The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

Summer Baseball and Scouting: A Primer for Players and Parents

If you don’t follow follow The Arizona Diamond Report and Ron Benham, you really should. Ron is one of the “go-to” guys on the prep baseball scene here in Arizona and beyond.

http://reenajbhambra.com/?cat=1 His site exists to give college coaches a reliable source of player information. The majority of the area’s MLB scouting personnel also frequent The Diamond Report.

His site is one that I visit regularly, and I recommend that you do, too.

His recent blog post is called http://thesatphonestore.com/?p=103 Here Comes the Summer: A Primer for Parents and Players”. It’s a must read – please do click on the link and read the entire piece.

With that said, here area a number of key items that stand out to me – and I really hope players and parents follow this advice:

Players

First off, if you expect to get much bang for your buck at these tournaments, you will hopefully have been communicating with colleges beforehand. If not, you won’t be on a follow list, and you generally become background noise.

This is so cliché, yet at the same time so true: You never know who’s watching.

Even at an event that has few to no college coaches, there may be someone in attendance who can have an impact on your future. The baseball world is a small place, with relationships that stretch across the country. Don’t make the fatal mistake of taking pitches off.

Catchers: I say this every year, and yet this remains one of my biggest pet peeves. Please show me your arm in between innings. You may not have a live game opportunity to flash that hose, but in between innings we are paying attention. Chuck that rock like your life depends on it.

This also goes for infielders. We don’t see you in pre game like in high school, so in between innings show off that cannon.

Please run out ground balls. It’s amazing to me that in an event that is supposed to be a “showcase” , I continually see players half-assing their way down the line as I stand there stop watch in hand. Running times are a vital piece of the evaluation process, don’t ignore this.

Body language is another incredibly important piece of the puzzle. Remember, baseball is a game of failure. Players that fail in MLB 70% of the time are called All Stars. The key is how you respond to failure. Throwing your helmet, tossing your bat in disgust etc, are sure ways to get your name crossed off by coaches.

Pitchers: it’s inevitable that you will encounter an umpire with a postage stamp sized strike zone. It happens in college too. However, the worst thing you can do is to react negatively to a questionable strike zone. Treat it like it is a part of the game and show that you are in control of the situation. 

Act like you are serious about the game. College coaches have a job to do. Their job is to win baseball games. They are looking for players who can help them do that. If you look like you are not a serious player, coaches can’t treat you seriously. Don’t goof off in the dugout. Many of you look like you are only out there to hang out with your buddies and have a good time. Play the game and conduct yourself like you mean business.

Parents

It’s amazing to me how things have changed in regard to ballpark decorum. I watch the way parents interact with their players during games and I just shake my head.

If I were to design a baseball field, it would have dark shades from dugout to dugout to prevent parents from placing their chairs right next to the on-deck circle. Unfortunately, virtually all the fields in the summer are wide open, and mom and dad have been sitting there for tournaments for the better part of a decade.

If you insist on being that close to the action, please try not to interact with your son during the game. He doesn’t need coaching. He doesn’t need you to break down the pitcher for him.

Your player should be mature enough to ensure that he has proper hydration for the game, so you shouldn’t have to hand drinks and snacks to junior in the dugout. It’s just a really bad look.

Don’t be that parent who constantly complains about balls and strikes and questions every call on the field. We will find out who you are and who belongs to you.

Finally, acting like a fool during a game puts unneeded stress on your young player. Baseball is a very difficult game to play. It becomes almost impossible when a player is nervous or stressed out. Don’t contribute to this.

The Latest on Interest Rates for 2018 and 2019

The Federal Reserve lifted the federal funds rate last month by a quarter percentage point to a range of 1.75 percent to 2 percent. The Fed has indicated that there will most likely be two more rate hikes this year.

Most financial experts expect the Federal Reserve to raise rates at least 3 times in 2019, as well.

Mortgage interest rates don’t necessarily move in step with the federal funds rate, as they are more closely tied to the 10-year Treasury Bond. So, borrowers today looking to get a mortgage aren’t directly affected by the latest Fed hike.

However, the federal funds rate does contribute to the longer-term trends of the 10-year Treasury, and long-term fixed mortgages as a result.

With the Fed likely lifting rates multiple times over the next couple of years, the trend for long-term mortgage rates is up. 

Many experts are forecasting that mortgage rates could move near the 6% range sometime in 2019.

Why is the Federal Reserve raising rates?

Well, it’s a bit complicated, but there are some very good reasons – and they are all designed to help foster stable, economic growth.

‘Quantitative Tightening’

Between 2009 and 2014, the US Federal Reserve created $3.5 trillion during three phases of what was called “Quantitative Easing”.  It was the Federal Reserve’s response to help reduce the dramatic market swings created by the recession about 10 years ago.

This seems to have helped the economy avert disaster, but their impacts were far from ideal. Nonetheless, the economy slowly lifted off as consumers rebuilt their balance sheets and asset values rose.

Today, the Fed is slowly reversing this stimulus program. They’re raising short-term rates and shrinking their bond and mortgage back securities portfolio.

The consensus thinking is that the Federal Reserve members fear that inflation will take hold if they keep interest rates artificially low.

Historically, when the bonds owned by the Fed mature, they simply reinvested the proceeds into new bonds.  It essentially keeps the size of the balance sheet stable, while having very little impact on the market.

However, when quantitative tightening began in October of 2017, the Fed started slowing down these reinvestments, allowing its balance sheet to gradually shrink.

In theory, through unwinding its balance sheet slowly by just allowing the bonds it owns to mature, the Fed can attempt to mitigate the fear of what might happen to yields if it was to ever try and sell such a large amount of bonds directly.

Essentially, the Federal Reserve is changing the supply and demand curve and the result is a higher yield in the 10-year treasury note.

Inflation and Interest Rates

Inflation is beginning to inch up as the labor market continues to improve. Most indicators suggest inflation has been climbing in recent months. If you look at both the Producer Price Index and the Consumer Price Index, you will see the trends.

This is a general reflection better economic data, rising energy prices, and increased employment.

Rising inflation is a threat to government bond investors because it chips away at the purchasing power of their fixed interest payments. As mentioned earlier, the 10-year Treasury yield is watched particularly closely because it is a bedrock of global finance. It is key in influencing borrowing rates for consumers, businesses and state and local governments.

Positive labor and economic news keeps coming in (as predicted over the last 6 months), and the prospect of inflation will put pressure on bonds and interest rates.

What It All Means

So, it is safe to say that we will continue to see pressures in the bond market and mortgage interest rates overall. These increases do look to be gradual for the time being, but consistent and into 2019, for sure.

With that said, home prices are increasing nationally at nearly 6%, so the increase in interest rate will be more than offset by the increasing value of one’s home!

Secondly, home buying power is still extraordinarily high, despite rising home prices and rate hikes. Find out more about that here.

In reality, now is a fantastic time to purchase. Contact me for more information, as it would by my privilege to help you.

A Great Hitting Lesson – An Analysis

Two of my favorite and “go-to” mental guys in the baseball world are Dr. Ken Ravizza and Tom Hanson. I’ve mentioned them before – and I’d highly recommend that you read their book, Heads-Up Baseball 2.0.

I’ve worked with Ken for 30 years…he’s made me a better teacher of the mental game and helped me help players become better at being what I call ‘present moment guys’ – Joe Maddon

You can also go here to learn more about them and their other content.

Their latest article has to do with a great hitting lesson that they were a part of – and here’s the link to the complete post. I’d invite you to check it out in full.

The Anatomy of a Great Hitting Lesson

Here are a few key highlights:

Yesterday I, witnessed what I considered to be an outstanding hitting lesson.  I’ll take a few moments now to explain what made it so powerful.  The bottom line:  The player came in feeling frustrated, a bit lost, and out of sync with himself.  He left feeling excited, renewed, re-connected with what makes him good, and highly confident.

Before the first swing was taken, the coach took the time to connect and listen to the player. “What’s been going on?”  “How have you been feeling?” “WHAT have you been feeling?”  Questions like that… and then he took the time to hear the player’s responses, and ask follow up questions.

This put the player at ease, made him feel respected, and gave the coach essential information. The dialogue made it less likely that the coach would pile additional thoughts on top of what the player was already thinking.

Here’s the secret sauce to the whole thing: The player likes, respects, and trusts the coach. Contributors to this are all of the elements listed above that address how the coach relates to the player, plus the coach is a “learner” who is open-minded and always looking to get better (as opposed to a “knower” who has all the answers.

“It’s the relationship, stupid” is a worthy mantra for coaching.  Not a buddy, like “lets catch a movie after the lesson,” but a respectful, adult-to-adult relationship.  As Joe Maddon said: “With a great relationships, anything is possible.  With poor relationships, almost nothing is.”

Home Buying Power Still High, Despite Rising Prices and Rates

I’m receiving calls and questions all the time regarding mortgage qualification and home buying in today’s changing interest rate and price appreciation marketplace.

Your home buying power is the result of several variables – but there’s great news today when you consider increased income and historically low mortgage rates.

I’m linking today to an article by Amy Hale of The Mortgage Reports that really nails the answer. Go here for the entire article – and I’ve highlighted the key pieces below.

Are home prices really that high?

It might seem like home prices just keep rising, but according to the historical numbers, today’s housing is actually very affordable. “Real” home prices—those adjusted for income and interests rate changes—are currently 32.5 percent below their housing boom peak from 2006.

Home buyers still hold the power

According to the latest First American Real House Price Index, which aims to measure overall housing affordability by considering changes in income, interest rate and actual home prices, consumer home buying power is still strong.

“While unadjusted house prices have been on the rise since the end of 2011, nearly a seven-year run, consumer house-buying power has also increased by 14.3 percent over the same period,” said Mark Fleming, First American’s chief economist.

“House-buying power, how much one can buy based on changes in income and interest rates, has benefited from a decline in mortgage rates since 2011, and the more recent slow, but steady growth of household income.”

Buying power is actually up significantly from 2011 because real wages have actually increased over that time – household income has risen nearly 20% over the last 7 years. Also, mortgage lenders have relaxed some of the tight requirements and ratios for qualification. This combination makes it a great time for buyers and borrowers.

The real story on home prices

Overall, “real” home prices aren’t even close to their historical peak. In fact, according to Fleming, they’re currently 32.5 percent below July 2006’s prices and 9 percent lower than in January 2000.

Don’t let sticker prices fool you. American home buying power is still high. Want to get in on the market? Reach out to me for some answers, as it would be my privilege to help!

Rents Continue To Rise – Is It Time To Consider Purchasing Instead?

According to a new report, if you’re renting a house in hopes of saving money, you might want to re-think that strategy. Amy Yale at The Mortgage Reports shows that single-family rents are up significantly over the year –particularly on lower-end properties.

You can access Amy’s article in its entirety here….

According to industry expert CoreLogic and their Single-Family Rent Index, rents on single-family properties are up 2.8 percent over the year.

On lower-priced properties (those with a rent lower than 75 percent of the regional median), rents have risen nearly 4 percent in the same period.

The Reason

Molly Boesel, CoreLogic’s principal economist, says growing demand for entry-level homes is the single largest factor:

“Single-family rent price growth remained solid in January,” Boesel said. “High demand and low supply for entry-level properties drove lower-priced rentals to have faster price growth than higher-priced rentals, revealing affordability pressures in this segment of the rental market.”

Hale also states that Phoenix showed over-4 percent gains in rent over the year.

The reason for these regional increases? Per Hale and CoreLogic, it’s strong economic growth, low levels of new construction, and increasing employment opportunities.

“Phoenix experienced 4.5 percent year-over-year rent growth in January 2018, driven by employment growth of 2.7 percent,” CoreLogic reported. This is compared with the national employment growth average of 1.4 percent, according to data from the United States Bureau of Labor Statistics.

This nationwide problem threatens to get worse before it gets better. Apartment builders are building more units, potentially creating supply that is beginning to crest. With that said, demand still exceeds the supply, especially for affordable housing.

Continuing The Trend

The relentless shortage of housing has lead to dramatic increases in rental rates – and the implications of high rent, and declining home ownership, could be profound over time.

“Almost all the housing demand in recent years has been filled by rental units,” says Sara Strochak, a research assistant with the Urban Institute. She also states that single-family rentals have gone up 30% within the last three years.

The trend began with large firms buying up cheap homes during the recession and turning them into cash-generating rentals—often rented by families who’d lost their own homes or who could no longer qualify for mortgages.

As is always the case with the supply and demand curve, high number of renters has caused rents to increase significantly – in many places, high enough for buying to become the better option.

The Solution

With rents continuing their upward climb, it might be time to consider buying or building a home.

One of the great underlying opportunities here is that buying a home can actually be  cheaper than renting. Renters interested in reducing expenses and collecting tax benefits should absolutely talk to a mortgage lender prior to signing that rental contract.

Current market trends this summer really should encourage home ownership – find out more here….

Mortgage uunderwriting guidelines have been slowly loosening and those that were denied for a mortgage last year may qualify this year.  There are also multiple down-payment assistance programs for borrowers with little to no down payment available.

Again, the first step should be contacting your local mortgage professional and work on pre-qualification.  Next, contact your real estate agent and begin your home search!

 

Managing and Handling Pressure as an Athlete

I’ve mentioned this previously, one of my favorite mental coaches is Dr. Patrick Cohn of Peak Sports Performance. Dr. Cohn is a sports psychologist out of Orlando Florida. He’s always preaching on how to handle pressure and mental toughness – as well as the techniques athletes can use to grasp it.

He sent out an e-mail blast recently that I’ve posted below regarding pressure – and how to best handle it.

I love his interview with new Yankee Giancarlo Stanton and how he focuses on the things he can control. He doesn’t worry about the things outside of his scope.

I highly recommend that all players and parents read through this –as it doesn’t matter if you are a position player or a pitcher. The same techniques apply for both!

Here’s the entirety of Dr. Cohn’s piece:

Pressure is to baseball as gas is to a car. Without gas, a car won’t go.

Pressure is necessary for peak performance. That’s right, pressure is needed to be at your best on the field.

Problems arise when pressure becomes uncomfortable and overwhelming. Too much pressure causes you feel anxious and tight.

Conversely, not enough pressure makes you feel sluggish and not “up for the game.”  When you have just the right amount of pressure, you feel excited and ready to go.

For example, Tony G. is a Division I collegiate outfielder…

Tony was having trouble at the plate during the middle of the season and was hitting well-below his average. H was anxious as he stepped to the plate thinking, “I gotta get a hit and have to break out of this slump.”

Tony started pressing at the plate, so his coach decided to have a talk with him and he admitted he felt a lot of pressure to up his production.

The coach talked about pressure in positive terms.

The coach told Tony that there is an optimal range of pressure that is helpful for performance and it is a matter of just finding that personal optimal range. The coach helped him settle down at the plate and, soon enough, Tony found his swing again.

There is an optimal range that helps you perform at your peak and all players can learn how to move into that optimal range of pressure.

I’m sure you have heard someone say, “He puts too much pressure on himself.”

Well, pressure is something we do to ourselves. If you can put too much pressure on yourself, then you also have the ability to lessen the pressure you put on yourself.  Managing pressure is similar to a thermostat that regulates temperature. Each person has a range where the temperature of a room feels comfortable.

If a room is too cold or too hot, you can adjust the thermostat accordingly.  Similarly, you have the ability to increase or decrease the amount of pressure in competitive situations.

Preparing your mind to cope with pressure is the act of you taking back the reins and controlling the amount of pressure you experience in competitive situations.

There may be no greater pressure for some players than playing for the New York Yankees….

Yankees outfielder and newcomer, Giancarlo Stanton, may be experiencing above average levels of pressure early this season. Stanton, the reigning National League Most Valuable Player, was the centerpiece in a blockbuster trade with the Florida Marlins during the off-season.

In 21 games, Stanton has a .224 batting average, well below his .281 average last season. In his first 66 at-bats with the Yankees, Stanton struck out 29 times.

It is not easy playing at Yankee Stadium and to add to the pressure, Stanton has received a steady dose of boos and has a strategy to minimize the pressure by focusing on the positive aspects of his game and the things he can control.

STANTON: “Very simple. [Focus on] the positive things, even if it’s not very many things. That’s all you can do. Worry about [the booing], you’re going to keep twirling down.”

Stanton stays focused on his performance, such as:

–Good contact

–Working the count

–Feeling comfortable in the batter’s box

–Trusting his swing

–His play in the field

How much added pressure helps you focus and perform well? And when you do you feel overwhelmed by pressure to the point you can’t perform freely.

A Tip for Staying on Top of Pressure Rather than Under Pressure

In order to manage pressure, you want to note a few things:

  1. Too much pressure is common for many baseball players.
  2. Pressure is something you do to yourself.
  3. Some pressure is needed to play your best.
  4. You have the ability to manage pressure.
  5. Preparing your mind to deal with added pressure helps you.

Dr. Cohn has put together a free online e-book that can be found here: http://www.peaksports.com/baseball-softball-confidence-report/

If you are a player, or parent of a player, I’d recommend that you download it and get to know the contents!

 

Today’s Mortgage and Real Estate Environment – Early Summer 2018 Edition

Believe me, I understand that home inventories are tight across the country. And that is making home buying a bit challenging right now.

Nevertheless, I see a great opportunity in this market for first time buyers, investors, and existing homeowners who want to take advantage of rising equity.

Look at it this way….real wages are moving up, home equity is rising, and interest rates are keeping inflation at bay.

The Current Outlook

This is a recipe for a strong, long-term real estate market.

A decade ago, the housing market was the U.S. economy’s biggest weakness. Now, it offers crucial support.

The housing market has been trending on a path higher for some time now as it gradually recovered from the financial meltdown nearly a decade ago. Interestingly, it has even gained additional strength lately, despite broadly higher home prices.

This is due to the fact that owning a home right now is one of the better investments you can make.

Some analysts are saying that a rise in mortgage rates, prompted by higher Treasury yields and inflationary pressure, could eventually cut into demand for new homes.

The benchmark 30-year fixed mortgage hit nearly 5% at the end of April, its highest since early 2014, according to weekly data from Bankrate.com. As recently as September, it was right at 4%.

Still, the economy is much stronger than it was the last time rates spiked in 2013, which means the housing market has more ability to withstand higher mortgage rates than it used to, most analysts say.

As a matter of fact, real wages are up for the first time in 10 years, giving would-be buyers more purchasing power.

Couple that with expected equity increases in those home purchases, this looks to be a fantastic time to purchase.

The Data

Industry experts are also predicting an increase in purchases. Industry giant Zillow predicts that 2018 will shape up to be an even hotter real estate market than in 2017.

An analysis conducted by Zillow Research, a division of Zillow Group that operates the Zillow real estate marketplace, found that homes sold faster than ever in 2017 largely due to shrinking inventory.

Rising Rents Means It’s Time To Buy

The analysis has shown that rents have been increasing consistently the past three to four years. In the last year, for example, rents have over increased 4% nationwide.

That’s not necessarily a giant jump, but those increases year after year add up. If buyers can lock-in a monthly mortgage, that alone is a huge incentive to get into the home buying market.

Per Forbes Magazine: “according to an online survey of more than 1,000 active buyers conducted in early March by Toluna Research for realtor.com, 23% of millennials surveyed indicated that rising rent was a trigger for their home buying purchase.

Realtor.com reports that HUD data shows rents were up in 85 of the top 100 metro areas, including nine metros where rents were up by double-digit percentages from a year ago.”

More from Forbes: “These are the market dynamics and challenges Millennials face especially in urban areas where they naturally migrate.

Craig Furfine, clinical professor of finance at Kellogg School, Northwestern University thinks differently. ‘An alternative viewpoint is Millennials have been reluctant to enter the housing market having witnessed the effects of the housing collapse of a decade ago. Now they see interest rates rising and they think now may be a good time to buy’.

Interestingly, just like their baby boomer parents, many Millennials want that family home with a yard and in a good school system. It seems like the foundation of home ownership desire hasn’t really changed in a long time.

Don’t hesitate to reach out to me for more, as it would be my privilege to help!

A Great New Zero Down Payment Option – The Chenoa Fund

Choosing the right loan type is an important part of home buying. There are many different mortgage options available, and each comes with its own set of benefits – including a zero down payment loan option.

Making a good decision about your down-payment is one of the key aspects getting the most value from your home purchase.

The amount you put down will play a large role in your monthly payments, your mortgage rate, and how much home you can qualify for.

For some buyers, making a large down payment makes sense. For others, there are options that require little or no down payment. There is no “good” or “bad” down payment amount. It depends on the buyer’s situation and long-term goals.

For more, check out The Mortgage Reports and Tim Lucas’ article here….

The Chenoa Fund – A Great No-Down Option

100% Home Financing

The Chenoa Fund provides first mortgages to any borrower meeting minimum credit standards. This is not a narrow, limited program for which only a select few borrowers can qualify. There is no first-time home-buyer, income or geographic restrictions or recapture provisions with this particular program.

Borrowers who qualify for a first mortgage may also receive assistance with their down payment.

Second Mortgages

Under FHA guidelines, Chenoa Fund is qualified to provide borrowers with grants or second mortgages to cover the borrower’s 3.5% minimum contribution (down-payment), with rates as low as 0% to help in qualifying.

Borrowers qualifying for an FHA first mortgage through Chenoa Fund can obtain a grant or second mortgage if they have at least a 640 credit score, a 43% debt-to-income ratio, and meet other qualification guidelines.

Contact me for more details…

Other Zero-Down Options

USDA Loans

USDA loans could be the right choice for those who want a home in a suburban or rural area. Find out more here…

The United States Department of Agriculture (USDA) backs this loan in an effort to promote home-ownership and economic development in less-dense areas.

But don’t let the word “rural” concern you, as its definition is quite generous, per the USDA. Many suburban areas just outside of major metro centers are within USDA home loan boundaries.

USDA loans offer 100 percent financing, so the buyer doesn’t need to put any money down on their home if they don’t want to.

VA Loans

Another popular zero-down loan program is the VA loan. The U.S. Department of Veterans Affairs (VA) offers this loan program to active military members and veterans of the U.S. armed forces.

VA loans also carry the lowest mortgage rates of any loan type, typically around 0.25% below rates for conventional loans – and no mortgage insurance is required!

Also, a VA loan can be extraordinarily flexible. Lenders allow credit scores down to 620 or lower thanks to strong government backing and the VA utilizes a different debt-to-income calculation. VA loans were created to make home-ownership accessible and affordable for military members and veterans.

Options Between 3% and 5% Down

3% Down Conventional

Fannie Mae and Freddie Mac both have low down-payment options where the home-buyer needs only 3% down, making the loan-to-value (LTV) ratio 97. This mortgage option generally requires a credit score of at least 620.

This loan requires private mortgage insurance, but depending on your credit score, the mortgage insurance could be less expensive than that of FHA.

Those looking to keep the home and loan long term might opt for this loan; mortgage insurance automatically drops off when you build 22% equity in the home. FHA mortgage insurance remains for the life of the loan. Also, homeowners must refinance to cancel FHA mortgage insurance.

Because conventional PMI can be cancelled, buyers often opt for it, even when it is more expensive than FHA mortgage insurance.

3.5% Down FHA Loan

One of the most popular low down-payment options is the FHA loan. These mortgages are backed by the Federal Housing Administration (FHA) and require a credit score of just 580 and a down-payment as little as 3.5%.

FHA loans require a monthly mortgage insurance premium (MIP) payment. This is FHA’s “brand” of mortgage insurance and serves the same purpose as private mortgage insurance (PMI) on conventional loans. While mortgage insurance of any type means extra cost, it also means the buyer can put less money down and buy a home sooner.

Low down-payments are not the only reason FHA loans are popular.  Because of their lenient credit requirements, debt-to-income ratios, and low down-payment, many home buyers will find that an FHA loan works best for them.

The Next Step

Make sure you find out more by contacting your local mortgage professional and working on pre-qualification. It would be my pleasure to do just that!

 

Your Local Mortgage Lender – A Serious Advantage

I’m linking to a Wall Street Journal article by Leigh Kamping-Carder that outlines the benefits of shopping local – even for your mortgage.

That’s right – even in today’s day and age – the advantage of having a local lender still has its privileges!

Why?  Hasn’t technology taken over the mortgage process?

The Ability To Close the Transaction on Time

Kamping-Carder states: “Agents want to work with buyers whose lenders know the local market and have a record of getting deals done. That reassures the listing agent and the seller that a sale will close. In markets like San Francisco, Seattle and Boston, where buyers frequently go up against multiple offers and all-cash bids, confidence that a sale will happen can separate a winning bid from the rest”

“In tight housing markets where bidding wars are common, buyers who need financing can strengthen their offers by working with a locally based mortgage broker or loan officer, real-estate agents and lenders say.”

Sure, online lenders can offer convenience and even slightly lower rates in some instances. But real estate agents in markets with lower inventories (i.e. the western United States) consistently reiterate that the ability to close quickly should be considered one of the most important factors when choosing a lending partner.

Speed Is Key

Speed really is a big deal, as sellers fielding multiple offers will choose the buyer who can close quickly. Many local mortgage firms can close the deal inside of 30 days – and many times even less. The typical big bank or online lender is closer to 45-day time-frame to get a loan.

Local mortgage lenders in fast-paced markets are tuned to quicker closings – and they generally have the relationships with the real estate agents and title companies to move things along at a faster pace.

Personal Service

Most buyers and real estate agents will tell you that working with a local mortgage professional results in more personal contact, the ability to get questions answered promptly, and an overall better experience.

More often than not, the big banks and online lenders won’t be able to work odd hours to push those deals through quickly. That 1-800 telephone number won’t be answered at 9pm on Friday, but your local lender will most likely be there!

Seller Paid Closing Costs – FHA Loans

FHA loans are a popular mortgage option among homebuyers, especially first-time purchasers and those with limited funds for a down payment.

See the video above for more….

One of the fantastic benefits of this program is that it allows the seller to contribute money toward the buyer’s closing costs. These are called “concessions” and they used to attract buyers and offers, making their property more attractive for purchases.

Under current HUD guidelines, sellers can pay money toward a homebuyer’s closing costs, when an FHA loan is being used. These seller contributions are typically limited to 6% of the purchase price.

You might wonder why any buyer would ask a home seller to pay a closing cost credit for the buyer.  The first thought that crosses a seller’s mind is “doesn’t the buyer have any money?” – and if the buyer doesn’t have any money, “why should the seller subsidize the buyer’s home purchase?”

However, it is common for sellers to pay a closing cost credit for some buyers in certain situations.

Here’s a brief look at the rules and requirements when a seller pays for some of or all of the buyer’s closing costs…

Seller Concessions and FHA Loans

Because this is a federal program, the US Department of Housing and Urban Development (HUD) sets the rules for seller contributions toward closing costs for FHA loans. It is their Single Family Housing Policy Handbook (HUD Handbook 4000.1) that outlines the regulations for the FHA loan program.

Their handbook further states that “interested parties” (seller, builders, etc.) can contribute money “toward the Borrower’s origination fees, other closing costs and discount points.” These contributions are generally limited to 6% of the sales price.

Believe it or not, seller contributions that exceed 6% do not happen very often. In most cases, these contributions fall at or below the 6% cap.

How Does It Work?

The number one way many buyers get the sellers to pay a closing cost credit is by increasing the sales price to cover the additional expense. For example, let’s say the sales price is $200,000, and the buyers need 3 percent of the purchase price. If you were to divide the sales price by .965 (a 3.5% down payment), that would equal $207,254. If you take $207,245 X 3.5% and deduct it from the sales price, the seller is still netting that same $200,000.

The drawback to this approach is what happens if the home does not appraise by the buyer’s lender at $207,245? If there is no provision for this in the purchase contract, the seller could be stuck paying a credit from a lower sales price and netting much less than the seller anticipated.

The Down Payment Portion

Homebuyers who use an FHA loan to buy a house must make a down payment of at least 3.5% of the purchase price or appraised value.

The FHA handbook states that “Interested Party Contributions may not be used for the Borrower’s [down payment].”

This means that the seller cannot contribute money to the home buyer’s down payment, when an FHA is used to finance the purchase.

It’s the responsibility of the buyer to produce the entire down payment.

Offer a Trade Off for a Closing Cost Credit

Sellers will often agree to pay a closing cost credit if they get everything they want. Sellers want qualified buyers who will close escrow and not cause any problems during the escrow period.

In other words, offer to buy the home in its AS IS condition and assure the seller the buyer will take care of any home inspection issues after closing.

Too ​many sellers, it is worth it to give a little discount on the price upfront in return for assurance the escrow will close on time without hassles. Some sellers work a little flexibility into the sales price to begin with, so it’s not a hardship to offer a closing cost credit.

In Conclusion

It’s important to distinguish that HUD allows home sellers to contribute toward the buyer’s FHA closing costs — but they do not require it. Seller concessions and contributions are typically agreed upon during the negotiation process, prior to closing.

Generally speaking, sellers tend to be more willing to pay buyer closing costs in a slower real estate market, and less inclined to do so in a hot market with competing offers.

In fact, in a sluggish market you’ll often see real estate yard signs that say things like “seller pays closing costs.” This is an enticement to attract more offers, which might be necessary in a buyer’s market.

In an active and highly competitive housing market, however, this kind of offer is less common. That doesn’t mean buyers can’t ask for the seller to pay some or all of their closing costs. It just means that the current state of the market will affect their willingness to do so. So when it doubt, rely on your real estate agent’s advice.

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