Category: Housing Market (Page 31 of 39)

Home Purchasing Is Easier Than You Might Think

September 10, 2017 / Tom Bonetto

I hear frequently from potential buyers in today’s market – and many are fearful of taking that leap into homeownership. Some are intimidated by the process, expecting a never-ending slog through their financial history.

Actually, the homebuying experience can vary depending on your preparation, and the team you have at your side. The lender you choose, the real estate professional involved, and other factors can make a big difference when buying a home.

You may even know someone who’s recently been though a less-than-pleasurable home buying experience, you may be apprehensive about the process.

I’ve got some good news….buying a home is easier than you probably think.

The key is understanding what it takes to get approved for a mortgage, and being properly prepared. These things will make all the difference in the story you will soon be telling your friends.

Source: Craig Berry and The Mortgage Reports

First Things First: Get Pre-approved

One of the best ways to ensure a smooth home buying process is what you do before you begin your home search.

First, check your credit report and know your credit scores.

Taking this step early in the process will tell you which loans may work better for you. Checking your credit will also give you time to clear up any possible errors or issues you find.

Mortgage pre-approval, without the pressure of a closing date, is easier than trying to engineer a full approval from the ground up. And having a pre-approved mortgage means you can close faster when you’re ready to buy.

If you’re pre-approved, you will have less to worry about when you begin your home search. You will know you’re a qualified buyer, and your offers will get more respect from sellers and their agents.

Please reach out to me to discuss the pre-approval process and how I can help!

Loan Approval Guidelines Have Loosened

The good news? Loans originated in May 2017 increased to more than 70 percent from the prior year. This is great news for homebuyers, as it means more approvals for mortgage applicants.

A common myth is that most folks buying or refinancing a home have a near-perfect credit score. In reality, the average FICO score on all closed loans is 723, and for FHA mortgages, it’s just 684. Many homebuyers are purchasing homes with considerably lower scores.

Mortgage Approval is Now Easier

Changes in the mortgage industry are making it easier for applicants to get approved and buy homes.

Recently, the Consumer Protection Financial Bureau (CFPB) determined that of the millions of consumers with medical collections on their credit reports aren’t as likely to default on future credit accounts as those with other types of collections. For this reason, many loan programs now treat medical debt differently.

Another major reason that homebuyers put off buying a home is that they think they don’t have enough money needed for their down payment.

In fact, many programs require very little down — from zero to five percent. You can find out more here. Even better, down payment assistance programs can help with grants or loans. Many who qualify have no idea this kind of help exists.

Again, you can find out more by vising The Mortgage Reports – but do know that I’m here to coach you through the entire process, from start to finish!

Photo Credit: Cafe Credit via Flickr, under the Creative Commons License

Rental Income and Qualification for Investors

September 2, 2017 / Tom Bonetto

I receive a fair amount of questions from real estate investors, asking about rental income and how that is calculated in their overall income that will enable them to qualify for mortgage.

The amount of rental income that may be used and how it is calculated will depend on multiple factors – such as when the borrower obtained the rental property, when rents were collected, and what how many units there are with the subject property.

Underwriters are looking for the likelihood that the rental income will continue, as well as any potential losses too.

If your rental is producing a net loss, it will absolutely be factored into the debt-to-income ratios that are used for qualifying.

Here are some of the standard guidelines for determining rental income.

Calculating rental income when the property is being purchased

If the property is leased, then copies of the current signed lease agreements may be required.
If the property is not currently leased, then the lender may use “market rent” information provided by the appraiser.
When there is no rental income for the subject property on the borrowers tax returns, the rental income will be reduced to 75% of the gross rental income provided on the lease.

Calculating rental income when the subject property is being refinanced

Copies of the fully executed lease agreements must be provided (assuming the home is currently rented).
If the borrower owned the property during the previous year, they will need to provide tax returns. The lender will use the information provided on Schedule E to determine the net rental income/loss.
If the property was rented for a portion of the previous year, the lender will still need to provide a copy of the tax returns, including Schedule E. The borrower will also need to explain (and document) why the home was not rented for the full year. For example, was the home recently purchased or out of service to be renovated.
Rental income will be averaged based on the months the home was in service the previous year.
The lender may also rely on “market rent” data from the appraisal.

What if you’re converting your existing home into a rental to buy another home?

The rental income may be used if you can provide:
- A fully executed lease agreement – and this lease may be month-to-month
- proof of security deposit from the tenant and first month’s rent (cancelled check); and
- a bank statement showing the deposited security and rent deposit.
- 75% of the verified rental income can be used to offset housing expenses

With that said, there are other options – outside of the standard conventional products for investors. Some enable borrowers to use only the expected rental income to qualify – without providing income or tax returns. Contact me for more information, as it would be my pleasure to help!

New Regulatory Changes Help More Borrowers Qualify

August 13, 2017 / Tom Bonetto

I have some good news for those looking to get a mortgage in the near future — as 20% of U.S. consumers could see their credit score increase this fall.

Credit Changes

The nation’s three major credit rating agencies, Equifax, TransUnion, and Experian, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete.

Because of the combination of these two dramatic changes, many potential borrowers that did not qualify for a home loan might now be eligible under these new regulations.

These credit bureaus will also be restricted from including medical debt collections. If the debt isn’t at least six-months old or if the medical debt was eventually paid by insurance, it can’t be listed.

The reason is that medical debts, unlike that of credit charges, are unplanned and doctors and hospitals have no standard formula for when they send unpaid debts to collection.

Debt-to-Income Changes

In addition to the FICO changes, mortgage titans Fannie Mae and Freddie Mac are allowing borrowers to have higher levels of debt and still qualify for a home loan. Both are raising their debt-to-income ratio limit to 50 percent of pretax income from 45 percent. That is designed to help those with high levels of student debt.

This move by the mortgage leaders will dramatically increase the number of people who will now be able to qualify for a home loan. Most industry experts agree that this is a welcomed and much needed change for millennials and first-time homebuyers.

If you have been considering a home purchase or refinance, now is a great time to take a look at it.

Contact me to find out if these changes might benefit you or someone you know!

Home Buyers Should Know These 5 Things for 2017-2018

August 6, 2017 / Tom Bonetto

There’s a lot of advice online for homebuyers these days. But, hey, who’s got the time to do all of that research. So I’ve selected five things prospective buyers should know about purchasing your house in the next 18 months.

The real estate market is getting more competitive by the day, due to limited inventory. On the other hand, mortgage qualifications have loosened a bit and rates are still near historic lows.

Home prices have risen steadily in recent years, and they continue to do so. Mortgage rates are expected to inch upward in the coming months. Most analysts are predicting a rate increase by the fed in the fall of 2017.

With those things in mind, let’s take a look at 5 key issues:

Mortgage rates are expected to slowly climb into 2018

The Federal Reserve will be reducing the amount of mortgage-backed securities in their portfolio relatively soon – and they have hinted at another rate increase or two over the next 6 months.

In its latest forecast, the Mortgage Banker’s Association economists predicted that the average rate for a 30-year fixed mortgage loan would rise to 4.5% by the fourth quarter of 2017. Looking beyond that, they expect 30-year loan rates to rise above 5% by around the middle of 2018.

With that said, these rates are still extraordinarily low compared to historical standards.

Home prices are rising

According to Zillow, the real estate information service, the median home value across the US has risen by over 7% in the last year – and many experts see that pace staying consistent. Most economists expect prices to rise by another 6% over the next 12 months, extending into the summer of 2018.

As a result, homebuyers will encounter higher housing costs than those who purchased over the last couple of years. So be sure to research the market ahead of time, work with the right real estate agent, and go into it with a realistic view of what you can afford.

Mortgage qualification is easier today

The mortgage industry has loosened up a bit over the last two or three years. Mortgage giants Fannie Mae and Freddie Mac have relaxed debt-to-income ratios. As a result, it’s slightly easier to qualify for a mortgage loan today than it was in the past.

For example, many first-time homebuyers think they must have 20% or more ready for a down payment. But that isn’t true at all. Today, there are mortgage programs available that allow for down payments as low as 3%, or even 0% if you’re military or live in rural areas.

Don’t make assumptions about your ability to qualify for a home loan. Reach out to me, and we’ll review your situation to determine if you’re a good candidate for a home loan.

Housing inventory is getting tighter

The reason why home prices are rising has to do with inventory – or the lack of it. It’s just supply and demand at work, really.

In most cities across the west, the current supply of homes is falling short of demand.

What does this mean to the homebuyer? It means you should be prepared for some competition, and be ready to move quickly when the right house comes along.

It’s a sellers market right now

Due to the lack of inventory, this will directly impact you as the buyer. In 2017, most of the major cities across the state are experiencing sellers’ market conditions. In short, there aren’t enough homes for sale to meet the current level of demand.

This is an important factor to remember when it comes time to make an offer and negotiate with sellers. This is where the right real estate agent can really help.

The reality is that current real estate market conditions favor sellers over buyers.

My opinion is that it isn’t worth your time to haggle with the seller over the small stuff. When you find a home that meets the majority of your criteria and falls within your budget, you should move quickly with a legitimate, competitive offer.

In conclusion

With that said, this is my reading on current trends in the real estate and mortgage marketplace. The continuation of rising home prices and more-than-likely mortgage rate increases makes a compelling argument for buying a home sooner rather than later.

As always, please do contact me for more, as it would be my privilege to help you!

What is a Home Appraisal and Why is it Important?

July 24, 2017 / Tom Bonetto

If you’re buying a home and your offer has been accepted, one of the next steps is verifying the value of the home. As part of that process, your lender orders a home appraisal.

It gives you a trained professional’s point of view on the fair market value of the home to make sure it’s in line with the purchase price.

What Is a Home Appraisal?

A home appraisal is an unbiased report on the worth of a house in the fair market, performed by a trained and licensed individual.

Appraisals are needed to ensure the homebuyer, the home seller and the mortgage lender receive the accurate and true value of the real estate in question.

In most residential property transactions you are able to choose your real estate agent and your lender. However, in today’s regulatory world, you don’t get to pick your appraiser. Instead the appraiser must be chosen by the lender to provide a level of independence from the buyer and seller.

In order to ensure that appraisals are impartial, the Appraisal Independence Requirements, or AIR, prohibits a lender’s loan production staff from having direct contact with—or influence upon—any appraisers.

To reduce the risk of violating AIR, lenders now hire appraisers via appraisal management companies. These companies work with many residential appraisers in order to cover a more diverse housing market and to reduce the risk of improper influence.

Who orders and pays for the appraisal?

Your lender orders the appraisal to be performed by a licensed appraiser through an appraisal management company. However, you, the borrower, are typically required to pay for it – outside of escrow. Usually with a credit card.

The cost appears on the Closing Disclosure as part of your closing costs.

What determines a home’s value?

When estimating a property’s value, appraisers consider:

Comparable properties that have sold recently, especially those that are similar in size and location to the home you are buying. Their sale prices are usually the most important factor.
General condition and age of the home
Location of the home, including views or other remarkable features
Size and features of the home and property, including the number of bedrooms and baths
Major structural improvements such as additions and remodeled rooms
Features and amenities such as swimming pools and wood flooring

What’s the difference between an appraisal and an inspection?

An appraiser does not necessarily look for potential defects in the home. That’s the responsibility of the home inspector. You hire an inspector directly if you are purchasing a home and want an itemized report of potential repairs or problems with the property.

The appraiser instead focuses on whether the home’s agreed-upon purchase price is in line with what it is worth.

How Can You Improve Your Home Appraisal Process?

As a buyer, you can make sure that the home appraisal process protects you by taking a careful look at the Final Report of Value. If there are portions of it that you don’t agree with, such as findings that differ from your inspection report, or inaccurate comps, be sure to speak up.

If there is a significant difference between the agreed selling price and the appraised value of the home, your bank may choose not to fund the mortgage and the deal could fall through. Buyers can typically solve this problem by bringing additional “cash to close,” which is essentially increasing your down payment by the difference between the sales price and the appraisal value, or negotiating the sales price.

As a home seller, you will also want to be ready for the appraisal process. Itemize any recent improvements that you have made to the home and complete any planned do-it-yourself projects before the appraisal. Don’t be afraid to highlight the upgrades and positive features of your home to the appraiser.

In Closing

Appraisals are a very important part of obtaining a mortgage loan. I’d be more than happy to help you learn more about the other steps involved in buying a home so you can navigate them with confidence. Please contact me to find out more about this important step in the home buying process.