|
|
|
|
|
|
|
| News from Arizona's |
|
 |
Scottsdale Homes $300K - $399K View select Scottsdale properties available ranging in price from under $100,000 to over $800,000 http://www.scottsdalearizona-homesforsale.com/scotts/scottsdale_3_patio_condo_townhome_homes_for_sale.htm |
Articles and Advice |
|
 |
|
| Understanding home appreciation By Inman News Think of appreciation as the paper profits in real estate. Your profits exist only on paper--in this case, your deed--until you actually sell the house. If you buy a house in a rapidly appreciating area, there is no guarantee that property values will be the same or higher when it comes time to sell. The economy may sour or your neighborhood may lose its luster. If you buy at the height of an upswing when demand drives up prices, you may overpay. Just like in the stock market, the flip side of boom is bust, or at least correction. If you overpay and prices settle out 10 percent lower down the road, you may not recoup all of your investment. Appreciation is nice to have, but not what you should bank on when you buy or sell a house. Almost every aspect of the national economy affects real estate appreciation: employment levels, business climate, housing supply and demand, affordability and of course, interest rates. A healthy economy and low interest rates drive demand, which pushes up prices and appreciation. Regional economic changes come into play as well, at times causing housing prices to see-saw up and down. Demographics play a significant role, too. In the 1980s, housing demand soared as the huge number of people born in the 1940s and '50s hit the market. Prices went up and many areas experienced appreciation that was greater than the rate of inflation, making real estate a profitable investment. As this group has settled into homeownership, lower demand in many areas has slowed appreciation to below inflation, making real estate less profitable than other kinds of investments such as mutual funds. Here are some tips for understanding the role of appreciation in your market and in the neighborhood where you want to buy: Look at recent sales. Get a comparative market analysis from your agent or go through public records at the tax assessor's office. You should be able to get a feel for sales volume, price direction and whether final sales prices exceed asking prices (a sure sign of a hot, appreciating market). Pay attention to local business news. Monitor reported real estate trends, but also find out about new industries coming to your area or other economic changes that may dramatically affect housing supply and demand. Know the neighborhood. Research the recent appreciation history of the area where you want to buy. Have prices risen steadily, see-sawed up and down, or been stable over the years? Historically, has the neighborhood been desirable, either because of its amenities or its affordability? Is there a lot of new development nearby? A sudden glut in the supply of new housing can lower property values in existing areas. Buying on the upswing. If you think about buying in a rapidly appreciating area, weigh your decision carefully. Decide if you should rent or buy by calculating the after-tax cost of renting, and comparing it with the after-tax cost of owning over five years. Renting may pencil out as the better bargain for now. If you decide to buy, buy only as much house as you need. The bigger the house, the greater the proportion you may overpay. If you have cash left over from your down payment, invest it elsewhere. Avoid a low-down-payment mortgage. If property values drop and you have to sell, you may not have enough equity in the house to pay off the mortgage and the selling costs, much less get any cash out. |
|
| How to profit from home appreciation By Liz Poppens There are many ways to save money, but taking advantage of a run-up in home prices isn’t usually on any financial planner’s list. However, appreciating property values can offer at least two ways to save money. Many homebuyers today, especially first-timers, purchase homes with less than 20 percent down payments. In such situations, lenders require buyers to buy private mortgage insurance, or PMI, and to set up an escrow account to pay homeowners insurance and property taxes until you have more than 20 percent equity in the house. It can take up to 10 years to reach the 20 percent equity point on a standard 30-year loan. However, when home values are appreciating, as they are in most markets nationwide, that point can be reached much sooner. Dropping PMI and the escrow account could save hundreds of dollars a year in insurance premiums and interest earnings. On average, PMI adds $50 to $100 to monthly mortgage costs, about $5,000 to $10,000 over the life of the loan. As for interest earnings, some lenders do pay modest interest on escrow accounts, but not as much as homeowners could earn by saving money for property taxes and insurance themselves. Because of new federal legislation requiring lenders to be more vigilant about canceling PMI on loans of 80 percent or less, most lenders have set up guidelines for consumers. In most cases, a property must be reappraised to prove its new higher value. Appraisals cost between $300 and $400. Still, that cost is minimal relative to the long-term cost of PMI, especially if appreciating property values make it unnecessary. Canceling an escrow account may take more time, depending on the lender. However, it is worth pursuing while property values are on the upswing. Once the account is canceled, it is wise to set up an automated monthly withdrawal of funds for future property taxes and homeowners insurance into some kind of interest-bearing account. Property taxes usually come due twice a year while homeowners insurance premiums vary. Until those bills are due, the funds could be earning interest. Over the course of a standard 30-year loan, the interest could total thousands of dollars of extra savings. Not only could such savings pay for a child’s college or a terrific vacation, but some could be put toward paying off the mortgage early, too. |
|
| A purchase contract primer It's important to ask questions when you're drafting the terms and conditions of your offer in the purchase contract, whether you do it yourself or with an agent or attorney. Not sure about contingencies? Wondering about fixtures? Just ask. You don't have to become a real estate expert to craft a good contract, but the more you know about how a contract works, the more effectively you can tailor it to your specifications. You'll also be a much savvier negotiator when the seller comes back with a counteroffer. Read the Fine (Pre)print Many residential purchase contracts include standard real estate boilerplate text. Many firms, in fact, use preprinted forms. While preprinted or computerized forms have improved efficiency, they sometimes do so at the expense of the buyer. It pays to get a copy early on of the contract you're likely to use. Read it and don't hesitate to rewrite or delete anything you don't like. If you plan to work with a preprint, get a copy when you start looking for a house and highlight terms or conditions you like or may want to modify when you make an offer. Circle what you dislike, too. This is a good way to catch buyer-unfriendly fine print. After that, you're ready to sit down and write an offer. Elements Every Contract Should Have Whether you write your own contract or using a preprinted form, you should always include between 10 and 20 basic elements, such as the address of the property, contingencies, financing terms, purchase price, closing date and others. Also include: ü Time to respond. Specify how much time the seller has to answer your offer. Contingencies should also include time limits. ü Seller's responsibilities. Include passing clear title to the property, maintaining the property in its present condition until closing, making any agreed-upon repairs and delivering the property clean and free of personal possessions and debris. ü Disposition of deposit. Specify who gets your good-faith deposit if the contract is terminated. This can vary. In cases such as failure to get loan approval, the seller should get the deposit. In the case of an unsatisfactory home inspection, the buyer should get the deposit. ü What stays. Specify fixtures and personal property to be included in the sale. Make a detailed list. Verbal agreements aren't binding. ü Terms of withdrawal. Spell out conditions that allow you or the seller to withdraw from the agreement. You may not think you'll need them, but it's good protection. ü Final walk-through. This is your chance to make sure the house is in order just before you close. Your contract should specify the seller's responsibility if the walk-through is unsatisfactory. ü Problem solving. As much as possible, your purchase contract should help you and the seller resolve any issues that crop up. For example, if your lender only guarantees your locked-in interest rate for 60 days and the seller isn't able to close in that time, one solution is to include a provision in your contract that sets a firm closing date and allows the seller to rent back to you at a cost equal to your monthly payment. ü Sellers' Contingencies Occasionally, sellers make the sale of their house contingent on their purchase of another house. If the sellers fail to complete the purchase of the other house, they can cancel the sale. It's much less risky for you to enter into contract with sellers who are already in contract to buy another home. Be sure to include a kick-out clause in your purchase contract that allows you to withdraw from the contract at some point. A kick-out clause can be structured in several ways. You may give the sellers a time limit to find another home, after which you can void the contract at your option. You may also structure the kick-out clause to let you withdraw from the contract any time until the sellers notify you that they have found another house and will remove their contingency for finding a replacement home. If the sellers' house has been on the market a long time with no offers, you may be able to convince them to waive their contingency. |
|
| Questions every buyer should ask Take this checklist along when you visit a home and talk to the listing agent. Make note of your own observations, watch for defects, and ask about anything you may not see on your own. § What is the visible condition of the property? Poor exterior condition may spell problems inside. § Does the house require major repairs or replacements? Major repairs, such as a new roof, can be costly. Consider these costs if you decide to make an offer. § How old are the mechanical systems? Consider the cost of replacing older systems if you decide to make an offer. § Has the house been well maintained? Ask if the sellers have kept any maintenance records. § Where is the house located on the block? Corner lots can be spacious, but exposed to more traffic and noise. Interior lots can be quieter but too close to neighbors. § How is the house sited on the lot? Be sure the area around the house is graded properly to provide good drainage. § Are there noteworthy architectural features? Front porches, gables or other details add value to the property. § Are there noteworthy landscaping features? Established trees, shrubbery and perennials add value to the property. § What is the condition of the houses on either side and across the street? If neighboring properties are too run-down, they may affect your resale value. § What is the surrounding neighborhood like? Look for evidence of a sense of identity, and pride of ownership in the other homes. § How close is it to shopping and schools? Nearby services can also add value. § Are there community amenities nearby? Parks or recreation centers can add value to the property. § How long has the house been on the market? A long time on the market may indicate problems with the house or neighborhood that you need to know. § Why does the seller want to sell? If there's a problem with the house or the neighborhood, assess the situation carefully. |
|
| Home equity or refinance: Which is better for you? By Michael D. Larson Looking to refinance your first mortgage and take cash out at closing? There may be a better deal for you. When the prime rate is below the average rate charged on 30-year fixed mortgages, consumers looking to tap their home equity may find it cheaper for them to get equity loans or lines of credit. Besides costing thousands of dollars less in closing costs, the rates on these loans may be lower than first mortgages. Before rushing out to a lender, though, consumers should take stock of why they're borrowing and which loan makes the most sense for them. While home equity loans and lines of credit are currently attractive, they still aren't always the best option. "It's good for someone who has to make a purchase and they know they're going to pay it off in a few years or they may want to move out in a couple of years," said Jim Cosman, managing director for consumer finance and executive vice president at Philadelphia-based Sovereign Bancorp Inc. "But once you get a bigger dollar amount, the line starts to cross," he added. "If I need a longer time to pay this off in order to keep my payments reasonable, if I can't afford a five-year or 10-year repayment schedule, I may need to go with a mortgage." First mortgage rates traditionally are the lowest rates around. Banks and loan investors feel the most secure with these loans because they have first lien position, which in English means they get first dibs on any money generated through foreclosure of deadbeat borrowers' homes. When first mortgage rates are lower than equity loan rates, it usually makes sense for a borrower to tap equity by going through a so-called cash-out refinance. In that process, the customer refinances the first mortgage, increases the balance and receives the difference between the old and new balances in cash at closing. The rate curve ball But rates don't always behave normally. Sometimes, the interest rate market throws borrowers and banks a curve ball. When that happens, equity loans can actually end up being cheaper than first mortgages, even though most equity loans are riskier because they're usually in the second-lien position. The reason lies in the way banks set rates on various home loan products. Most first mortgages are bundled into mortgage-backed securities, or MBS, and sold into the secondary market via Fannie Mae and Freddie Mac. Because of this process, bond market traders and the MBS yields -- rather than any banker, broker, lender or even, to a degree, Federal Reserve Board Chairman Alan Greenspan -- control what happens with first mortgage rates. Wall Street bond traders operate the same way stock market investors do. They're constantly trying to figure out what's going to happen next in the economy, not what's already taken place. When the Fed cuts rates, it usually helps the economy recover. So bond traders start to drive mortgage rates higher in anticipation of an eventual recovery -- even though the Fed may still be cutting the rates it controls directly and the economy hasn't improved yet. Home equity behavior Home equity loans work differently, though. For one thing, banks have more say over the rates charged on those because they typically keep the loans on their books, rather than sell them off to third-party investors. For another thing, banks use yields on shorter-term bonds, such as two-year or five-year Treasuries as a guideline for their equity loan rates rather than yields on long-term MBS. Those shorter-term yields are much more sensitive to the level of the Fed-controlled fed funds rate than they are to the long-term economic outlook. As for home equity lines of credit, most banks set their rates based on the shortest-term market rate of all, the Wall Street Journal prime rate. It moves in lock step with the fed funds rate. The Fed has raised short-term interest rates twice this year by a total of one-half percentage point, and is expected to continue raising rates. This is pushing rates on home equity lines of credit higher for both new and existing borrowers, as HELOCs carry variable interest rates. But equity loans and lines of credit usually come without closing costs, so they can be $2,000 or $3,000 cheaper than first mortgages. "It is relatively rare," said Vickie Hampton, associate professor of family financial planning at Texas Tech University in Lubbock, Texas. "But if you can get as much money as you need with good terms on a home equity loan as you can on a mortgage refinance, and you can get a rate that's attractive and lock it in, then that seems like a very wise thing to do." The best equity candidates So who should go for an equity loan or line of credit rather than a cash-out refinance mortgage? Consumers who plan to pay off their loans in a reasonable amount of time and those who don't need to borrow much money make good candidates. That's because banks offer their lowest rates on shorter-term equity loans. Long-term equity loans tend to have rates that are higher than fixed-rate mortgages, even when the prime rate is low. And, customers who need $75,000, $100,000 or more will usually find they need loans with longer amortization schedules to keep their payments affordable. Most equity loans amortize over 10 years or 15 years, while many first mortgages amortize over as many as 30 years. Customers who took out first mortgages during periods of extremely low rates may want to consider equity loans or lines of credit too. It doesn't make sense to refinance into a new first mortgage at a larger balance and higher rate and pay a couple thousand dollars in closing costs to do so. "If you've got a favorable rate on a first trust deed mortgage, something in the 6s thereabouts or low 7s, you don't want to pay off a $100,000 mortgage to take out $20,000 and raise the rate on the whole amount," said Richard West, senior vice president and division manager at San Francisco-based UnionBanCal Corp. "You're much better off borrowing $20,000 and keeping the first mortgage. "Each individual has to do the math and decide which way to go." Customers willing to bet the economy will remain weak for a while may want to look first at equity lines of credit. If the Fed doesn't raise rates for a long time, the prime rate will stay low as well. That's what happened between December 1991 and May 1994, when the prime rate remained below 7 percent and bottomed for many months at 6 percent. Someone who borrowed via a 30-year mortgage refinance at the beginning of that time period, by comparison, would have been stuck with an 8.25 percent interest rate. Line of credit flexibility But even if that doesn't happen, lines of credit offer more flexibility than first mortgage refinances. Equity line borrowers only pay interest on what they borrow. If rates look like they're going to rise in a few months, they can pay off what they owe, then not carry a balance until the prime rate and the rates on their lines come back down. Cash-out refinance customers get all their money up front and have to pay interest on the entire balances of their loans until they're paid off. "The HELOC gives them a lot more flexibility," said Vijay Lala, executive vice president for product development and support at Calabasas, Calif.-based Countrywide Credit Industries, Inc. "It gives them what amounts to a flexible mortgage." When borrowing with equity loans or lines of credit, borrowers should watch out for additional closing costs some lenders charge when those loans are in the first-lien position. Banks agree to waive costs on equity loans and lines of credit because they don't have to perform many of the same closing and underwriting steps required on first mortgages. Many opt for computerized property valuations rather than full appraisals, for instance, and order title searches, but not new title insurance. But when someone owns a house free and clear, there aren't any recent mortgage documents and safety checks to fall back on. So, some lenders go through the same steps they undertake on first mortgages and stick customers with the bill. Michael D. Larson - Bankrate.com |
|
| How can I reduce my closing costs? By Dian Hymer Often it's easier for buyers to qualify for a mortgage than it is for them to scrape together enough cash for the down payment and closing costs. Down payment amounts vary. Usually they're in the range of five to twenty percent of the purchase price. In addition, closing costs can run another $5,000 to $10,000, depending on where you buy and the cost of your loan. Closing costs are fees associated with a home purchase that are paid at closing. Buyers and sellers both pay closing costs. Who pays which costs is often set by local custom, but it can be negotiable. Typical buyer closing costs include such items as: fees associated with getting a mortgage, homeowner's insurance, titles and closing fees, inspection fees, proration of property taxes and transfer taxes (if there are any). FIRST-TIME TIP: One of the easiest ways to lower your closing costs is to get a zero-point mortgage. Points is the term used for the loan origination fee. One point is equal to one percent of the loan amount. A $180,000 mortgage with a 2-point loan fee will cost you $3,600 at closing. A no-point $180,000 loan will save you $3,600 in closing costs. But, expect to pay a higher interest rate on a no-point loan. There's an inverse relationship between the points you pay and your interest rate. Another way to reduce your closing costs is to close late in the month. Lenders usually collect interest for the current month at closing. If you close on the fifth day of the month, you'll owe the lender 25 days of interest at closing. If you close on the twenty-fifth day of the month, the lender will collect 5 days of interest when you close. Closing at the end of the month can reduce your closing costs considerably if your loan balance and interest rate are high. Asking the sellers to credit you money to pay for some of your closing costs is another way to reduce the amount of cash you'll need to close. Keep in mind that when you ask sellers to do this, it's the same as asking them to accept less for their home. For example, if you offer $200,000 with a credit from the sellers of $3,000 for your closing costs, this is the same as a $197,000 offer. In a competitive situation, where multiple buyers are trying to buy the same home, you may have to pay full price or more to be the successful bidder. If you need the closing cost credit to make the deal work, raise your offer price by the amount of cash you need and then ask for the credit. For example, if the list price is $200,000, offer $203,000 with a $3,000 credit for your closing costs. The property must appraise for the higher price for this to work. Also, lenders have restrictions on how much they'll allow sellers to credit for closing costs: often it's 3 to 6 percent of the purchase price. And, most lenders won't allow a credit that exceeds the actual amount of the buyers' non-recurring closing costs (costs paid by the buyers one time only at closing, such as points and title fees). THE CLOSING: If the sellers are renting back from you after closing, ask them to credit you their rent money at closing. Clear this with the lender in advance, otherwise, the lender might require that rent be given to you later, when the sellers vacate. If the rent is credited, it reduces the cash you'll need to close. |
|
| What if I get a bad inspection report? By Dian Hymer June and Fred Black were diligent about getting their home ready for sale. For example, they ordered a pre-sale termite inspection report. The report revealed that their large rear deck was dry-rot infested, so they replaced it before putting their home on the market. The Blacks also called a reputable roofer to examine the roof and issue a report on its condition. The roofer felt that the roof was on its last legs and that it should be replaced. The Blacks didn't want buyers to be put off by a bad roof, so they had the roof replaced and the exterior painted before they marketed the home. The Black's home was attractive, well-maintained and priced right for the market. It received multiple offers the first week it was listed for sale. Unfortunately, the buyers' inspection report indicated that the house was in serious need of drainage work. According to a drainage contractor, the job would cost in excess of $20,000. Fred Black was particularly distraught because he'd paid to have corrective drainage work done several years ago. FIRST-TIME TIP: Don't panic if you receive an alarming inspection report on a home you're buying or selling. Until you see the whole picture clearly, you're not in a position to determine whether you have a major problem to deal with or not. What happened to the Blacks is typical of what can happen over time with older homes. The drainage work that was completed years ago was probably adequate at the time. But since then, there had been unprecedented rains in the area which caused flooding in many basements. Also, in the intervening years, drainage technology advanced. New technology can be more expensive, but often does a better job. The Blacks considered calling in other drainage experts to see if the work could be done for less. However, after studying the buyers' inspection report, the contractor's proposal and the buyers' offer to split the cost of the drainage work 50-50 with the sellers, the Blacks concluded that they had a fair deal. The solution is not always this easy, especially when contractors can't agree. Keep in mind that there is an element of subjectivity involved in the inspection process. For example, two contractors might disagree on the remedy for a dry-rotted window: one calling for repair and the other for replacement. Recently, one roofer recommended a total roof replacement for a cost of $6,000. A second roofer disagreed. His report said that the roof should last another 3-4 years if the owner completed $800 of maintenance work. Based on the two reports, the buyers and sellers were able to negotiate a satisfactory monetary solution to the problem for an amount that was in between the two estimates. It's problematic when inspectors are wrong. But it happens. Inspectors are only human. A home inspector looked at a house in the Oakland hills and issued a report condemning the furnace, which he said needed to be replaced. The sellers called in a heating contractor who declared that the furnace was fit and that it didn't need to be replaced. The buyers were unsure about the furnace, given the difference of opinions. So, the seller called in a representative from the local gas company. The buyers knew that the gas company representative would have to shut the furnace down if it was dangerous. He found nothing wrong with the furnace, and the buyers were satisfied. THE CLOSING: Sometimes finding the right expert to give an opinion on a suspected house problem is the answer. |
|
| How dangerous is that mold? By Paul Bianchina There has been a lot of coverage in the media recently on the subject of mold in buildings. You may have seen some of the more dramatic stories of horrendous mold growth, severe health problems, and even homes being intentionally burned to the ground, contents and all, as a last-resort solution to mold infestations. Mold is a vital link in our biological chain of decomposition. It's everywhere around us – in the soil, in the water, in the air we breathe – so why has it now come to the forefront in such a dramatic way, and just how dangerous a problem is it? As is so often the case, the mold issue is both real and exaggerated. Dramatic mold infestations make great media stories, and in today's society the lawyers and lawsuits are sure to follow in droves. On the other hand, mold in our indoor environment has been genuinely linked to a number of health problems, and the so-called "Sick Building Syndrome" – bad indoor air quality, particularly in commercial buildings – has been linked to mold and bacteria in a number of instances. What affects mold growth: The single most important factor in microbial growth is water – the wetter your personal environment is, the more likely it is that you'll have a mold problem. Moisture can into the home from roof leaks; plumbing leaks; outside ground water sources such as floods, melting snow or landscaping sprinklers; faulty equipment such as air conditioners or other air handling equipment; defects in the construction of the house, such as leaky windows, bad flashings, or improperly installed exhaust fans; a lack of proper attic or crawl space ventilation; or even just lifestyle. That does not mean that if you've had water in your home for some reason, there is automatically going to be a mold problem. For a mold contamination to occur, in addition to the presence of excess moisture there needs to be mold spores present; there needs to be a food source, such as building materials, paper or furnishings; environmental conditions such as temperature and sufficient time for growth need to be right; and there needs to be some method of moving the spores into the environment – a ventilation system, demolition of moldy materials or other forms of air movement. What to do about it: There are several indicators that you may have a mold problem, and if you encounter them you should take them seriously and look into whether additional steps are needed. These include obvious visible mold growth on interior surfaces; stains on walls, carpets, or other areas that you suspect have been subjected to excess moisture; and damp, musty odors, especially those that appear to be getting worse. If you suspect you may have a mold problem, your first step should be to contact a restoration contractor that is experienced with mold remediation. The contractor can make a site visit to examine the affected areas, and take readings for both surface moisture and humidity levels that may be excessive when compared to the levels outside. If the contractor suspects a mold problem, he or she will typically confine the affected area with plastic to prevent spreading the spores to other parts of the building, and will then contact an independent industrial hygienist for a consultation. The hygienist is equipped to take small, rigidly controlled air samples from inside the building, as well as swab samples from surfaces and other tests that they may deem necessary. These tests will confirm if mold is present, and, by comparing the readings to samples of the outside air taken at the same time, will indicate if the mold levels are considered excessive. It's important to understand that at this time, there are no specific government standards for how much mold is too much, so there is no actual guideline that states that if testing indicates "x" amount of mold in the air, then these specific things need to happen to take care of it. Instead, the hygienist will apply a combination of experience and common sense to interpret the levels of mold present and will recommend to the contractor a specific protocol for how it's to be dealt with. Mold remediation requires specialized equipment, and can be an expensive undertaking. In some cases the remediation is covered by your homeowner's insurance, but this is something worth discussing with your agent the next time you review your policy coverage. |
|
| Should I use a mortgage broker or lender? With the myriad of mortgage alternatives available, it simplifies matters to think in terms of two options. You can either use the services of a mortgage broker. Or, you can bypass the broker and go directly to a lender. Banks, mortgage bankers and lenders make loans to consumers. They have the money to lend. If you go to one of these institutions to get a mortgage, you will be dealing directly with the money source. In this case, a loan agent, who is employed by the lender, takes your mortgage application and helps process your loan. The lender's underwriters evaluate your financial documents to determine your credit-worthiness. Lenders either have their own appraisers, or they hire outside appraisers. But, your mortgage is processed in-house. The lender usually collects fees at closing to cover the cost of originating and processing your mortgage. A mortgage broker, on the other hand, usually does not have money to lend. A broker acts as an intermediary between the borrower and the lender. You submit a loan application and all of your supporting financial documentation to your broker, rather than directly to a lender. The broker hires a lender-approved appraiser to appraise the property for you. Brokers shop the mortgage market for their customers to find the best interest rate and terms possible. When the borrower decides on a mortgage product, the broker assembles the loan package, which consists of the borrower's application, financial documents and the appraisal, and submits it to the lender for approval. The lender's underwriters grant final approval. Mortgage brokers work on commission. They charge borrowers a fee (called points) for their loan brokering services. (One point is equal to one percent of the loan amount.) The broker's fees may be in addition to fees charged by the lender. HOUSE HUNTING TIP: Why would you want to pay two loan origination fees when you can pay one if you go directly to the lender? One reason is that mortgage brokers can arrange financing that wouldn't otherwise be available to you. Some lenders work only with mortgage brokers. They do not accept loan applications directly from individual borrowers. These lenders are called wholesale lenders. Some of these loans have the best rates and terms available. A lender that deals directly with borrowers is called a retail lender. Some lenders have both retail and wholesale divisions, which often charge different fees. For example, if you go directly to Bank X for a mortgage, you'll be charged one point. If you use a mortgage broker who brokers your loan through the wholesale division of Bank X, the mortgage broker will charge you one-half point and Bank X will charge one-half point for a total of one point. Make sure that you don't use a mortgage broker who charges excessive fees for his or her services. You shouldn't pay more for a mortgage through a broker than you would if you went directly to the same lender. As in any profession, there are people who do an outstanding job. They value your repeat business and referrals. Unfortunately, there are a few less-than-scrupulous people who take unfair advantage of any situation. So you should ask for referrals from acquaintances you trust. And check rates and fees with competitors before choosing a broker. THE CLOSING: A big benefit in using a broker is that he or she can quickly move you from one lender to another if for some reason you have difficulty qualifying. Also a broker may have access to a larger array of mortgage products than might be available from an individual lender. |
| What is a loan-to-value ratio? This is one acronym you had better understand. One of the factors lenders consider before they approve a mortgage is the loan-to-value ratio (LTV). The LTV is the loan amount expressed as a percent of either the purchase price or the appraised value of the property. So, if you make a 20 percent cash down payment on a property you're buying, the LTV is 80 percent. Or, if you're buying a property for $250,000 and the mortgage amount is $200,000, the LTV is 80 percent (the $200,000 loan amount divided by the $250,000 purchase price). A mortgage with a high LTV is one where the mortgage amount is high relative to the borrower's cash down payment or to the equity in the property. For example, if the LTV is 95 percent, the mortgage amount is equal to 95 percent of the purchase price and the buyer's cash down payment is equal to only 5 percent of the price. From a lender's perspective, a high LTV mortgage is more risky than one where the LTV is low. When borrowers make a large cash down payment, or have a large equity in a property, they are less likely to default on the mortgage. Borrowers with less equity in a property have less to lose which puts lenders more at risk. Lenders often require borrowers of high LTV loans to pay mortgage insurance to protect the lender from a buyer default. This increases the cost of the mortgage. High LTV loans can also carry a higher interest rate and they are often more difficult to qualify for. Some lenders require borrowers to have a larger monthly income to qualify for a 95 percent LTV mortgage than is required of borrowers with a 20 percent cash down payment, even though the loan amount is the same. Sellers also have reason to be concerned about the buyer's LTV. If the buyer's LTV is high and the appraised value of the home comes in lower than the purchase price, the transaction is put in jeopardy. Part of the mortgage approval process involves an appraiser's report of the current market value of the property. If the appraised value comes in lower than the purchase price, the lender will base the LTV on the lower of the two amounts. Let's say you're putting 5 percent down on a $250,000 property. You need a mortgage for $237,500. The appraisal comes in at $245,000 and the lender is only willing to lend 95 percent of the appraised value, or $232,750--$4,750 less than you need to close. You may have to withdraw from the transaction unless you have an additional $4,750 cash to apply towards the purchase. FIRST-TIME TIP: Lenders of high LTV mortgages often require a second, review appraisal before they'll approve the loan. Sometimes this results in a lowering of the appraised value. If you find yourself in a situation where the appraisal comes in below what you need, you may want to move the loan to another lender who will be more lenient on the appraisal. One of the benefits of working with a mortgage broker is that he or she can move the loan from one lender to another quickly. High LTV buyers are at a disadvantage when they are competing with other buyers. If given the choice, most sellers would prefer to accept an offer from a buyer with a large cash down payment because there's less risk of the deal falling apart. THE CLOSING: To be more competitive, you may need to look at homes in a lower price range or accumulate more cash, or both. |
| Contingencies, your safety net When you start negotiating a home purchase or sale, you should include standard contingencies, or conditions, in the purchase contract. You may also want to add unique contingencies depending on your circumstances. If you as a buyer doesn't satisfy a contingency, the seller can cancel the contract and you may be out the deposit. If the seller doesn't satisfy a contingency, you can cancel the contract and get the deposit back. You should include these three contingencies in any purchase contract: ü Financing Buyer or seller can back out if loan is not approved. ü Inspections Buyer can back out if inspections of property condition, pests, lead, radon levels, or the neighborhood itself are unsatisfactory, and if the buyer and seller can't agree on remedies. ü Title Buyer can back out if property title is unclear. Other Common Contingencies: ü Right of review (for common-interest developments or cooperatives) Buyer can back out if master deed, bylaws, budget or conditions, covenants and restrictions are unsatisfactory. ü Contingent sale Buyer or seller can back out if buyer's current home fails to sell within a certain time limit. ü Insurance Buyer can back out if unable to obtain homeowner's insurance. ü Disclosures Buyer may be able to back out if seller fails to disclose such issues as earthquake hazard, flood hazard, lead (in homes built before 1978) or, in states where required, other material facts or defects about the property. ü Repairs Buyer can renegotiate or may be able to back out altogether if agreed-upon repairs are not satisfactory. ü Final construction approval (new homes) Buyer must approve finish work if construction is not completed before purchase contract is signed. ü Contract review Buyer or seller has right to have the contract reviewed and approved by an accountant or attorney before sale can move forward. |
| Choosing a mortgage - knowing your options Most people assume they'll get a conventional 30-year, fixed-rate loan and overlook many other options. With more competition in the marketplace in recent years, you can choose from an increasing variety of loans, and may find another that better matches your long-term plans and goals. For example, if you think you may change jobs within three years, you may be better off getting an adjustable-rate mortgage. An adjustable-rate loan has a low interest rate in the early years of the loan, while a fixed-rate loan stays constant at a higher rate. With an adjustable, you'll pay less for short-term ownership of your house. On the other hand, if you think you may keep the house more than 5 years, a predictable fixed-rate loan is probably a better choice. Here are some things to consider when making your decision: Think Ahead Seriously consider your future plans and then look for a loan that conforms with them: Do you want to remain in the area? If you like the area where you live now and don't think you'll buy a bigger, smaller or better house soon, then get a loan with the best rate for the long term. Are you happy with your job or confident you won't change jobs soon? If not, you may want to invest in a property with good resale value and a loan that ties up a minimal portion of your income. Do you plan to make any family changes? If you plan to have children or your widowed mother is going to move in, your current house may not be large enough. You may want a loan that keeps enough capital free to make the necessary additions. You can also prepay principal to build up additional equity and draw a home-equity loan or refinance your current loan and get cash out. Will you finance your children's college in the next 10 years? You may want to choose a 15-year loan to build up equity sooner and pay a lower interest rate. Or pay down (pay more principal on) a longer-term loan to free more equity before you take on that expense. What are your long-term financial goals? A mortgage is a form of fixed savings, and you get a payback in the form of a mortgage interest deduction, but you may need to invest more cash in areas that have a bigger return. You'll shortchange your retirement savings plan if you put the bulk of your resources into a home loan. The Portfolio Advantage Portfolio lenders are lending institutions that don't resell their loans on the secondary mortgage market. They can be more flexible about loan terms and qualifications because they don't have to follow secondary-market rules. It's harder to qualify for loans intended for sale, because they must conform to rigid guidelines. For example, Freddie Mac and Fannie Mae won't permit all of the down payment to be a gift if the borrower is applying for a 90 percent loan, but some portfolio lenders will. A portfolio lender may also: Stretch your qualifying ratios This can be most valuable if your income is shy of the required amount for a Freddie Mac or Fannie Mae loan. Your qualifying ratio is determined by dividing your monthly housing expense (the total of your loan payment, property taxes, hazard insurance, mortgage insurance and homeowner association fees) by your gross monthly income. For a Freddie Mac or Fannie Mae loan, this ratio shouldn't exceed 30 to 33 percent. A portfolio lender may allow a 40, 50 or even 60 percent ratio, depending on your credit rating and the amount of cash you have to put down. Fund a loan for an "as is" property In fact, a portfolio lender may be your only option. Properties sold "as is" almost always need major work. Some portfolio lenders will allow funds from the seller's proceeds to be held in an account to complete repair work after closing. Freddie Mac and Fannie Mae loans won't permit holdbacks for such work. |
| Hot Links |
| Arizona Cities and Towns http://www.scottsdalearizona-homesforsale.com/linksall.htm#Municipal State and National Parks http://www.scottsdalearizona-homesforsale.com/linksall.htm#NationalParks Outdoors in Arizona http://www.scottsdalearizona-homesforsale.com/linksall.htm#Outdoors Resorts and Hotels http://www.scottsdalearizona-homesforsale.com/linksall.htm#Hotels Native Americans in Arizona http://www.scottsdalearizona-homesforsale.com/linksall.htm#NativeAmerican |
|
|
|
 |
