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.

So your agent has shown you a bunch of  houses and you might be getting a little frustrated if you havent found the right one.  Be patient! Sometimes it takes a few showings to really fine tune what it is that you REALLY want. 

 Then, you finally find it! Let the flood of emotions and questions begin!

In my opinion, it is good idea to educate the buyer as to what the process is and what decisions we will have to be made when finally making the offer.  However there are still little things that will need to be addressed and especially if there are going to be multiple offers on the property.  Thats where you will need to really listen to what your Realtor advises you to do. They have the experience and negotiating skills that will put your offer in its strongest possible position.

Although there are many part to the purchase contract here are a couple examples of things to think about:

The  purchase price. What is the amount you really want to offer? This will usually be a number you come up with according to the sold comps your agent has provided to you. Keep in mind this is probably the toughest part. There are a couple of factors to consider when finalizing the price. Is the seller being asked to give a credit for your closing costs? Are you asking for the seller to pay for all the inspections? How long is your escrow period?  These are things that need to be considered and your agent  will help you fine tune the numbers to make it attractive to the seller.

Escrow Period- How long of an Escrow do you need? Generally the normal time period is 30-45 days. Its a good idea to check with your lender regarding the time period they may need to complete the loan process.

Inspections- What type of inspections do you want to do? What is customary? What do you want the seller to pay for and which ones will you as the buyer pay for?  Your agent will be able to advise you on what the different types of inspections you can do and the importance of them. Your lender may also require certain inspections depending on the type of loan you have.

Here is an example of what a Califonia Purchase contract will look like.

 Mortgage interest rates dropped as well as home prices. You have decided its time to buy a house. Now what? Over the next few days I will take you through the process of what to expect when buying a home.

If you’ve never bought a home before or if you currently own a home but have never bought and sold at the same time, the process can seem intimidating. You can ease your anxiety by making a game plan and choosing the best team of professionals you can find.

The two key players on your team are the mortgage person and the real estate agent. Once you have these selected, they can help you line up the additional help you need.

The first step is to find out how much you can afford and what type of loan you will be getting. A lender will qualify you for a certain loan amount depending on how much cash you have available for a down payment and closing costs — the various fees associated with buying or selling a home. Depending on your loan, the house may have to qualify as well.

Other relevant factors are your credit score, your verifiable income and what type mortgage you decide to use for your purchase. There are a lot of different mortgage options: 30-year fixed-rate mortgages, 15-year fixed, interest-only, as well as various types of adjustable-rate mortgages.

Once you know how much you can afford, your mortgage broker or lender can provide you with a pre-approval letter. This is key in the Oroville Real Estate market today with foreclosures, short sales and seller’s alike. This requires that you complete a loan application and have your credit checked. This will put you in a good bargaining position with the seller.

While you’re checking on financing, you should also find a real estate agent, if you don’t already have one. If you’ve never bought a home before, you should use an agent who is a good communicator and who will take the time to explain the process. Also, keep in mind that your agent will be working with the other parties in the transaction. You want someone you trust and who you are sure will represent you professionally and work diligent on your behalf.

With this ground work completed, you are ready to seriously hunt for a home!

Congratulations if you have purchased your first home!

While many buyers are still on the fence, there are many that took advantage of the low prices, interest rates and got a bonus of a tax credit. Through the home buying process one of the biggest fears I see is “what if I lose my job, and cant make my payment?” Well with all of the foreclosures,short sales and negative media, no wonder these buyers are a little nervous. Well, there is a program to help buyers feel a little more confident. 

The California Association of Realtors has put together the Housing Affordability Fund. This FREE program was designed to help a first time home buyer in the event they become unemployed after the purchase of their home. Here is how it works: 

 Through the program, first-time home buyers who lose their jobs may be eligible to receive up to $1,500 per month for up to six months to help make their mortgage payments. A qualified co-buyer can also participate in this program, for a reduced monthly benefit of $750 per month for up to six months in the event of a job loss.

Who qualifies for this program?

First-time home buyer – someone who hasn’t owned property in the last three years (includes co-buyer) Open and close “escrow” between 4/2/2009 and 12/31/2010 (purchase offer cannot be dated before April 2, 2009

Purchase a principal residence in California

Buyer must be represented by a California REALTOR® (“referrals” do not qualify);

Be a W-2 employee (i.e. not self-employed) but can not be a sole proprietor, partner or controlling stockholder in the business in which you are employed, or a dependent of a sole proprietor, partner or a controlling stockholder in the business in which you are employed.

How do home buyers apply?

Home buyers must apply through a California REALTOR®. The REALTOR® will submit the completed application to CARHAF on the home buyer’s behalf.

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)

Recently I went to the Realty World NCA event  where I was introduced to the team at Realty World Financial Services, Inc. I learned of some great programs they have to help homeowners in financial distress.

It is important to remember that we want to do everything we can to help homeowners KEEP their homes. Many homeowners are fighting like crazy to stay in their home and barley making it. Homeowners that are current on their payment but in trouble may find this a perfect solution. With all the different talk of scams and failure to find anyone to do a loan modification, I was pleased to hear that they actually were helping homeowners.

Their goal is to educate you on all aspects of the Short-Payoff-Refinance and Modification so that you are 100% aware of exactly how to obtain the approval that you deserve.
 
Unlike a Loan Modification, where you are modifying your existing mortgage to more  favorable terms, due to some form of ‘hardship’,  the Short-Payoff-Refinance is qualifying for a new FHA 30yr Fixed Loan or “New Money” as they say in the mortgage business, and paying off your existing lender for 90 to 97% of ‘Fair Market Value’ of the home.
 
With a Short-Pay, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor but more importantly the lender.  This negotiation is all done through communication with a bank’s internal department’s.  Once the Discounted Payoff Demand has been obtained by the current note holder, the refinance is completed and the proceeds of the refinance to the original lender is in full satisfaction of the 90 to 97% agreed upon debt.  In such instances, the lender would have the right to approve or disapprove of a proposed loan balance. These circumstances are usually related to the current real estate market and the borrowers’ financial situation. .

They are also very well equipped to perform Loan Modifications by using a streamlined approach using HTI (Home to Income) and NPV (Net Present Value) tools to assist borrowers.

If you are a struggling homeowner, please contact me at mail@ChristiNelson.com so that I can put you in contact with a loan officer.

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.

 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!