to underwrite the file. You can question what we request-but generally there is no court of appeals. Please keep in mind that a lot of what is needed is federally mandated.

6) The Federal Government requires you to have three days to review your final fees prior to closing. This time table can't be moved up. Be aware that closings can't happen on the fly.

7) Do not change the terms of your contract-such as ask for closing costs after submission or decide to bring more money for the down payment to closing without telling your lender. We won't know if you don't tell us so the changes won't be made to the loan.

8) Tell your lender as soon as you are aware that there is an issue with your whole house inspection or if there isn't. Sometimes the lender, as a courtesy to you, will not order the appraisal until they hear that no deal killers came out of the inspection.

9) Don't anticipate that the appraiser will value your home for more than the sale price. He/she might, but the job is to support the sale price, not give you instant equity.

10) Be sure to get all requested documents while your loan is in process to your lender in a timely manner. Most underwriters and loan processors work on an assembly line type basis. If you miss your turn, you don't get moved to the front when you get your items in. You have to wait until your turn comes around again. So slow response only slows your loan down.
Typically, if we have what we need when we submit the loan file we can close your loan within 30 days. Items we don't control are the appraisal results, title concerns, and how fast you respond. If everyone works together we can deliver a smooth, on time closing.

Ready, Set Go!

deviantart.com

So. You have decided that you want to get out of that apartment and purchase a home this year. Congratulations, I support you 150%. (Full disclosure here, I make my living doing mortgages so your successful house hunt, means I get to pay my mortgage-but that aside, even given the fact I have a dog in the hunt, I really do believe whole heartedly that home ownership is the way to go.)

But it is important that if you are planning on purchasing a home this year that you understand the lay of the land. Locally, that is. In the Tippecanoe and contiguous county area there is currently a shortage of homes in certain price ranges. And the price range that most first time home buyer's are looking is a key one.

That being said, it is a very bad idea to go open housing on a Sunday without a plan. You may not intend to buy a house next Sunday, but if you find "The One", it probably won't be available by the time you are ready to write an offer. By ready I mean that you have been to your lender to get your financing in order. You might think you know what you can afford to pay for a mortgage payment, but do you really know if that is what a lender will allow? Do you have a down payment? What if you don't? How is your credit? Is it mortgage ready? What kind of loan are you talking about? All key questions to a purchase agreement.

Every year I have first time home buyers (and some second or third timers who don't realize how vastly different lending is than the first time they bought) present themselves for a quickie pre-approval letter, only to find that the assumptions they have made about what they can buy, or the payment required is vastly different than what they thought. Maybe the credit score is a tick too low for the loan that is being requested, or too low for mortgage lending at all. And before you can say, "Bob's your uncle," "The One' is gone, sold to a buyer who had their financing in place and ready to go. I know, the financing and number crunching isn't the fun part of the process, but it is a necessary part. So please...don't assume anything. Give me a call and get ready, set, to go. You may not find a house for six months, and that's okay. When you do I will have what we need in my file to give you a thumbs up to rock and roll on an offer so you are in the best negotiating position possible.