In almost every state in the U.S., buyers have the option of being represented by their real estate agent. This relationship creates responsibilities that require the agent put their client's interests above their own.

The duties a buyer or seller can expect to receive among others are honesty, accountability, full disclosure, representation and reasonable skill and care. In a nutshell, the agent who represents you is working in your best interest.

It's a special relationship that doesn't exist with most of the other professionals involved in a real estate transaction. Mortgage and title officers are limited to their duties of honesty, accountability and specific requirements under the Real Estate Settlement and Procedures Act.

This special relationship with your real estate agent makes it advantageous to have them coordinate your efforts with the other professionals in the home buying process. Since most buyers' and sellers' transactions are infrequent, the agent can bring valuable experiences to the transaction.

A Residential Finance Consultant is trained and has special tools to help you make better decisions when you buy or sell and in between. Our goal is to help you improve and maintain the investment in your home so we can earn the right to be your lifelong real estate professional.

Fannie Mae and Freddie Mac underwritten conventional, FHA and VA loans account for the vast majority of mortgages chosen by buyers to finance their home purchase. While buyers have the choice on which product to use, there are some considerable advantages to FHA.

1. More tolerant for credit challenges than conventional loans.
2. Lower down payments than conventional loans.
3. Broader qualifying ratios - total house payment with MIP can be up to 31% of borrower's monthly gross income and total house payment with all recurring debt can be up to 43%.
4. Seller can contribute up to 6% of purchase price - this money must be specified in the contract and can be used to pay all or part of the buyer's closing costs, pre-paid items and/or buy-down of the interest rate.
5. Self-employed may qualify with adequate documentation - two year's tax returns and a current profit and loss statement would be required in addition to the normal qualifying and underwriting requirements.
6. Mortgage Insurance Premium can be released in five years when the balance is 78% of original sales price
7. Liberal use of gift monies - borrowers can receive a cash gift to assist in purchase from family members, buyer's employer, close friend, labor union or charity. A gift letter will be required specifying that the gift does not have to be repaid.
8. Special 203(k) program for buying a home that needs capital improvements - requires a firm contractor's bid attached to the contract specifying the work to be done. The home is appraised subject to the work being done. If approved, the home can close, the money for the improvements escrowed and paid when completed.
9. Loans are assumable at the existing interest rate - assumptions require buyer qualification but are actually easier than qualifying for a new mortgage. Closing costs are lower on assumptions than originating a new mortgage.
10. If the rate on the assumable mortgage is lower than current rates for new mortgages, it could add value to the property.

You might think that a person who pays cash doesn't have many concerns or at least not the same ones as most people.  Roughly, about 9% of people paid cash for their home last year with a considerably higher percentage paying cash this year. 

The first question that comes to mind when I hear someone say they want to pay cash for a home is "Do you think that you might put a loan on the home in the future?"  Paying cash may affect your ability to deduct the interest on a mortgage placed on the home at a later date.

Currently, a homeowner may deduct the interest on up to $1 million of acquisition debt.  Paying cash for a home establishes acquisition debt at $0.  At that point, the only deductible interest would be home equity debt which is limited to $100,000 over acquisition debt.  You can get more information about this from IRS Publication 936.

On the surface, paying cash certainly seems simple but it may have consequences later.  As a Residential Finance Consultant, I can point out the areas when advice from a tax professional is in order.

Go to PA Homes.co for more information.

Uncertainty as to whether prices will continue to fall has to be one of the most com

mon causes of buyer procrastination.  Paying too much wouldn't be a smart thing but price isn't the only factor to consider.  Interest rates have as much effect on housing costs as price.

A small increase in mortgage interest rates can offset a significant drop in home prices.  If the price of the home were to come down by 5% but the interest rates were to go up by .5%, the payments might be close to the same.

In the example below, if the price of $175,000 home went down 5% but the interest rate went from 4.75% to 5.25%, the payments would actually be $4.98 more at the cheaper price.  If while the buyer was waiting for the home to decrease 5% and the interest rate increased by 1%, the payments would actually go up by $55.30.

Then, of course, there is always the possiblility that the price of the home doesn't go down but the rate does go up by 1%.  The payments would be $104.58 more per month, each and every month for as long as you have the mortgage on the home.

As a Residential Finance Consultant, I can provide solid information that will help you make better buying decisions.  A home is a place to feel safe and secure, to raise your family, share with your friends and an investment.  It's an investment in your marriage, your family and your future.  You owe it to yourself to check out the real numbers in your market because every market is different.

Here's an interesting thought. Instead of pulling money out of your equity when refinancing your home, consider putting some cash into your equity. The strategy would be to get a considerably lower rate and a shorter term than 30 years. It will pay off your mortgage sooner, build equity faster and save lots of money in interest.

If you have some extra cash available, this might be very atteractive compared to what your are earning currently on those savings.

In the example below, the current mortgage is at 5% for 30 years with payments of $939.44. The owner can refinance for 15 years at 3.875%. If he puts $30,000 into the refinance, his payments will be slightly more than the current $1,011.06 but the mortgage will be paid off in 15 years. At that same point, if he keeps the current mortgage, his unpaid balance will be $101,572.88.

In order to have the same payments as the mortgage he is refinancing, he'll need to add $39,764.68 to the refinance.

If you have a goal to get your home paid off and you have some funds available, a Cash-In Refinance may be just the strategy for you.

 

 

 

The Housing Affordability Index reached a record high of 192.3 forFebruary, 2011. Two contributing factors to the Index are the priceadjustments homes have experienced in recent years combined with theunusually low mortgage rates make this an outstanding opportunity forbuyers who can qualify.

Before the housing bubble burst in 2006, the index average for theyear was 108. The high prices and higher interest rates restricted manybuyers from purchasing. As the market started to deteriorate, whichresulted in declining values and lower interest rates, the index startedto rise.

The opportunities are not being seized by buyers and some real estateprofessionals feel that it's because there is confusion in themarketplace. Buyers are uncertain whether they would qualify and whethernow is a good time to be purchasing a home.

All markets are different and every situation is unique. The onlycertain way to determine would be to investigate your individualsituation. You owe it to yourself and your family to visit with a realestate professional who can show you the real cost of housing andrecommend a lender.

The National Association of Realtors releases the index atthe end of each month with a two month lag time for compiling theinformation. When the index is at 100, a median income family can afforda median price home. As the index increases, housing affordabilityincreases.

To take advantage of this great opportunity Contact Me.

Whether you rent or buy, you pay for the house you occupy. You must live somewhere and there's a price to pay for it. A simple analysis will show you whether it's cheaper to rent or buy.

Some people don't have any choice but to rent because they don't have the means to qualify for a loan. But for those who do have a down payment and good credit, they actually have a choice of whether to rent or buy. In some cases, owning will cost significantly less than renting.

Rentals are in high demand in many markets and rents are going up. People who have experienced foreclosures and short sales have increased demand. The first comparison a discerning buyer needs to make is whether the house payment is lower than what they'd have to pay in rent.

The next comparison needs to consider the other benefits that accrue to an owner such as principal reduction, appreciation and tax savings. These can dramatically weigh in favor of owning rather than renting.

Tenants have made the decision to buy a home. The decision currently facing them is whether to buy it for themselves or their landlord.

It's one thing to have the down payment and not qualify because of credit scores but in today's tough financial environment, it may be even more frustrating to have good credit, income and job stability without the down payment.

The 2010 NAR National Housing Pulse Survey states that 79% of respondents identified the down payment and closing costs as obstacles to homeownership.  73% express a lack of confidence in getting approved based on a concern that banks have made it too hard to qualify for a home loan.

Most buyers depend on the savings or the proceeds from the sale of a previous primary residence for the down payment.  The savvy agent can recommend some other legitimate sources such as a gift from a relative or friend that doesn't have to be repaid.

Another frequently overlooked source of down payments could be the buyer's IRA.  If neither buyer has owned a home within two years, each may withdraw $10,000 from their own IRA to be used to buy a home.  The money must be applied within 120 days from the withdrawl.  The 10% penalty normally associated with early distributions is avoided but it will be subject to income tax since it was exempt the year it was deposited into the IRA.

Full disclosure of the source of the down payment needs to be made to the lender.

Sources of Down Payment First-Time and Repeat Buyers	All Buyers	First-Time	Repeat
Savings	66%	74%	57%
Proceeds from sale of primary residence	23%	1%	42%
Gift from a relative or friend	18%	27%	8%
Sale of stocks or bonds	7%	6%	8%
401k/pension fund including a loan	7%	8%	6%
Loan from a relative or friend	6%	9%	3%
Inheritance	4%	4%	3%
Individual Retirement Account	3%	3%	3%
Equity from primary residence buyer continues to own	2%	*	3%
Loan or financial assistance from source other than employer	2%	3%	1%
Loan from financial institution other than a mortgage	1%	2%	1%
Proceeds from sale of real estate other than primary residence	2%	*	2%
Loan or financial assistance through employer	1%	1%	*
Other	4%	5%	3%
National Association  of REALTORS® Profile of Home Buyers and Sellers 2010

Since 2004, the maximum VA loan is the same as the maximum FNMA mortgage which is currently $417,000.  Occasionally, a Veteran wants a loan in excess of that amount.  If the Veteran will put a 25% down payment on the excess amount, a lender will loan the other 75%.

Example
Sales Price                                                           $475,000
Maximum VA Loan                                          $417,000
Excess Amount                                                  $ 58,000
25% Down Payment on Excess                   $ 14,500
Adjusted Loan                                                    $460,500

VA loans are eligible for veterans of the military with a certificate of eligibility.  A Veteran can get a 100% loan up to the maximum VA loan amount and the seller can pay their closing costs which would allow a Vet to get into a home with no down payment and no closing costs.  The VA Funding Fee can be rolled into the mortgage or paid by the Seller.

When the Vet sells the home, their VA loan is assumable at the existing interest rates but does require qualification of the new buyer.  The benefits would be a possible lower interest rate and lower closing costs.

There's more to finding the "Right" home than driving around looking at houses.  A Residential Finance Consultant can help you make better decisions to help you understand the tax advantages, financing alternatives and investment aspects of homeownership.

If you haven't heard by now, FHA is increasing the annual Mortgage Insurance Premium again by .25% on April 18, 2011.  Payments will be higher even if the interest rates remain the same.

Buyers who are ready to take action can still lock in the lower MIP.  If they have a contract signed by all parties and get a FHA case number issued prior to 4/18/11, the lower MIP rate will apply.

For a $175,000 home at 5% interest, the new MIP will mean the buyer will pay $35 more to live in the same home.  If you don't have to pay more, why would you?

Another possibility is that if interest rates go up .5% by the same effective date, you could pay $88 more to live in the same home.  What would you spend $88.36 on if you don't have to make a larger payment?

 

April 18th is a Monday this year, so you'll probably need to get your contract completed by the previous Friday at the latest to give your loan officer an opportunity to order the case number.  If you don't have a loan officer, your real estate professional can recommend a reliable one.  Making good decisions will improve your entire homeowner experience and save you money.