Financing-home loans, Real Estate

Mortgage Process…What to expect!

house questionIt is critical to get your “ducks in a row” before even beginning to look at homes.  First so that you are fully aware of what you can afford and how much a lender will loan you based on their lending criteria.  And second, so that you truly understand what the purchase will cost you out of pocket…this is something that you really need a Good Faith Estimate (GFE) for and a lender is usually very happy to provide a preliminary GFE based on a specific purchase price.  Additionally, selecting the right lender goes beyond simply finding someone with a good rate.  You should consider other things in addition to the rate, such as fees and points charged, do they apply excessive risk “overlays” in addition to standard guidelines that could make it difficult to get full loan approval for certain types of properties and how accessible and responsive the loan officer is.  Credit Unions often have good rates, but you will almost never get the same person on the phone to discuss your loan status…they do not worry about contract deadlines as much, nor do individual agents have much visibility into the full process of the loan…this can delay settlement or worse, cause default.  It is important to deal with a lender that has great rates AND provides great customer service, availability, is very knowledgeable and has a number of loan products so that they can help you select the right one.

All that said, below is a (basic) description of the mortgage process (note: this is not the overall purchase process…more on that in another post 🙂 ):

1) Pre-Approval: Crucial first step and a necessary document to provide sellers in the offer process.  This is relatively easy and gives you great visibility into the size of mortgage you can afford and what the purchase will cost you.

2) Loan Application: You will actually apply for the loan once your offer is accepted…in Virginia, this step is required to be completed within seven days of ratification of the contract.  As part of this application you will need to provide income documentation and other important asset information.

3) Processing: The processor verifies that the information that you provided is correct and all supporting documents are in tact.  For this to go smoothly and quickly, it is critical that you provide ALL information requested in a timely manner.  As the sales contract says “time is of the essence” and this holds true with getting the lender your documentation as well.  If all items are in place and verified, the processor will prepare your loan for underwriting.

4) Underwriting: An underwriter compares your loan to standard guidelines.  If the guidelines are met, an approval and loan commitment are issued.  Note: additional documents may be requested by underwriting at this time

5) Closing: At closing, you will sign the mortgage promissory note and other required documents transferring ownership (title) from the seller to you.

Hope this is helpful and as always, don’t hesitate to reach out to me with any questions.  I am always happy to help!

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Financing-home loans, Real Estate, The Market

The cost of waiting to buy…

rent_buyI recently read an article in the Washington Post regarding “millennials” and home buying titled “Studies find now is the time for millennials to buy”.

I found it very informative and interesting, so I thought I would share the highlights, weigh in and provide a link to the original article for your viewing pleasure 🙂

Basically, the article sited studies done by Zillow and the Harvard Joint Center for Housing Studies.

Zillow looked at how interest rates and rising home prices will affect purchasing power and discovered (shocker)  that waiting even one year, could cost you more money (approximately $189/month in the DC area) based on the assumption of home prices staying the same and interest rates increasing.

The Harvard Joint Center for Housing Studies looked at why first-time buyers weren’t buying even though affordability is at an all time high.  They looked at 25-34 year olds who do not own a home and looked at how many earned enough to afford a median-priced home in the top metro areas.  The discovery was that in 42 of the 85 metro areas, more than 50% of the renters can afford the monthly payments of owning a home if purchased with 5% down. 

See the Full Article Here

Here are my thoughts:

Affordability IS at an all time high, for all age groups because of the drastically low interest rates that WILL at some point increase.  But for millennials, it may be their greatest opportunity to get in with very little invested and the ability to borrow money at a historically low rate. 

Here is an example of how interest rates effect affordability.  In 1981, the typical house payment was around 31% of a person’s income…in 2010 (even though homes are much more expensive), it comprised around 14% of individuals income.  One reason is because the interest rates in 1981 were around 19%.  In 2010 they were around 5%.  Now the rates are around 4.25%

To illustrate the affect interest rate has on affordability, here is an example:

  • Home Price: $400,000
  • 5% Down: $20,000
  • Loan Amount: $380,000
  • Monthly Payment with a 4% Interest Rate @ 30years: $1814.18 (principal and interest only)

Scenario 1: Home prices decline 5% but there is a 1% rate increase

  • Home Price (same home): $380,000
  • 5% Down: $19,000
  • Loan Amount: $361,000
  • Monthly payment with a 5% Interest Rate @ 30years: $1,937.93 (principal and interest only)…this is a monthly increase of $123.75

Scenario 2: Home prices increase 5% (which is +/- the current rate of appreciation depending on the area) and there is a 1% rate increase as well

  • Home Price (same home): $420,000
  • 5% Down: $21,000
  • Loan Amount: $399,000
  • Monthly Payment with a 5% Interest Rate @ 30 years: $2141.92 (principal and interest only)…this is a monthly increase of $327.74

We live in the monthly payment, because realistically, most of us do not keep our homes for 30 years.  So really the monthly payment and, more importantly, the interest rate will affect us much more than the total home price in terms of affordability. Don’t let marginal price differences cloud this reality.

Of course now may not be an option for some, and everyone needs to evaluate where they are financially and personally and determine what works best for them.  Simply put, for those who are in a financial and personal position where buying makes sense, now is one of the best times to jump in…and simply waiting due to fear or hoping prices will drop, may not be the best over-all financial decision. 

Hope this was helpful and please feel free to reach out with any questions!

Financing-home loans, Real Estate

2014 VA loan limits for the DC Metro area

Anyone who knows mehome ownership for vets, they know I love a VA Loan.  VA loans are truly the best deal on the market (in my humble opinion)…and they do not have all of the problems that some agents and veterans think they do.  The appraisal process can be a little more difficult, but only in the fact that they MAY require some repairs (such as fixing peeling lead-based paint…not such a bad thing to require)  and a re-inspect if repairs were required, but more often than not, they do not require anything.  They value the home just the same as a conventional appraiser and I have never seen a VA appraiser come in low on a property that was priced right.  I digress…

Just to update you folks, the VA loan limits for a 0% down loan (yes…ZERO down) have changed in many higher cost areas.  For most areas, it is still a max of loan limit of $417,000.  In Northern Virginia and DC, the loan limit has always been higher and is now $692,500…NOT BAD!  And if you are willing to put money down, they will lend up to (I am told) @ $1.5 million (depending on the down payment of course).

VA loans have low rates and if you are disabled in ANY way, they will waive the funding fee (this fee is 9 times out of 10 financed into the loan amount anyway).  They will also allow up to 6% of the purchase price towards closing costs in subsidies from the seller…if you are in an area where subsidies “fly”…more on that another time (*there are a few caveats to this, so be sure you have a good lender who will find a way to get the most out of any seller subsidies you have negotiated…such as the seller buying down your rate, etc*)

Lastly, the VA will allow you to do what is called a streamline refinance.  If a lower rate is available, you can get it and there is no appraisal required.  Additionally, most lenders will pay the refi costs, so you can pretty much to the refi for free or for VERY little out of pocket.  If it benefits the veteran, it is allowed.

This is an amazing way to realize the dream of home-ownership…and a rightful benefit for our nation’s heroes who have risked their lives for our freedom and liberties!

In summery, if you are eligible to get a VA loan, consider it!

 

Financing-home loans, Real Estate, The Market

Lock Your Mortgage Rate: New Loan Fees Expected Within Days

Article sent from a lender partner: Will and Nancy Jacobs with First Heritage Mortgage in Virginia

Starting soon, nearly all home buyers and refinancing households nationwide will pay higher mortgage loan fees. Congress has made it law.

13 months ago, as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Congress enacted a one-year cut to FICA payroll taxes.

FICA stands for Federal Insurance Contributions Act. Taxes collected under FICA fund such programs as Social Security and Medicare.

The stimulus plan temporarily lowered tax rates for salaried workers from 6.2% to 4.2%; and for self-employed persons from 12.4% to 10.4%. Effective January 1, 2012, “regular” tax rates were to return.

That is, until late-December 2011. In one of its last moves of the year, Congress passed a temporary, two-month extension to the payroll tax cut, extending it through February 29, 2012. The expected cost to the U.S. Treasury is $33 billion.

To recoup those costs, Congress has turned to Fannie Mae, Freddie Mac and the FHA.

Each entity has been ordered to collect news fees on each new mortgage is backs, and has been told to forward said fees to U.S. Treasury directly. There’s no “workaround” allowed or forgiveness applied — each new loan is subject to the payment.

The rules are listed on page 17 of the law’s final draft, in a section unambiguously titled “Title IV — Mortgage Fees and Premiums”.

According to the law :

*  Fannie Mae and Freddie Mac must collect an average fee of no less than 10 basis points (0.1%) per new loan

The FHA must raise its monthly mortgage insurance premiums 10 basis points for all new loans

The expected cost to consumers is no less than $10 monthly per $100,000 borrowed. Some analysts, however, expect Fannie Mae and Freddie Mac to collect more than is minimally required. This could add an additional $30-50 to your monthly mortgage payment per $100,000 borrowed.

Therefore, if you’ve been shopping for a home or for mortgage rates , take advantage. Within days, lenders are expected to start collecting Payroll Tax Extension fees from mortgage applicants — a move that will cost you money.

Lock today to avoid the big fees. Save yourself money.

Financing-home loans, Investing, Real Estate, The Market

Looks like the FHA loan limits will go back to $729,750

Logo of the Federal Housing Administration.
Image via Wikipedia

Looks like the FHA loan limits will go back to $729,750, not Fannie Mae or Freddie Mac limits though at this point.  It isn’t a done deal yet…the president still needs to sign it into law but this is a good sign!  See article below.

NOVEMBER 18, 2011
Congress Increases the Ceiling on Size of Mortgages
By ALAN ZIBEL
WASHINGTON—U.S. lawmakers moved Thursday to increase the maximum size of loans that can be guaranteed by the Federal Housing Administration.
Congress passed a broad spending bill that included a provision to restore to $729,750 the maximum size of mortgage that can be backed by the FHA, giving some borrowers the option of putting less money down to obtain a mortgage in expensive cities.  FHA-backed loans currently account for a third of new mortgages for home purchases and can be made with down payments of as little as 3.5%, compared with the 20% industry standard.  The bill goes next to President Barack Obama to be signed into law.
The loan limits fell to $625,500 on Oct. 1 in expensive markets like New York, San Francisco and Washington. They declined in around 250 counties for loans guaranteed by mortgage-finance companies Fannie Mae and Freddie Mac, and in around 600 counties for FHA-backed loans. In some cases, the FHA loan limits fell below those of Fannie Mae and Freddie Mac.
The housing lobby pushed for Congress to reinstate loan limits for Fannie, Freddie and FHA, citing concerns that any steps to raise borrowing costs might be too much for fragile housing markets to bear. Limits for Fannie and Freddie loans were not restored.  Sen. Robert Menendez (D., N.J.) said that restoring the loan limits will benefit the housing market at a time when it is weak. Doing so, he said, “won’t cost taxpayers a dime” and will benefit the housing market in many other parts of the country besides those cities.
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Tim McLaughlin
Senior Vice President, Secondary Marketing

Weichert Financial Services
225 Littleton Road, Morris Plains, NJ 07950

area info, Dining, DIY, Financing-home loans, home for rent, Homes for Sale, New Listing, open houses, Real Estate, The Market, Things to Do

Washington DC Open House-Chevy Chase-Sunday, October 30, 2011, 1-4pm

2908 LEGATION ST NW, WASHINGTON, DC 20015

4 br, 2.5 bath Cape Cod in sought after Chevy Chase.  This home sits on a quiet residential street, boasts an open floor plan, spacious living room with fireplace, airy sunroom, renovated kitchen with breakfast bar, finished lower level perfect for an in-law suite, and private hot tub just outside the back door. Close to Metro, Garage Parking and long driveway!  Metro Bus stops & shops/restaurants of Connecticut. Ave.

Come visit!

Financing-home loans

GSE and FHA Loan Limit Changes for 2011: Scope of Impact

Special Studies, June 1, 2011 
By Robert Dietz, Ph.D., and Natalia Siniavskaia, Ph.D.
Economics and Housing Policy Group
National Association of Home Builders

October 1, 2011, some mortgage loan limits for the government-sponsored enterprises Fannie Mae and Freddie Mac (GSEs) and the Federal Housing Administration (FHA) will drop from their current temporary levels to reduced limits based on permanent criteria established by Congress in 2008.[1]

Read the rest of the article here: http://www.nahb.org/generic.aspx?genericContentID=159279