Tag Archive: House

Oct 23

Mortgage Helpful Hint #6

Cash to Close

 We have already covered in Helpful Hint #2 that EVERY PENNY used at the closing must be sourced (show where it comes from).  Be ready for this well in advance. 

 If you show up at closing with a check drawn off of an account we have not verified then we can not close!

 We cannot accept CASH at closing, I had a guy show up with a briefcase full of cash once, did not close, took weeks to fix before he could close. 

The check you bring to closing must be drawn off YOUR account from funds we have sourced, made payable to yourself for the exact amount needed at closing.  It is okay if you bring too much, the closing attorney will refund the difference at closing.  It is not okay to be short on funds at closing.

 There are a couple of exceptions to checks allowable only from your account.  If you are selling a home right before buying another home is one exception.   Do not deposit the check you receive from the first closing unless there is plenty of time for it to clear (a week or more).  If you deposit more than $5,000 in your account there is a very good chance your bank will freeze your account until the check clears and they receive the funds from the other bank.  Your bank will not certify funds until they have them from the other bank.  Under this circumstance you should bring the net proceeds check from the first closing to our closing.

 BUT DO NOT assume the closing attorney preparing your deed and mortgage will accept an escrow check from another closing attorney they do not know.  If you intend to bring a third-party check to closing and endorse it over then we need to clear that PRIOR to our closing.  

 Another exception is when the buyer is receiving a gift from a blood relative, that check can be from the donor’s account.  But don’t wait until the last-minute, this is something that should be covered very early in the process.  If the donor proves funds from one account but writes the check from another…BOOM! Your closing will explode.

 Every Penny must be sourced if you are using a mortgage to finance the purchase.  Do you think I care if your money is buried in a fruit jar under your neighbor’s house?  Absolutely NOT.  These are Federal Regulations, not my rules.  All I am trying to do is help you get from where you are to where you want to go without stepping in a mess.  Call me before moving money around, not after.  I can’t fix something that is already messed up.   

Please link this page to any of your friends or family that are planning to buy or refinance a home.  They’ll be glad you did.

Oct 17

Mortgage Helpful Hint #5

Do Not Change Jobs

Okay this one sounds silly but it happens often enough I included it on the list.  Remember we are taking a snapshot of your position, your ENTIRE POSITION,  financial, employment, credit, etc.

 ANYTHING that changes has the possibility of changing the picture. 

 Probationary periods on a new job can train wreck a real estate mortgage transaction.  So could a lower pay scale, or different type of job, etc.  ANY change, even one for the better should be discussed BEFORE doing it.

 My goal in sharing these Helpful Hints is to make your experience as pleasant as possible. 

Jun 23

Overpriced Listings

Twice this week I ran across buyers that were attempting to purchase properties that were obviously overpriced. Declining property values have been a growing problem for everyone in the industry for the last few years.  Issues with appraisals run neck-and-neck with problems regarding the condition of the properties. 

The reduction in property values created an almost cottage industry called short sales.  Short sales have been around for as long as there have been mortgages but they have never been as main stream as they are today.  Lenders and the real estate industry were not prepared for the magnitude of the problem.  They have been playing catch up from the very beginning.  

A short sale is what happens when the value of the property is less than the balance of the mortgage and the seller asks the lender to accept less than is owed so the property can be sold.   Explaining this to a seller is not an easy task for a Realtor.  The idea that real estate is the best investment because “They don’t make any more of it” is hard wired in to all of us. 

Not all overpriced listings are an attempt to avoid a short sale, in fact most are simply an indication of greed.  The seller just wants more than the property is worth.

The rules for lending are very specific regarding the value of the real estate being pledged for a mortgage.  The lender must use the lower of the sale price or appraised value when computing the loan-to-value for the mortgage.  This doesn’t mean the buyer cannot pay more for the property than it will appraise for, it simply means they cannot use the inflated price for calculating the size of the mortgage.

How Mortgage Amounts Are Calculated

Let’s assume a property priced at $110,000 but will appraise for only $100,000.  On a standard conventional fixed rate mortgage the minimum down payment is 5%.  Okay, that is the flip side of saying the maximum loan amount is 95%.  But the definition is 95% of the sale price or the appraised value whichever is less.  If the property only appraised for $100,000 then the maximum mortgage is $95,000.  The buyer could still purchase the property for $110,000 but the amount needed for down payment would be the difference between that figure and the maximum loan amount which works out to be $15,000.  

If the property had appraised for $110,000 then the required down payment in our example would have been $5,500, a far cry from $15,000.  This is the primary reason most properties that are priced above the market value will not be sold at the inflated price. 

Some Realtors Will Take a Listing at Any Price

Listings are inventory and the more inventory a Realtor has the more inquiries they will receive from buyers.  Some Realtors will list a home at any price while others will not.  It is a numbers game for those who choose to ignore the comparable sales.  If a buyer calls about a Realtor’s overpriced listing the agent may be able to sell them another home that is not overpriced.  Although there is nothing illegal about taking an overpriced listing it doesn’t help the owner of the property or the marketplace only the Realtor taking the listing.  

The seller is hoping for a miracle, somehow their property will sell for a significant amount above what similar properties are selling for.  Even if they are lucky enough to find a buyer that loves the property a problem will occur when the buyer applies for a mortgage.  Okay, the seller hopes a cash buyer will step up that doesn’t need a mortgage.  Possible, but cash buyers think they are special because they are paying all cash and therefore deserve a bargain, not compatible with the seller’s plan.   

What Can a Buyer Do?

This article began because a couple of buyers asked what to do because they found a property they liked but the price was significantly above the market value.  There is actually a fair solution when you receive a counter offer from the seller that is higher than what you believe is the actual value.  Accept the seller’s counter offer provided the seller or the listing Realtor pays the buyer’s lender for the appraisal upfront.  

Oh man!  Can I kick a hornet’s nest or what?  Ask the seller’s Realtor to pay for the buyer’s appraisal?  You must admit that is out of the box thinking.  Leave it up to the selling side, let them decide who is going to pay it, or maybe they split the cost, it doesn’t matter to the buyer.  This little maneuver will at least initiate a serious dialogue between the seller and the listing Realtor about the true value of the property.

I had to toss the listing Realtor into the mix because the problem never would have surfaced in the first place if they had not listed the property for more than it was worth.    

The clause would also indicate that in the event the property does not appraise for the agreed upon price the seller will have the option to lower the price to the appraised value or release the buyer from the contract.  This solution protects both sides; the buyer is not forking out money for the appraisal on an overpriced property yet both parties have the possibility of discovering how much the property will appraise for.  Win, win.   

Please share this article with others if you like out of the box thinking.

 

May 23

Attend Your Closing

Recently had another closing when one of the sellers did not attend.    The closing attorney was kind enough to have the deed and closing statement prepared a day in advance so the missing seller could come by and sign off.  At the real closing the next day the seller made a $5 change to the closing figures! FIVE DOLLARS!!!

What a pain in the neck stuff like this is when the lender is trying to meet all of the federal regulations regarding the closing.  The closing was delayed because of the seller and then one of them decided they had something more important to do at the time they choose, we showed up on time.  What could possibly be more important than closing a half million dollar deal?  Couldn’t get a baby sitter? Had to water the lawn? I never did catch the conflict; it was glossed over by the attending side of the couple.  But it didn’t make sense to anyone that was in attendance.

If you lose money because you do not attend the closing there is no one to blame but yourself.  This little incident could easily have caused everything to go back to the underwriter.  It took the seller six months to find a buyer, another month to get to the closing table, it was not a surprise.

Compare the stacks.  How much was the stack worth that the missing seller had to attend to compared to the stack of money the buyer and I brought to the closing table, $50 versus $500,000? That doesn’t sound right does it?

A change to the figures could have required a change to the closing statement, thus requiring the missing spouse’s signature on the new numbers, therefore no closing that day.  The closing attorney accommodated the problem by issuing a refund check for the $5.

I have no idea why so many buyers and sellers are trying to not attend the closing.  It has happened to me more times this year than the previous 20 years combined; I would say that is a major change.

Ramifications

Could be many problems if the closing is delayed because one of the parties does not attend.  A closing late on a Friday afternoon might require rolling over to the following Monday.  That might require switching dates on movers, three extra days of interest on the seller’s mortgage.  Or how about this one, the buyer walks!  I have seen it happen for a lot less.

Attend your closing!

Apr 24

Conventional Loan Apps Jump Up

For the past couple of years my FHA loan applications have outnumbered conventional loan apps two or three to one.  This month they are equal, a big jump forward on the conventional side. 

All of the Realtors that refer their clients to me are much busier than last month and last month was very good.  Interest rates are just a little above the level they were in January, still very low.  If the demand continues to increase there will be upward pressure on rates.  It is a good time to move before the rates move.

I was in La Grange this afternoon, saw several new homes going up.  Good to see some new construction.  I have had more calls about end loans for new construction this month than the entire previous year combined.  Still not back to the levels long ago, but a definite improvement.

  

Apr 21

Mortgage Interest Rates Update

Mortgage rates for Kentucky continued to be ranged bound this week ending about where they started.  Not much good news for the economy kept them in check.  Even the mess in Europe had little impact.  The latest update on my Rate Sheet was almost identical to Monday’s posting.

I had a couple of interesting conversations on this topic with people that were inquiring about getting a loan this week.  The first person asked if I thought rates would go a lot lower.  My response was the same as it has been for almost a year now, “How much lower CAN they go?  There are more numbers above the current rate than there are below it.”

Jim’s Rules Regarding Rates:

Rule #1:  What goes up must come down, what goes down must come up.

Rule #2:  Every day you don’t lock a low rate is one day you are closer to locking a higher rate.

Rule #3:  The current rate is either going to get better, stay the same or get worse.  Count on it.

There was actually a quarter point improvement in the Secondary Market Program at KHC which I find odd.  This is a relatively new program and allows borrowers that are not first time home buyers.  Historically KHC has only provided financing to first time home buyers.  Last week both programs were priced the same.

The second interesting conversation on this subject was with a lady that is currently has an adjustable rate mortgage (ARM) and was inquiring about refinancing to a fixed rate.  Her reluctance is that her current ARM rate is about a quarter point lower than the current fixed rate.  Her answers to my questions pointed out that her rate cap is almost 8 points higher than where she is now!

It took her breath when I told her the highest rate on her existing loan could be in the mid 11’s.  See Rules # 1 & 2 above.

HARP 2.0

Harp is helping a lot of home owners refinance that are currently upside down or do not have enough equity.  If you have been told that you do not qualify due to either of these reasons, ask about Harp 2.0.

 

Visit my online application site or print and use this simple formto get started. If you prefer we can do it over the phone, call my direct line during normal office hours, (502) 753-4127.

 

Apr 11

Mortgage Application Support Documents – New Page Added

We just added a new page to help home buyers with the support documents that are needed to process a mortgage loan.  Being prepared eliminates most of the stress with the home buying and financing process.  Knowing what to expect helps the buyer and makes the process much simpler.

The single largest delay in processing a mortgage application is trying to obtain missing documents or pages that are missing from the documents.  This checklist will help eliminate the problem for the buyer that wants a Quick and Easy Process.

 

Apr 28

Selling the Invisible House

My book is in the editing stage, should be published soon.  Very excited!

Cover Small 2 199x300 Selling the Invisible House