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.

To Infinity And Beyond-My Apologies to Buzz Lightyear

  If you watch The Big 10 Channel lately (as well as the Super Bowl) you have seen commercials for an online lender that feature this little guy. The commercials are touting the speed of qualification for a mortgage of the space ship mortgage that is offered. It's fast-like a Titan Rocket. The showing of the ad during the Super Bowl has elicited a twitter war that even the CFPB (Consumer Financial Protection Bureau) got into - “When it comes to ‪#‎mortgages‬, take your time, ask questions and ‪#‎knowbeforeyouowe‬,” Maybe not such bad advice. While the Space Ship mortgage company is highly technologically evolved as far as automated systems go, obtaining a mortgage isn't quite the same transaction as purchasing a pair of shoes online. Shoes in the wrong size can be returned in most cases. Mortgages cannot.

  When I was a mortgage broker one of our investors was the aforementioned Space Ship Mortgage Company. I can attest to the fact that they are a highly automated company. The particular process that they are advertising actually allows them to view your assets, taxes and income (you check off that 's ok) through automation so that you aren't hassled with getting those items to a real live person upfront. Or asking that real live person to wing it. I presume you do have to provide hard copies at some point-that was the case when I had transactions with them. And that is where it can all break down. Garbage in, garbage out. While income, assets, and credit are a huge part of the story, it's the details that aren't apparent with just that information that hang a loan process up or kill it all together. Things like child support that add or subtract from income, the fact that someone quit their job a year ago and then was rehired six weeks later, thereby changing their hire date and tossing out the possibility of using any overtime to qualify since the use of overtime funds is a two year average from hire date. This speedo qualifying doesn't pick up nuances of credit. Your loan might not qualify due to credit issues, but maybe your issue can be easily solved. What you know is that you are declined-not what you need to do to fix it. For reasons such as those, I think having a person is good. Someone who knows the mortgage industry and how things work. Of course that is my job- I would prefer to keep my job so in the interests of full disclosure, I have a dog in the hunt. And I am all for automation. Hands down my company does a great automated gig. However, there is a human being on the front end.

  This is the most important financial transaction you will probably ever be involved in. Service from a person you can go see-isn't that worth a little bit of time?

HOW ARE CREDIT SCORES DETERMINED?

Here is a very instructive graphic from MGIC (the mortgage insurance company) illustrating what factors go into creating your credit score. This is a brilliant example of how you can increase yours because if you want a mortgage, you score has everything to do with mortgage eligibility, your interest rate, and the amount of mortgage insurance you will pay

Trendy?  2016?

pointit.com

Trends-cultural, political, social - - trending seems to be what everyone seems to be interested in. Catching the wave as it goes by, or better yet, being ahead of the wave and reaping the benefits.
Zombies, super heros, and dystopian societies are all trends that are manifesting themselves in entertainment, farm to table in fine dining; so are there trends to be found in housing and mortgages?

Of course there are. From those who are in the know I am learning that open concept is on the way out, as is granite for every flat surface. Mortgage lending can be trendy too - -so for the mortgage hipster, here is what is trending for 2016.

Interest Rates: The trend currently is down. While rates are not expected to hit the lows of a couple years ago,t he short term trend is rates hovering around or just below 4%. However, that trend is expected to reverse itself in 2016 and by the end of the year we could be close to 5%.

Credit Scoring: There are a couple of lenders on the West Coast that are experiencing with doing away with credit scoring in their loan approval process. The idea is to evaluate the history of payments and open debt, rather than assign a number to it. How this plays out with Fannie Mae and Freddie Mac and selling mortgages on the secondary market was not clear to me as loan sales are credit score driven-but it will be interesting to watch. In the meantime, for most of us, there seems to be a trend towards a relaxation of some credit rules which should help more buyers obtain mortgages.

Increasing Rents: There is a definite upswing in the cost of rent according to Fortune Magazine - - 8% for 2016. The reason being increased demand and decreased supply nationwide.

http://fortune.com/2015/10/07/rents-rise-housing/

And that leads us to this trend:

Millennials getting into the housing market. The biggest group will be the older millennials-those that are 35-40 years old, but we should also see large numbers of 25-30 somethings seriously considering purchasing their first home this year. In fact the millennial generation will be the largest percentage of home buyers this year.

Housing Prices: Nationwide should increase 3%

1.5 million new households are expected to be formed.

Sounds like a good year to jump on the trend and buy.