Category: Buying Process

FHA to Cut Premium Mortgage Insurance (PMI) Starting This Year

 

Low- to moderate-income homebuyers will get a boost in 2017, with the FHA to Cut Premium Mortgage Insurance (PMI) Starting This Year.

The move “will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” said National Association of Realtors President William E. Brown in a statement.

Annual premiums going down

The FHA will reduce the annual mortgage insurance premium most FHA borrowers pay by a quarter of a percentage point starting January 27. Annual premiums will drop to 0.6 percent from 0.85 percent, according to NAR.

“Every time we cut the cost of mortgage insurance it means more borrowers meet the debt-to-income ratio required to purchase a home,” said Brown, explaining why the move should lead more aspiring homebuyers to pull the trigger.

The rate cut means new borrowers who take out mortgages insured by the FHA will save an average of $500 this year, according to HUD.

The action “comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing,” according to Julián Castro, the U.S. Housing and Urban Development (HUD) Secretary, which oversees the FHA.

Why this is good news

The FHA makes it possible for banks to lend to borrowers who might not qualify for conventional mortgages, serving as a wellspring of credit for those buyers.

FHA borrowers pay both an insurance premium to the FHA and higher interest rates in return for a mortgage that requires as little as a 3.5 percent down payment.

“FHA mortgage products exist to serve an important mission: providing homeownership opportunities to creditworthy borrowers who are overlooked by conventional lenders,” said NAR President William E. Brown in a statement.

“The high cost of mortgage insurance has unfortunately put those opportunities out of reach for many young, first-time- and lower-income borrowers. Now, we have a real opportunity to get back on track.”

“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” Castro said in a statement. FFHA to Cut Premium Mortgage Insurance (PMI) Starting This YearHA to Cut Premium Mortgage Insurance (PMI) Starting This Year

“This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”

According to Guy Cecala, CEO and publisher of Inside Mortgage Finance, FHA’s share of the home purchase market in first three quarters of 2016 was 16.6 percent.

“That was way down from the 33.8 percent market share seen as recently as 2010, but up from the 13.5 percent share seen right before FHA first lowered its annual MIP in early 2015,” Cecala told Inman via email. FHA to Cut Premium Mortgage Insurance (PMI) Starting This Year

Gazing into a crystal ball requires a leap of faith, but if you’re willing to take a look, you might find a few insightful nuggets that could help you and your clients make more informed decisions. Zillow’s predictions for 2017 include a change in course for the housing market as it continues to reflect the nation’s economic recovery. These are 5 Real Estate Trends to Expect for 2017.

Cities will get cozier

Smaller homes will crowd each other in new, denser developments, and they will be closer to public transit and urban centers. Knowing that square footage is off the table, your buyer clients might ask you to focus more on finding homes with upscale features or green technology.

Millennials will move out of the nest

No surprise here if you’ve read the Zillow Group Report on Consumer Housing Trends. In 2017, millennials will continue to drive up the homeownership rate by finally buying homes of their own. As millennials are the most racially diverse cohort, it also means more people of color will become homeowners. Your marketing efforts might include updated strategies to attract this new generation of buyers.

New construction buyers will pony up

Labor shortages in the construction industry — possibly compounded by the President-elect’s proposed immigration policy crackdown — have resulted in rising construction wages, which will be passed on to buyers who choose new construction homes. It will be vital to let buyers know they can negotiate for upgrade credits, floor plan options or reduced closing costs to recoup some value when they choose a new construction home.

Commuters will get comfortable

In their cars, that is. As homeowners move deeper into the suburbs — and farther away from viable public transportation — in search of affordable housing, the percentage of people who drive to work will increase. Although inventory remains low, farming local suburban homeowners might help you drum up some listings.

Current homeowners will continue to prosper

National home values rose 4.8 percent between December 2015 and 2016, and the trend is likely to continue past the New Year’s celebrations. In 2017, Zillow predicts home values will grow 3.6 percent. It’s an opportunity to check in with homeowners who might have been waiting for a better list price.

A Timeline for Building a New Home

Breaking ground on a new home is more than exciting. It’s a chance for you to make every last cabinet, closet, and paint color speak to you. It’s also something that might make you feel in over your head if you’re not aware of the timelines or building stages. A Timeline for Building a New Home

Depending on square footage, weather conditions, the availability of workers and supplies, and more, construction of a new home can take anywhere from three months to over a year. You’ll need to be prepared to make important decisions along the way and to experience setbacks. The truth is, whether you’re building a simple starter home or the ultimate abode, most homeowners find the home construction process a bit overwhelming.

That’s where we come in. We’ve put together an easy to understand home building timeline that demystifies the home building process. From shopping for a lot to move-in day, read on to learn about the major steps you’ll encounter while building a home.

Designing Your Home

Prior to build

Before you do anything, you’ll need to find a pre-designed plan or architect to design your home. This is where you’ll see how far your dollars will go and what it will take to make your dreams come true.

In this stage, figure out answers to questions like, “How many square feet do we want/need?”, “Should the master bedroom face east or west?”, and, “Do we want all bedrooms on the second floor?” Hammer out all of these details in this phase to set yourself up for satisfaction in your new home.

Now is also the time to talk to an interior designer if you don’t plan on doing the decorating yourself. They’ll be able to tell you about prints, textures, finishes, and more that will make your home come together.

Not sure where to start? Angie’s List specializes in providing users with real reviews, background checks, and more about companies. Whether you’re looking for a contractor, designer, or architect, you can count on Angie’s List to find you a reliable person.

Purchasing a Lot

Prior to build

No matter if you’re going for a lot that’s in a housing development or a piece of property secluded on 100 acres, you’ll need to purchase land before you can build. This can happen during the home design process or before. It’s just important that you allocate part of your budget to your land purchase.

In order to budget wisely, shop around for lots. See what the going rate is per acre and by neighborhood. Make sure the house design you’re working on will fit properly and is zoned to fit on a certain sized property.

These are all great conversations to have with your architect. They’ll know the zoning laws and building height restrictions of nearby areas and can point you in the right direction.

To start shopping, check out real estate websites like Zillow, Realtor.com, and Trulia. You can search by very specific requirements—including lots of land—so it’ll be an easy place to start.

Site Preparation

Week 1

Once this stage starts, you can pass the torch to the experts. Everything will be set in stone as far as the look and construction of your home and that barren plot of land you’ve purchased will be prepped and ready to become the site of your new home.

Expect a lot of back hoes and heavy equipment to come with this stage. Workers will be busy clearing, excavating, and leveling the lot according to your architect’s plan. Then, they’ll outline the footprint of your home with stakes. It’ll be the first time that you’ll be able to see the rough shape of your home on your property and can be exhilarating.

The “Three Fs”

Weeks 2-5

The “three Fs” stand for footings, foundation, and framing. You’ll hear your contractor talk about “pouring the footers” and that entails pouring concrete to support your home’s foundation. Once footers are in place and have passed inspection, the workers will pour the concrete slab of your foundation. Then, your home will have a stable structure for framing.

As the name implies, the floors, walls, and roof will be “framed” out with wood. You can think of this as the skeleton of your home. Once framing is complete, an inspector will come out again to verify that everything has been done to code. After that, exterior finishes like plywood and house wrap will be applied to seal off the inside from the outside.

This stage requires major structural work. Keep in mind that delays might happen if the weather is too wet for concrete to set or failed inspections lead to longer construction time.

The Guts

Weeks 6-8

Now that your home has its basic structure, workers can begin filling it with the things that make it function and look like a home. Experts will install important mechanicals like heating and cooling units, plumbing lines, and electrical systems. Once that work is done, walls will begin to close up too with insulation and drywall. The next time you walk into your home, it’ll look much cleaner. In most cases, the drywall will be sanded and primed, but it might also be painted.

If you’re interested in a home security system, solar panels, or other special infrastructure, this is the time to incorporate them. Many builders can prewire your home for a security system for an additional cost. You won’t have to choose a provider when they do so. Opting for this service will simply provide you with the wiring you’ll need to install a home security system down the line.

Flooring and Paint

Weeks 9-11

Up until this point, all you’ll see on your home building site is a lot of concrete, wood, insulation, drywall, and wires. This is the phase where your home will start to look more like one. Flooring will be going in, cabinets will be hung, and the pretty stuff like trim and mouldings will be installed during this period. Most homeowners will smile at this stage since the site will finally look like the drawings your architect showed you months ago.

Choosing flooring is one of the bigger decisions you’ll make for this stage. Determining your lifestyle, style, and budget will help guide you. For instance, genuine hardwood floors are gorgeous, but are prone to scratching, staining, and come with a large price tag. If you like the look, but need better durability, then engineered hardwood or tile might be a better bet. There are also funky solutions like dyed concrete that add an artistic and industrial flare to homes. This is all up to you, but consider all flooring materials before you pick one. It’ll be much harder to change your mind once everything is moved in!

Fixtures and Appliances

Week 12

Delivery trucks will make frequent stops at your home during this end stage. That’s because now is the time when sub-contractors (sometimes referred to as “trades”) install faucets, countertops, light fixtures, plugs, and appliances. The front of your yard will also be undergoing massive transformative if you’ve purchased landscaping services.

You will have been asked to choose these finishings long before they are delivered. Don’t delay the move-in date by changing your mind last-minute or waiting too long to commit. There are so many tools out there to help you with the overall design of your home. If you’re doing it yourself instead of hiring a designer, check out HGTV.com or Young House Lovefor some great ideas.

Here are some other design resources to help you decide what to do with your home’s interior and exterior.

  • Pinterest has a whole section dedicated to DIY and Home Décor
  • Apartment Therapy has a lot of user-generated and expert advice about how to transform your home
  • Better Homes and Gardens covers all kinds of design projects from plotting out an epic backyard garden to setting up a cozy living room.
  • Houzz is a one-stop-shop for all your design needs. It connects you with designers and other home professionals. Houzz provides you with advice about home decorating. The website even shows you where to shop to find certain items.

Final Countdown

Weeks 13-14

The last few weeks of your home building timeline will be a whirlwind of emotion and small details. You’ll be excited, but probably will want to know if it will all come together in time for closing.

Although you’ll be anxious to occupy your home, be absolutely sure all of your questions and concerns have been addressed before you head to settlement. That way, loose ends will be tied up, the small details of your home will be completed, and your home will be cleaned in anticipation of your arrival.

Closing

The moment you’ve been waiting for, closing, will be the best. There are just a couple things you’ll need to do before you formally close and move in.

After your home is complete, do a “walk through” of the home. In addition to inspecting it and making a “punch list” of things you want the builder to correct, take note of its features and learn how to work add-ons like the home security network. This is also a time when you can think about how to integrate more safety into your home. Walk the property and view the home through the lens of a burglar, meet your neighbors, and determine where you need better lighting. Once you’re done with all of this, you can close, get the keys to your new home, and enjoy every last detail.

Now that you’ve gotten a better idea of the home building process, is it still something you want to do? If you’re open to a flexible schedule and unforeseen incidents, it’s a great option to get a home that is 100% you.
We’ll leave you with one piece of advice: One of the best ways to stay on track with your home building timeline is to communicate your needs and wants clearly from the start. Before you build, consider if you’d like your home wired for a security system or want to have one installed post-construction. A Timeline for Building a New Home

Do Buyers or Sellers Pay the Buyer's Real Estate Agent?

Do Buyers or Sellers Pay the Buyer’s Real Estate Agent?

This has caused a great deal of confusion in the real estate industry and with consumers. Generally, a listing agreement between the seller and the seller’s listing agent specifies how much the listing brokerage will pay the selling brokerage for bringing a buyer.

Yes, you read that correctly. The seller, in effect, pays your buyer’s agent to negotiate on behalf of the buyer, not the seller. C. A.R. buyer broker representation agreements state that if anybody other than the buyer pays the commission, then the buyer is relieved of the obligation to pay it.

There are instances where a buyer may pay a brokerage directly such as when there is no commission offered because the property is a for sale by owner. But typically the commission is paid by the seller to the listing brokerage. The listing brokerage divides the commission in some fashion with the broker of the agent who brings an offer.

Buyer’s Agents Usually Do Not Work for Free

When you ask a buyer’s agent to show you property, you are implying that you will eventually write an offer through that buyer’s agent.

 If you have no intention of ever writing an offer with that buyer’s agent, you are taking advantage of that agent.

Procuring cause is a complex process that determines which buyer’s agent is entitled to a real estate commission when a buyer works with more than one agent. Generally, the agent who writes the offer gets paid.

Therefore, if you ask an agent to spend weekends driving you around, sharing knowledge and helping you to select a home, it is only fair to be loyal to that agent.

The 203k Loan Process

What You Should Know – The 203k Loan Process:

In simple terms, the 203k loan is a type of home improvement loan program insured through the FHA that works by allowing homebuyers the ability to finance the purchase and costs of upgrades through one single mortgage. The 203k loan can also work as a refinance option for homeowners who want to add basic cosmetic or structural improvements to their home. The 203k Loan Process

It is important to remember that neither the FHA or HUD do not actually lend the money to a borrower. Instead, the FHA “Insures” a loan that is provided by an FHA approved lender.

While the borrower eligibility requirements for a 203k loan follow standard FHA lending guidelines, there are a few extra steps involving a contractor, inspector and HUD consultant to ensure the property meets FHA’s insurance standards.

The Renovation and Loan Process

We have highlighted the primary steps of how the 203k loan process works below to serve as a general reference guide, so please don’t worry about a test at the end of this chapter.

Step 1 – Meet With A 203k Mortgage Lender

Many home buyers may rush out to look at properties before speaking with a qualified Renovation Loan Specialist, which obviously may present some future challenges after a purchase contract has been accepted by a seller.

Our initial conversation with a borrower starts with the basic loan qualifying questions, such as budgeted down payment, total loan amount, employment, income and credit history.

Once we get a picture of the borrower’s lending scenario, we start drilling down on the property and home improvement requirements to determine which loan program best matches short and long-term financing goals.

Our best advice would be to please have your real estate agent contact us first to ensure you fall in love with a property that qualifies for this program. With a little insight, your agent may even be able to help you find a better deal on a home that can be renovated to your specific needs and wants.

Step 2 – Preliminary Market Analysis

With your loan pre-qualification letter prepared stating the terms and a maximum loan amount that fits your budget, it is time to start searching for properties.

Once you’ve found a potential property, a Preliminary Market Analysis can be completed by your real estate agent and with the help of a contractor and 203k Consultant to help get an estimate of what the property’s projected value might be after the renovation is complete. This should be performed prior to signing the sales contract and before you commit funds for an appraisal.

The market analysis should include:

  • The extent of the rehabilitation work required (Contact a 203K Consultant)
  • The rough cost estimate of the work (Contact a 203K Consultant or/and Contractor)
  • The expected market value of the property after completion of the work (Contact a Real Estate Agent)

Step 3 – Writing The Sales Contract

A provision should be included in the sales contract that the buyer has applied for FHA 203k financing, and that the contract is contingent upon loan approval and the buyer’s acceptance of additional required improvements as determined by HUD, the Appraiser and/or the Rehab Lender.

Step 4 – Work Write-up, Cost Estimate and HUD Case #

With the Consultant’s help, a feasibility study and preliminary cost estimate is used to produce the SOR – Specification of Repairs. After having refined and determined the specification of repairs, the Contractor submits the bid for repairs.

At this point the lender will request the HUD Case number and the project will now move quickly to the appraisal stage.

Note: HUD does not require a Consultant on a Streamlined 203k loan (a rehab with minor repairs that total less then $35,000 and/or that does not include structural repairs). However, the experience and value of the consultant’s advice can often save more than the fees charged for the service.

Step 5 – Lender Prepares/Issues Firm Commitment Application

After the appraisal and the contractor’s bid have been accepted, the lender will issue a Conditional Commitment and Statement of Appraised Value to establish the maximum insurable mortgage amount for the property. The 203k Loan Process

Step 6 – Mortgage Loan Closing

Note To Real Estate Agents – This is a typical closing where the buyers would sign final loan documents and the close of escrow date is met, which is also when the real estate agents are paid and technically done with the transaction. To meet the COE deadline with as little anxiety as possible, we ask our agents to let us drive the bus from steps 4-6.

Note To Buyers – The mortgage closing is where the lender prepares the Rehab Loan Agreement and other pre-closing documents required for the mortgage closing. The Agreement is executed by both borrower and lender, and establishes conditions under which the lender will release funds from the Rehab Escrow Account.

A few of these conditions include the construction draw schedule, fees schedule, work item change orders and identity of interest statement.

Step 7 – Construction Begins

At closing, mortgage proceeds are disbursed and the Rehab Escrow Account is established. Construction may begin immediately, and must begin with 30 days of closing.

Step 8 – Funds are Released from Rehab Escrow Account

Funds are disbursed to the various contractors according to the Rehab Lon Agreement. Changes to the work write-up are made through written change orders and are typically inspected by the Consultant or Lender’s Fee Inspector. A final release of the funds confirms the substantial competition of the rehab.The 203k Loan Process

It’s well known that homes in good school districts sell for a premium—and are a good investment for buyers with or without children. But just how much can you expect to top up that listing price or bid? And what are the top school districts where people  are rushing to buy homes—regardless of the cost?

The economic research team at realtor.com® took up the challenge and dived into the data. The team compared homes in school districts rated 9 or 10, the highest score, by GreatSchools.org with homes in nearby districts rated 6 or less.

“It’s common knowledge that buyers are often willing to pay a premium for a home in a strong school district,” says Javier Vivas, research analyst for realtor.com. “Our analysis quantifies just how good it is to be a seller in these areas.”

It turns out, homes in the higher-rated public school districts are, on average, 49% more expensive—at $400,000—than the national median of $269,000, and 77% more expensive than schools located in lower-ranked districts in their own area, with a median of $225,000.

Plus, homes in higher-rated school districts sell an average of eight days faster than homes in below-average school districts, and four days faster than the national average.

People are more interested in homes in good school districts, too—they’re viewed 26% more, on average, than the average home on realtor.com, and 42% more than homes in areas with below-average schools.

Let’s check out the schools where you’ll shell out the most extra (or profit the most) for a quality public school education.

Top 10 school districts with the highest premium

1. Beverly Hills Unified School District, Los Angeles County, CA

Sixteen years after the hit teen show “Beverly Hills 90210” went off the air, the coveted ZIP code still has cachet. Homes in the top-rated Beverly Hills Unified School District (GreatSchools rating: 9) sell for an average 689% more (that’s $3.8 million) than other homes in Los Angeles County (a far more reasonable $550,000). BHUSD homes beat out those in nearby Santa Monica–Malibu Unified School District, which is rated 9 and has a median list price of $2.5 million, and more recently hip Culver City Unified School District, with a rating of 8 and a median list price of $975,000.

Beverly Hills High School, home of the BHHS Normans.

Beverly Hills High School, home of the BHHS Normans

Michael Tran/FilmMagic

2. Highland Park Independent School District, Dallas County, TX

Homes in the Dallas-area Highland Park Independent School District (rated 10) carry an average 632% premium, at $1.8 million, over the median-price home in Dallas County (a mere $277,000). Buyers would get a relative bargain in the neighboring Coppell Independent School District, which has a rating of 9 and a median home price of $470,000.

3. Kenilworth School District No. 38, Cook County, IL

The Chicago area’s Kenilworth School District No. 38 ranked third in the nation with a home price premium of 606% compared with greater Cook County. Homes in the district alongside Lake Michigan (rating: 10) go for a median list price of $1.6 million. But just a bit southwest, Wilmette Public Schools District 39 has a rating of 10 and homes that go for $780,000.

Rounding out the top 10 school districts with the highest price premiums are:

4. Indian Hill Exempted Village School District, Hamilton County, OH

5. Winnetka School District 36, Cook County, IL

6. Manhattan Beach Unified School District, Los Angeles County, CA

7. Scarsdale Union Free School District, Westchester County, NY

8. Saddle River School District, Bergen County, NJ

9. San Marino Unified School District, Los Angeles County, CA

10. Mariemont City School District, Hamilton County, OH

The Benefits of a Home Warranty.

I have a client that just purchased a home. It was the home of their dreams and it had everything they ever asked for. I suggested to them that they get a home warranty because all of the benefits it provided.

“Home Warranty of America” was included in my 1st Home purchase and I made good use of it during the first year. I did not have it when I bought my 2nd home. As you know, the 2nd home was recently renovated with high-end appliances so I didn’t think purchasing another Home Warranty was needed. I am very glad you suggested it because in 2 months my microwave and oven both went dead. At first I panicked but I remembered that we had the home warranty. I could have paid over $1,000 to fix to these and didnt have to pay a dime. High-end products look and work good but they are expensive to repair. I won’t even think twice about buying a home without “Home Warranty of America” again.

 

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Nationwide, as buyer demand and competition for homes has grown, so has the desire for “quick closings”. Requests for quick closings have climbed as the home buying landscape has become more competitive. Buyers will offer to “close quickly” to enhance the appeal of their purchase offer making it more compelling and to help their offer stand-out among the competition.

Loan volumes play a major role in approval timelines and as loan volumes decrease, lenders are able to turn purchase approvals more quickly to the benefit of today’s home buyers. Loan volume is highly seasonal and volumes tend to increase in the spring and summer months.

As loan volume rises, your ability to do a quick close will wane. If you’re considering purchasing a home you’ll want to know How Long It Takes to Close on a Home Purchase and ways to maximize your closing speed, Follow these helpful behaviors outlined in the link and your loan can be approved more quickly.

As always, I am here to help you with all of your home-related needs whether you are in the market to buy or to sell. Call or email me anytime with questions or to start this important process.

Typically I suggest that home buyers negotiate with the seller over who pays closing costs. Sometimes the seller will agree to assume the buyer’s closing fees and buyers walk into the closing with minimum or no money down.

On the average, home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs. Lenders are required by law to give you a Loan Estimate, which will include what the closing costs on your home will be, within three days of receiving your loan application. But these are just an estimate, and many of the fees listed can change.

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WHY

The purpose of the inspection process is to identify any habitability issues with the home and to ensure the buyer is comfortable with the condition of the property. Small cosmetic and “maintenance” items are not to be considered “issues” when addressing an inspection report.

WHO

The buyer typically pays for any/all home inspections. Ranging from $200-$500 depending on the size of the home. A whole house inspection usually takes between 2-3 hours. I recommend a buyer showing up for the last half hour to get an overview from the inspector.

WHAT

Option 1: Whole House inspection

A professional inspection should look at the following for defects or malfunctions.

  • Buildings Structure (important to note, the inspector is not a structural engineer, they will mark areas of concern, but a professional structural engineer may need to be brought in for further assessment.
  • Systems and Physical components such as the roof, plumbing, electrical, heating/cooling
  • Floors surfaces, windows and doors
  • Detect pest infestations or dry rot and similar damage
  • The inspector should also examine the land around the house for issues concerning grading, drainage, retaining walls and plants affecting the house.

Important note: A whole house inspector is a jack of all trades and a master of none. 

Option 2: Specialized Inspections

A Buyer can choose to break down specialty inspections and pay for professionals to assess items of interest. Each professional will charge for an assessment.

  • HVAC
  • Plumbing
  • Roof
  • Structure
  • Electrical

Option 3: Additional Inspections

  • Radon
  • Mold
  • Asbestos
  • Lead Based paint ( homes built prior to 1976)
WHEN

The inspection process begins when a buyer/seller are officially under contract and all terms have been agreed upon. The buyer typically has 10 days to conduct any/all inspections. Followed by the post inspection period when repairs can be requested.


Contact

I am always available to talk. (614)289-8799 #RealEstateSuitedForYou

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