For a real estate glossary of words, please click here Q: What are typical breakdown of buyer/sellers cost?
Q: What’s the difference between pre-qual and pre-approval?
Q: Should I get pre-approved before I go “house shopping?”
Q: When buying new construction, do I have to use the builder’s lender?
Q: What is the Mortgage process?
Q: Will my lender give a kick-back to the REALTOR® who referred me to him or her?
Q: What are some differences between loans for primary residences vs. investment properties?
Q: How long should the loan process take?
Q: How are rates determined?
Q: What is the difference between a mortgage banker and a mortgage broker?
Q: Benefits of a Bank or Credit Union:
Q: Risks of a bank or credit union:
Q: Benefits of a Mortgage Broker:
Q: What Makes Up your Credit Score?
Q: How Can you Improve your Score?
Q: What Actions Will Hurt your Score?
Q: What does Not Affect your Score?
Q: What is a home warranty?
Q: How does a home warranty work?
Q: How the Warranty Helps the Buyer:
Q: What is Title insurance?
Q: What is a Title Defect/Past Claim?
Q: Who is responsible for title insurance?
Q: How do I choose a title company?
Q: How much can I expect to pay?
Q: What is a closing and what can I expect?
All about The Termite Inspection Buyer’s cost: Closing costs typically amount to between 2 and 5 percent of the sale price - Loan origination fee
- Discount fee
- Property appraisal
- Credit report
- Mortgage broker fee
- Tax related service fee
- Application
- Commitment
- Rate lock
- Processing
- Underwriting
- Settlement, closing or escrow fee
- Abstract or title search
- Title examination
- Document preparation
- Attorney
- Lender’s Title insurance
- Recording documents
- City/county tax – Doc Stamps and Intangible Tax on loan
- Survey
- Pest inspection
- Wire transfer/courier fees
- Pre-paids collected for interest, hazard insurance, property taxes, mortgage insurance, and flood insurance.
Seller’s Cost: - Real Estate commission
- State Tax/Stamps – Doc Stamps on the Deed
- Owner’s title insurance
- Title company fees
- Wire transfer and courier fees
- Property taxes – Pro-rated
Prequalification: The mortgage lender will use details you provide about your credit, income, assets and debts to arrive at an estimate of how much mortgage you can afford. A “pre-qual” is not-binding to the lender because the information provided had not been verified. It serves as a good indication of what someone can afford. Pre-approval: Pre-approval takes prequalification one step further. The lender will verify your income, assets, debts ,and credit history, and then issue you a letter stating that your mortgage is approved for a certain amount within a certain time. A small fee may be charged to cover the cost of your credit reports and application. Yes! A pre-approval is very attractive to sellers. When you get pre-approved for a mortgage, negotiating power will be available to you. Time will be saved by helping you to find a home in your price range. You also won’t be tempted to buy an unaffordable home. The lender will have already completed the necessary qualifying and underwriting steps so the closing can take place sooner. No! It is good to receive a good faith estimate from the builder’s lender with other mortgage lenders. At times the builder will contribute a percentage toward closing; however, even with the contribution, sometimes other lenders will have lower closing costs. Pre-approval The lender will ask for documentation of employment, income, debts, savings, assets and the source of your down-payment money. Be prepared to give tax returns, paycheck stubs, checking statements, investment records, and a copy of the home sale contract to the lender. After application, the lender should provide a packet of information including a good faith estimate of closing costs and a truth in lending document. - After application is Approved and a Contract is received:
- Appraisal
- Title insurance
- Flood certification
- Survey
- Pest inspection, if needed
- Home Owner’s insurance
- All documentation is collected and submitted to Underwriting for Final Approval. Then the file is sent to closing.
No! Kickbacks, rebates, referral and unearned fees are prohibited. Typically, the terms “primary” and “secondary” in real estate are used to describe a homeowner’s properties as either a “primary residence,” which is a principal dwelling, or a “secondary residence,” which can be a second home, vacation home, cabin, or time share. Normally a Pre-approval will take between 24 to 48 hours. After the Mortgage application is approved and a contract is received the process normally takes 2-3 weeks. Most lenders like about 30 days for the entire process. Mortgage rates vary based on credit score, tradelines, the size of down payment, property use, type of documentation, and if discount points are paid. Mortgage lenders: Banks, credit unions, and retail mortgage companies are direct lenders; that is, employees alone review the application and make the decision to lend you money. Typically, they will sell your loan on the secondary market. Reliability: You probably know and trust your local bank/credit union. It is regulated by state and federal agencies and likely has strong ties with your community. One-stop shopping: You deal directly with the source of your loan. Savings: As the loan originator, a bank or credit union may save you money in the loan process and/or offer you better terms based on your total assets on deposit with the bank or credit union. Speed: A bank or credit union also may process your loan faster than other providers. Limited choice: Banks, credit unions, and retail lenders only offer their own programs. To comparison shop, you will need to speak with several lenders. Banks and credit unions are usually very conservative with their credit risk and loan programs. Mortgage Brokers: A mortgage broker is a middleman who may represent the mortgage loan products of hundreds of different wholesale lenders. The broker’s goal is to match the borrower up with the loan product that best meets their needs at the best price. Variety: By shopping across a range of different programs and lenders, a mortgage broker may find you a better fit than a mortgage bank. Qualifying: A mortgage broker can best steer you to the national or regional lenders that are most likely to accept your application based on your financial and personal information Savings: You may get a more favorable loan rate Speed: A broker saves you time shopping for a loan Risks of a mortgage broker: Hidden costs: Some mortgage brokers attempt to increase their profit by writing hidden costs into your loan Professional oversight: Unlike mortgage bankers, mortgage brokers are not subject to licensing and regulation in all states.
35% = Based on payment history (ie on-time pays or delinquencies) with more weight on current pay history 30% = Capacity (capacity is King) 15% = Length of credit 10% = Accumulation of debt in the last 12-18 months (# of inquiries, opening dates) 10% = Mix of credit (Installment (can raise) vs. revolving (can lower). Finance company loans – They can lower your score - Payoff or pay down on your credit cards
- Do not close credit cards because capacity may decrease
- Move your revolving debt into installment debt
- Continue to make payment on time(older pays will become less significant with time)
- Slow down on opening new accounts
- Acquire a solid credit history with years of experience
- Missing payments (regardless of $ amounts… It can take 24 months to restore credit with one late payment)
- Credit cards at capacity (ie maxing out credit cards)
- Shopping for credit excessively
- Opening up numerous trades in a short time frame
- Having more revolving debts in relation to installments debts
- Closing credit cards out (this could lower available capacity)
- Borrowing from finance companies
- Debt ratios
- Income
- Length of residence
- Length of employment
Q: What Makes Up your Score? 40% = Current to 12 months 30% = 13-24 months 20% = 25-36 months 10% = 37+ months A home warranty plan is a service agreement that helps protect home buyers and sellers from unexpected bills for covered repairs or replacements of major systems and appliances in the home. Home warranties cover many of the items not covered by homeowner’s insurance, such as a/c & heating systems, water heaters, dishwashers, and electrical problems, etc. Home warranties are annual contracts that protect homeowners against costly repair bills for the breakdown of covered systems and appliances due to normal wear and tear. When untimely breakdowns occur, warranty holders call one number for service. Customer service representatives arrange for a local contractor to visit the home to assess the problem. On each new service work order, the homeowner is responsible for a nominal trade service fee ( trade service fees vary nationally and per contract). Home warranties protect homebuyers avoiding unforeseen repair expenses helping protect their investments. More “peace of mind” because home warranties help to alleviate buyers’ concerns, provide the “no-hassle” repair guarantee, offer renewal options, and an appliance purchase plan. Home warranties help the seller provide a competitive advantage and combat potential after-sale liabilities. A: Title insurance is the foundation of ownership of property. It means that you have legal right to possess that property and use it within the restrictions imposed by authorities or limitations on its use. Basically, title insurance protects the investment by allowing experts to search the records to guarantee that the property you have purchased is free and clear of any past claims. A: Defects or past claims are hidden risks that include but are not limited to; forgery and fraud, unpaid taxes, missing heirs, and incorrect legal descriptions. A: Respectfully, the seller is required to pay the one-time premium at closing, but during the negotiations of the sales, other arrangements can be made between the seller and the buyer. A: Consumers may shop title insurers to find the most competitive rates. In most cases, the seller’s broker will select a title company that they choose to do business with. However, consumers are not required to use that company. If there is any kind of “affiliated business arrangement” between the broker and a title or mortgage company, this arrangement must be disclosed. A: The title insurance premiums are promulgated by the state of Florida while search fees, examination fees, and closing fees can vary in price depending on what company is used. In some cases when you sell or refinance your property, you have the right to receive a discounted rate called a reissue premium. This rate is controlled by state law and is not dependent on who issued the previous policy. A: While each closing is as unique as the people attending it, much of the behind-the scenes work leading up to the closing is fairly commonplace for the skilled professionals performing it. A closing is typically held in the office of the Title company that you have chosen. All paperwork and financial issues are settled at this time. You will need to provide certain items at this time. These include: - Driver’s license or legal picture identification
- Cashier’s check made payable to your selected title company
- Buyers homeowners insurance policy
- Any items requested by the lender
One of the most frequently misunderstood processes in a real estate transaction is the WDO inspection. WDO is short for wood destroying organisms. Many Realtors refer to this inspection as the termite inspection. However, it is for much more than just termites, as the name implies, it is for ANY wood destroying organism. The report that is used for this process is mandated by the State of Florida, not any pest control company, so every WDO inspection will be on the state form, or at least it should be. The WDO form is referred to in the termite and pest control industry as the 13645 form: the State of Florida designated number for the form. It is the goal of this information to provide basic information such as the overall importance of the form, explaining what the form is the do and why, what should and should not be on the form and who can legally provide and complete the WDO form. Wood decay fungi, commonly referred to as wood rot must be reported, at a minimum as a damaged area. There is much debate as to if it is live or not, because technically live spores would need to be seen to say it’s live and since the spores are microscopic that is not possible unless someone carries a microscope in their tool box and can recognize live spores. Many people will confuse mold and mildew with wood decay fungi. Wood destroying fungi penetrate and destroy wood whereas molds and mildews are found on the surface only (no penetration). WDO’s especially termites, do not normally come out in the open and walk around like a roach or ant would, their biology is for them to remain hidden, thus the reason the inspection is so critical. If any evidence is found concern and caution should be observed. It has been reported that some WDO inspectors have Hold Harmless Agreements signed. They do this so in their opinion, a clear report can be issued when visible problems exist. This is not legal practice and will not provide protection for any parties to the transaction. If at any time there are any questions concerning an inspection and/or who can perform one please contact the division of Entomology and Pest Control at 950-921-4177. Consumer information: The State of Florida has a very detailed information document titled, Consumer Services Aid for the Homeowner and Buyer Relating to Termites and Other Wood-infesting pest. This entire document is found at http://www.flaes.org/pdf/pubre.pdf Pest Control companies are regulated by the State of Florida under Chapter 482, Florida Statutes. All inspectors MUST have a state issued ID card and be in a permanently market vehicle (no magnetic signs allowed), be aware of any unmarked vehicles or someone with no valid ID card. WDO inspections are highly recommended by the State for home purchase Many areas are not visible or accessible during the inspection such as behind walls, floor coverings, etc, so be aware that even the best inspection is limited to what can be seen. Disputes concerning the WDO report and its findings can and will be investigated for consumers by the Division of Entomology and Pest Control by completing a complaint form The WDO form is a one page document. To view the form language and the guidelines our industry is provided by the State of Florida to complete the form is found at http://www.flaes.org/pdf/wdocpckt.pdf The form asks an independent questions about if evidence of a WDO was found. This can be dead WDO insects or insect body parts, markings on a wall or wood, etc, but possibly no actual live insects are found. If evidence is present, that means at some point in time they were there and caution should be observed, thus the reason that question is on the form. Another question is if a LIVE WDO was found. This is obviously one of the most important questions because if a live insect is found in most situations there are more that can’t be seen. Absolutely no editorial comments are to be on the form. FACTS only Carpenter bees, carpenter ants, mold, and mildew are NOT to be reported, if they are this is a violation of the statutory language. Home Buyer information: It defines what the term “clear” report means The document also addresses what to do if problems are found after the home was purchased - No Down payment - Borrowers without savings or who wish to retain their savings qualify
- 100% financing – 102% Loan to Value (LTV) for the guaranteed first mortgage loan when including the guarantee fee, 100% LTV without the fee included
- Loan not limited by contract amount – Wrap closing costs into loan when appraisal is higher than value
- No Private Mortgage Insurance (PMI) – One time guarantee 2% fee
- No reserves – No need for seasoned funds, bank statements, or bank accounts
- Expanded ratios 29/41 (31/43 on homes built post Jan 01) – Clients with satisfactory credit may qualify with higher ratios to accommodate high cost housing areas, etc.
- Streamlined processing with 620 FICO score – No explanations on credit with FICO score of 620 or greater. No rental verification
- One time 2% guarantee fee can be rolled into the loan – No monthly mortgage insurance means a lower monthly payment for the clients and additional cash each month
- Generous income limits based on 115% US median (not HUD area limits) – Deductions are available for dependents, daycare, elderly households, etc. to assist individuals and families in qualifying.
- No maximum purchase price limit – Clients choose a home that meets their needs and repayment ability
- NOT limited to first time homebuyers – Anyone not owning suitable housing may apply
- Education/training substitute for job tenuse – Income history for ratios is waived
- Lowest payment of affordable products – No mortgage insurance, best rate, 30 year gives lowest payment, less eligibility issues, more loan
- Unrestricted gifts – No limitation on source of funds for closing costs. No seasoning requirement.
Contact me today to find out if the property you are interested is in an eligible area or would like to see properties that would be eligible for this program! Must qualify for loan limits - Must meet location eligibility
- Substandard homes that won’t get funded by lenders “as is”
- Seller cannot or does not want to make repairs
- Example: $170,000 “As Is” listing in a $200,000 or above community
- Example: Property could need new appliances and carpeting, AC is missing, etc.
Characteristics of the FHA 203K loan: - Limited repair program
- Allows borrowers to finance improvements or upgrades up to $35,000 into mortgage before/after move-in including a 10% contingency fee
- All standard FHA guidelines apply
Features of the FHA 203K loan: - May be purchase or refinance of 1-4 family single family residences including HUD or Bank owned property. Cash-out refinances not allowed
- Fixed or adjustable rate
- Borrower and credit eligibility same as FHA programs
- One closing with rehab funds escrowed by lender and disbursed as work is completed
- Can be used to update homes, correct health and safety issues, pay for higher cost items such as a roof, etc.
Eligible improvements with the FHA 203K rehab loan - Repair or replacement of
- Roofs, gutters, and downspouts
- Upgrade of existing HVAC systems
- Upgrade of plumbing and electrical systems
- Flooring
- Exterior decks, patios, and porches
- Minor remodeling (no structural repairs)
- Painting – interior/exterior
- Weatherization – including storm windows/doors, insulation, weather stripping, etc
- Purchase and installation of new appliances
- Disability access improvements
- Connect property to public utilities
- Window and door replacement
- Exterior wall re-siding
- The cost for termite treatment when they must tent the entire dwelling can be included. Required repairs from the termite damage can be included provided no structural items are needing repair.
Ineligible improvements include: - Major rehabilitation
- New constructions including room additions
- Repair of structural damage
- Repairs requiring detailed drawings or exhibits
- Landscaping or site amenity improvements
- Any improvement that will take longer than 3 months
- Rehab activities that require more than 2 payments per specialized contractor or requires architectural plans or exhibits or a plan reviewer, results in work not starting within 30 days of loan closing or cause the mortgagor to be displaced from property for more than 30 days during the rehab period.
- Repair foundations for manufactured homes
- Add or correct fencing
Additional fees - Supplemental Origination fee: Minimum $350.00 or 1.5% of mortgage amount
- $100.00 final inspection fee
Signed into law on December 20, 2007, it provides that, when lenders forgive some portion of a mortgage debt or agree to a workout, the forgiven amount will NOT be treated as taxable income. Here are the features of that relief. Q: Is all forgiven mortgage debt non taxable? A: No. Only debt on a principal residence is eligible for the exclusion Q: Is there a dollar limit on the amount of mortgage debt that is eligible for the relief? A: Yes. No more than $2 million may be excluded from taxation ($1 million on a married filing separately tax return). Any amount above those limits will be taxed at ordinary income rates. Q: Is there an income limit on the borrower? A: No. Any borrower, no matter how high or how low his/her income, qualifies or this relief. Q: If I refinanced, am I eligible for relief? A: Refinanced amounts less than or equal to the acquisition indebtedness are eligible for the relief. Q: Is cash-out refinancing qualified? A: No, unless the total refinanced debt is less than the acquisition indebtedness limit. Q: What about any home equity loan/line of credit on the house? A: Funds from this type of financing are eligible for the relief ONLY if the funds were applied to structural improvements to the home. Documentation is essential. Q: What about the mortgage on my rental property? A: Rental property, even if it is residential property, is subject to a different set of rules. Some borrowers who own rental properties that are foreclosed or in short sales or workouts may qualify for mortgage cancellation relief under rules enacted in 1993 that apply to investment property. Q: Will I get a 1099? A: Yes. The lender is still required to provide a 1099 to you and to the IRS. The amount reported on the 1099 will not be taxed unless the forgiven amount is ineligible for the exclusion, such as debt on a second home (non-rental), forgiven debt in excess of $2 million, cash-out refinancing or if other exceptions apply. Q: How long is this relief in effect? A: The relief applies to mortgage debt forgiven between January 1, 2007 and January 1, 2013. The National Association of Realtors affordability index measures whether or not a typical family could qualify for a motgage loan on a typical home. A typical home is defined as the national median-priced, existing single-family home as calculated by NAR. The typical family is defined as one earning the median family income as reported by the US Bureau of the Census. The prevailing mortgage interest rate is the effective rate on loans closed on existing homes from the Federal Housing Finance Board and HSH Associates. These components are used to determmine if the median income family can qualify for a mortgage on a typical home. To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20% down payment. For example, a composite HAI of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80% of a median-priced existing single-family home. An increase in te HAI, then, shows that this family is more able to afford the median priced home. The calculation assumes a down payment of 20% of the home price and it assdumes a qualifying ratio of 25%. That means the monthly P&I payment cannot exceed 25% of the median family monthly income. |