Christi Nelson's Lake Oroville Real Estate Blog

A Good Faith Estimate is a lenders proposal as to what closing costs and loan fees will be associated with your home loan. Real Estate Settlement Procedures Act (RESPA)  now mandates home buyers receive a standard, three-page Good Faith Estimate within three days after they apply for a  loan.

The Good Faith Estimate form requires lenders to combine all of the bank’s fees into one “origination charge,” enabling consumers to compare one lender’s fees with another’s. These mortgage fees, also called settlement or closing costs, cover every expense associated with your home loan: inspections, title insurance, taxes and other charges.  An accurate Good Faith Estimate is essential for a prospective home buyer to make a informed decision about their exact settlement or closing costs.

Lenders also are prohibited from increasing the origination fee from the estimate. Some additional charges, including title services and recording charges, can increase by as much as a combined 10 percent. Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower,may not be subject to such limits.

It is important to have your lender fully explain your Good Faith Estimate to you. All charges typically paid for by the buyer must be disclosed on the GFE regardless of  whether the charges will be paid for by the buyer, the seller or other party. Remember, dont be afraid to ASK QUESTIONS!

For example: Lets say the seller is paying the buyers closing costs of  5% on a purchase price of $250,000 that would be a credit to the buyer of $12,500. That is now going to be shown on the buyers GFE as a buyers cost. DONT PANIC! At closing the seller will still be giving the credit to the buyer but it must show as a cost for the buyer to give the buyer a true picture of what the costs for the loan are.

New Year still Offers Great Interest Rates!

The 30-year fixed-rate mortgage  averaged 5.06 percent for the week ending January 14, 2010, down from last week when it averaged 5.09 percent. Last year at this time, the 30-year FRM averaged 4.96 percent.

Home sales in the Lake Oroville real estate market, especially for lower-priced homes, increased due in part to the home buyer tax credit and house prices appeared to have changed little.

I want to give you an example again of what the difference between a 5.06% interest rate and say 6.5% rate is on a 30 year mortgage.

Lets say on a $150,000 purchase price at 5.06, the principle and interest payment would be approx. $810.74 per month. Now take that same purchase price of $150,000 at 6.5% and the approx. monthly payment would be  $948.10. This is a difference of $ 137.36 per month, a  savings of $1648.32 a year and $49,449,60 over the life of the loan! That is almost a $50,000 difference. So interest rates play a big role in purchasing a home.

Whether your a first time buyer or looking to move up or down for that matter, you need to take advantage of this!

Speak with a Oroville Real Estate Professional to see how they may be able to help you get into a home. There are alot of programs available.

In my next post ,I will be giving you the information and links you need to get enrolled in  the Mortgage Protection Program. This is a free program that every first time buyer should be enrolled in! There are time periods so stay tuned for details.

Interest rates are low and prices have come down. Some buyers have decided that it is a good time to buy, even if it is a little while before the Oroville Real Estate Market fully stabilizes.

Buyers who have a house to sell face a more complicated situation than they did when they bought their first home. They may not be able to afford to buy a new house before selling the old one. And, it may be more difficult to find a home to buy because many sellers are not selling now due to current market conditions.

Despite complications, homeowners who want to trade up in a down market can benefit financially. They may sell their current home for less than it might have sold for a few years ago, but they also could pay a lot to less for the replacement home.

Let’s say your current home that was worth $300,000 two years ago is now worth $200,000, or 20 percent less. Even though you would sell for $100,000 less today, if you buy a $1 million house that two years ago was worth $1.25 million, or 20 percent more, you come out $150,000 ahead.

Interest rates are still at an all time low! Even edging up this week, they are 4.81 on a 30-year fixed. On a $200,000 mortgage the principle and interest payment at todays average rate would be about $1049, compared to $1,199 a year ago. A savings of $150.00 per month.

Combine those two major factors and add the $8000 tax credit to first time buyer and the $6500 credit to move up buyers and you have a win win situatuion!

The 30-year fixed-rate mortgage averaged 4.91 percent with an average 0.7 point for the week ending November 12, 2009, down from last week when it averaged 4.98 percent. Last year at this time, the 30-year FRM averaged 6.14 percent.

 Mortgage Rates
30 Year Fixed: 4.98%
15 Year Fixed: 4.40%
1 Year Adj: 4.47%
(U.S. Weekly Averages)

 First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers has been extended until April 30, 2010. The  improvment to this? There is now a credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010. Home buyers can still take advantage of the prices in the Oroville, Chico and Paradise Real Estate Markets as well as take advantage ofgreat interest rates!

This is a great  “MOVE UP” market. If you have been thinnking about upgrading to a larger home..there is a credit for you, here is your chance!

Who Qualifies for the Extended Credit? 

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase. 

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

• Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
• Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase. 

Can a Buyer Still Qualify If He/She Closes After April 30, 2010 

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Is there a difference between a Mortgage Pre-Qualification letter and a Mortgage Pre-Approval letter?  The answer is YES!

These terms appear to be similar, but are different.

Speaking as a REALTOR®, the difference is in documentation and verification. In other words, is the buyer providing copies of income pay stubs and bank account statements to the Lender or is the Lender simply relying on verbal information provided by the buyer?

 Mortgage Pre-Qualification is generally a process where a buyer contacts a Mortgage Lender/Mortgage Representative, often on the telephone, who then asks the buyer to provide some information. The information requested involves a current address and how long living there, a social security number and permission to order a credit report, annual income and hopefully the amount of down payment.

 After the credit check is ordered and received by the Mortgage Lender, the Mortgage Rep then estimates the amount of mortgage the buyer can afford and sends (via fax or email) a letter to the buyer with the title Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ or Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ and a purchase price of $__. This is usually done within a half hour or so of the initial phone call, and at best can be described as an estimate of potential mortgage ability and not Mortgage Pre-Approval.

Mortgage Pre-Approval,  in addition to obtaining a credit report, many Lenders require the buyer to provide proof of two years of work history, pay-stubs or income tax forms, copies of bank statements for source of funds verification and copies of charge card statements.

When the documentation is provided, it is then submitted to the Mortgage Underwriter for review and approval. The Mortgage Pre-Approval letter is worded something like this: Congratulations, You Are Pre-Approved for a mortgage loan in the amount of $__ and a purchase price of $__ subject to a Contract of Sale and a satisfactory Bank Appraisal on the home being purchased. While more time consuming than the previous pre-qualification practice discussed above, it is more thorough and more reliable, shortens the formal mortgage application and approval process and provides the ability for a fast closing if one is desired.

Mortgage Pre-Approval will give the buyer confidence in a price range and confidence in obtaining mortgage approval. In submitting offers, sellers will know they have a serious buyer who has taken the time to arrange for mortgage financing first.

Mortgage Rates
30 Year Fixed: 5.29%
15 Year Fixed: 4.79%
1 Year Adj: 4.81%
(U.S. Weekly Averages)

 While chatting with other parents at a baseball game, we began to discuss the market and if it was the right time to buy. As we discussed how property values have dropped and interest rates were still at an all time low. I said “Yes, now is absolutely the time to buy!” One of the parents made a statement that was amazing to me. He said “sure that’s what all Realtors would say” Of course that’s what we would say! That is what our profession is all about. Educating the public as to what the market is doing and what they should do if thinking about buying real estate.

Consumers, who are hesitant about purchasing a home today because they fear price depreciation, need to understand that real estate is cyclical and that prices will increase again. Home buyers should view a house as a long-term investment and not be fixated on short-term prices. Consumers should purchase a house if they plan to live in or hold the property for at least several years. This will allow the market to stabilize and homeowners to possibly profit from their investment, if they decide to sell. 

Interest rates are still at a fantastic low, especially if you compare it to the market of the 80’s where they could be up to 18%. That’s like charging the purchase of a home on a credit card!

So as buyers have been sitting on the fence waiting for the bottom and low interest rates, the rates are starting to creep up. 

Here is an example of the difference in a mortgage payment with a small change in interest rate:

Weekly national mortgage survey

So the answer is Yes, now is the time to buy.

Happy Househunting!