When do you need an appraisal?

It’s finally happened — after months of searching, you’ve found your dream home. It’s the perfect size for your growing family, the kitchen was just remodeled and there’s a huge deck for entertaining. And best of all, the seller accepted your offer!

As we near your closing date, your lender will want to verify the home’s value with an appraisal. This might sound nerve-wracking, but don’t worry: Appraisals protect you from overpaying.

Let’s dive into appraisals to demystify the process:

When do you need an appraisal?
If you’re taking out a mortgage to buy a new home, the lender will require an appraisal. The appraiser gives an independent estimate of the property based on recent sales data of similar homes.

When your mortgage amount matches the appraised price of the home, you know that you have a good loan-to-value ratio — and aren’t paying more than you should be.

What does an appraiser look for?
An appraiser will physically measure the home’s square footage and visually inspect the entire property. They’ll note things like:

  • Floor plan functionality and the number of bedrooms and bathrooms
  • Age of the house and its overall appearance
  • Value of any recent updates or remodeling
  • Size of the lot
  • Desirability of the surrounding neighborhood

Comparing all of that against similar nearby homes sold within the last 90 days, the appraiser arrives at your home’s value.

What if it’s valued for less than you expected?
Let’s say you agreed to buy the property for $250,000 but the appraisal came in at $225,000. Your lender won’t approve a loan for more than the appraised price.

If you still want to buy the home, we can negotiate a lower price with the seller or challenge the appraisal and pay for a second opinion.

Another option is to walk away. This may not sound ideal, and it will probably be hard to do. But our goal is to get you the right home at the best price.

If an appraisal comes in low, we’ll discuss all the options available to make sure you don’t overpay.

Are you ready to find your dream home? Reach out today to get started.

 

Home Financing Is Easier Than You Think

You saw an online ad for low mortgage rates and decided to apply — just to see if you qualify. Now your phone is buzzing nonstop, and lenders are emailing you about “DTIs” and W-2s.

The onslaught of financing questions can be baffling when you’re tackling them alone. But it doesn’t have to be that way.

Looking for some insight to make financing more straightforward? These four tips will get you started:

  1. It’s okay to play the field.
    Don’t be afraid to apply for several loans with different lenders to compare the terms and rates. You can — and should —  shop around.

Just be sure to do so within a set time period to avoid multiple credit inquiries.

  1. Manual underwriting can help you qualify.
    Most lenders automate their approval process to speed up transactions. However, if you fall outside conventional requirements, they can’t see your full financial picture. That’s where manual underwriting comes in.

Buyers with concerns about their income or credit should verify that their lender will manually underwrite the loan if needed.

  1. Broaden your prospects with a fixer-upper mortgage.
    Buying a fixer-upper can give you more home at a lower price. Did you know that the Federal Housing Authority (FHA) and Fannie Mae offer loans that will cover the mortgage and necessary home repairs?
  2. You don’t need 20% down.
    Perhaps the biggest homebuying myth is that you can’t buy without 20% down. But you can. Here’s how:
  • Low Down Payment Options: FHA loans only require 3.5% down with a FICO score of 580 or higher, or 10% down with a score of 500 to 579.
  • 0% Down Options: Buyers shopping in rural areas may be eligible for a USDA loan with 0% down. For qualified veterans and active-duty military members, VA loans often have no down payment requirement.
  • Buyer Assistance Programs: There are down payment and closing cost assistance programs available to first-time homebuyers. Not a first-timer? Some are also available to those who haven’t owned a home in the past three years.

Mortgage financing can feel overwhelming. But you’re not in it alone.

Reach out today for a referral to a trusted lender to get preapproved for your next home.

5 Ways Buyers Can Make the Winning Bid

In a tough market, it pays to be prepared. Make sure you’re ready to pounce once you find your dream home with these five tips to help you place the winning bid.

1. Down Payment
There are plenty of low down payment mortgage options that can help you get into the home of your dreams, but saving up a larger down payment gives you leverage to offer more for your home in case you find yourself in a bidding war. Just remember to keep in mind how much home you can realistically afford when you’re considering offering more for a home.

2. Get Pre-Approved
Getting pre-approved for a mortgage is one of the first steps to buying a home.Not only will it give you a solid idea of what you can afford to pay for your home, it will reduce the seller’s risk when choosing your offer over someone else’s in a multi-offer situation.

3. Know What You Want
Time is a critical factor when placing an offer in a tight market. While you sleep on your decision to put in an offer, other buyers could be making their move. So, as soon as you’re sure you want the home, take action!

4. Minimize Contingencies
The fewer conditions you add to your offer, the more appealing it will be to the seller. If you love the house, but hate the carpet, consider a renovation loan instead of requesting the seller install new flooring. Pick and choose your contingencies carefully.

5. Be Flexible
Most buyers have a very specific time frame they’re hoping to move during – one that lines up neatly with the end of their current lease or sale of their current home. If you can create some flexibility on when you need to close to better accommodate the sellers, it could give you a serious advantage.

6 Ways to Improve Your Odds of Getting a Home Loan

 

Buying a home is one of the biggest financial transactions people experience in their lives, so it’s no wonder financing is one of the biggest challenges’ buyers face when shopping for a new home. Even though the money components of home shopping can be stressful, the good news is there are steps you can take to ensure a smoother process and hopefully improve your odds of getting approved for your home loan.

  1. Get Pre-Approved Early

If you want to be ready to make an offer on a home as soon as it hits the market, consider getting pre-approved or pre-qualified early in your home search. Having this pre-approval will help you move fast when you find the perfect home. It’s also typically the first thing an agent will ask you to do before helping you with your house-hunting journey. So getting it done before  talking to an agent will show that you’re serious about buying and ready to start touring homes immediately.

The vast majority of people who financed their home with a mortgage in the last year got pre-approved (92 percent), but it’s when they got approved that is the real differentiator.

A little over a third (35 percent) of buyers got pre-approved before involving an agent, while 50 percent waited until they involved an agent before they got pre-approved. Buyers who use an agent are more likely to obtain pre-approval than those who don’t work with an agent, indicating pre-approval is either a prerequisite to securing an agent or highly recommended by their agent.

  1. Get a Fully Underwritten Pre-Approval

If you want to take an extra step and do some work upfront to get your offer to stand out, consider asking your lender for a fully underwritten pre-approval. This will not only help speed up the mortgage process even more, but it will also show that you are a serious buyer who has been vetted.

During this process, a lender will verify the information in your mortgage application, your income, assets and debts, and send your loan through the underwriting process so that you can quickly get final approval for a loan once you’ve found your home and your offer has been accepted. So long as your financial condition and creditworthiness hasn’t changed since you were pre-approved, and the home meets other “closing conditions,” you’ll be approved for the loan.

Doing this work up front will allow you to close quickly, opposed to the sometimes-lengthy time frame of these steps once the offer is accepted.

Even though getting fully underwritten sounds like more work initially, you’ll have to go through this process in the later stages of the process anyways, so getting it out of the way early may save time in the long run and help you stand out.

  1. Get Your Credit in Check

One of the most crucial component of getting approved for a home loan is your credit score. Not only does it have a huge financial impact by helping determine your interest rate, but lenders will also use this number to determine if you will be approved for a loan. Getting a firm grasp on how your credit is early in your home search could give you the time you need to improve it, if necessary.

Even if you think your score is good enough, it’s a good idea to get a copy of your credit report and take time to review it for any errors. Sometimes, boosting your credit score can be as simple as disputing errors. But if you catch them late, you may not have enough time to dispute before locking in your mortgage rate.

It’s also a good idea to not open any additional lines of credit to reduce further scrutiny from lenders.

  1. Demonstrate Financial Stability

When lenders assess whether you qualify for a loan, they’re looking to make sure you’ll be able to repay the loan and not default. You can improve your chances of qualifying by demonstrating that you’re financially stable.

Limiting your spending is one of the easier ways to make sure your lender doesn’t find any red flags when reviewing your financial history. Lenders generally don’t like to see a number of big purchases recently made. And just as much as they don’t like seeing big purchases, they don’t want to see that you’ve missed payments either, so make sure your payments are on time.

To help ensure that you aren’t likely to miss payments, lenders like to see work consistency. If you’re able to, try not to change jobs during this process as the lender might think you no longer have the same funds to afford the mortgage.

  1. Put More Down

Even though coming up with enough money for a down payment is often a buyers’ biggest hurdle during the buying process, if you’re able to make a larger down payment (of 20 percent or more), you might up your odds of getting approved.

A large down payment can show lenders you’re serious about buying and have the money to prove it. Outside of a larger down payment giving off the impression that you’re more trustworthy as a borrower to a lender, it can also reduce the loan-to-value ratio, which can increase your chances of getting approved for your loan.

Not only is a larger down payment a plus for lenders, but it can also help make your offer look more attractive to sellers and help them feel more confident that your financing is secure, which could help increase your odds of landing the home over someone else.

  1. Move Quickly Once Your Offer Is Accepted

Unfortunately, there are a number of ways mortgages can fall through once your offer is accepted. But if you’re able to speed up the loan, inspection and appraisal periods, you might find yourself coming out ahead.

In some markets, the appraisal can take a particularly long time. So, to speed this process up, ask your lender to order the appraisal the day your offer on the home is accepted. Getting it done quickly may give you time to address any issues that arise.

For example, if the home is appraised for less than the sale price, you can still make concessions with the seller in hopes of getting the loan to go through. Some buyers find luck by paying the difference in cash, getting a second opinion on the appraisal or asking the seller to reduce the price of the home. If the buyer and seller can’t come to an agreement on one of these terms in time, the pending sale can fall apart.

Another step you can take to ensure a smooth, speedy process is to schedule your general home inspection as soon as your offer is accepted. That way if the inspector finds something wrong, you’ll have time to bring in a specialist to take a look. In competitive markets, some buyers even opt to do a pre-inspection to make their offers more competitive, while also removing potential obstacles that could prevent them from getting the house.

Buying With Friends Isn’t Like Renting

You’ve been living with your best friend since freshman year of college, and it’s been a blast. So why not pool your money and go in on a house together? After all, it’s easier to buy when you have two incomes.

It’s true that co-buying a home with friends or family can make it easier to own a home. And it can reduce your upfront costs.

But there are a few unique differences to co-buying. Here are three you should consider and discuss before you jump into the process.

1. What type of ownership will you have?
Don’t assume that splitting the mortgage determines the ownership.

If one person will be paying a larger portion, you might want to be tenants in common. This also allows you to transfer or sell your share of the property at any time. But if you want to divide the ownership equally, you can choose to be joint tenants.

2. How are your credit scores looking?
When two buyers are on a mortgage app, lenders use the lowest credit score to determine the interest rate.

Do you both have excellent credit? If not, you could have only one person on the mortgage loan, but you’ll only be able to count one income to determine the loan size.

3. How will you pay your bills each month?
This sounds like a minor detail, but it’s important to be on the same page about finances before the bills come in.

Will you pay bills out of a joint household account? Or will one person pay the full bill and have the other pay them back?

Once you’ve discussed your plans for the finances and ownership, your best bet is to have a legal agreement prepared ahead of time.

Have more questions about co-buying a home? Reach out today to discuss your needs and get the process started.

Get in touch with Matt now to get started!

Best practices for kicking off your home-buying journey

Open houses are the gold standard in real estate. They’ve been around for decades and will be ingrained in the buying and selling of homes for years to come.

The average buyer attends three open houses, according to the Zillow Group Consumer Housing Trends Report, a survey of more than 13,000 homeowners, sellers, buyers, and renters. Seventy-one percent of all buyers attend at least open house, and first-time buyers are even more likely to go (77 percent attend one open house or more).

But as a buyer, are you making the most of your open house visits?

Here are some best practices and helpful questions for buyers at all ends of the home-buying spectrum.

Use the open house to learn the market without committing

For the most part, open houses are just that — open. They make it possible for anyone to see a property in a certain time period, without an appointment or even being a very serious buyer.

New buyers should leverage the open house opportunity to get a feel for the market. In today’s world, using online search tools, mobile apps and the open house, a buyer can start to get a feel for pricing and the market before committing to an agent. Most importantly, open houses are some of the best ways for buyer and agent relationships to start.

You don’t have to sign in (but don’t be rude)

The biggest fear of some newer buyers is that a real estate agent at an open house will be all over them, ask for their contact information and then start harassing them for the next three weeks. It does happen, but it’s also common courtesy to at least recognize and say hello to the agent at the open house. Don’t forget, in addition to trying to sell the home for her client, for safety reasons, the agent is keeping a look out for who is coming and going. It’s polite to say hello and introduce yourself to the agent, but you can also politely decline to sign in.

If you’re an active buyer, you should make yourself known to the agent. Let the seller’s agent know who your agent is and don’t be afraid to express interest. When it comes time to review an offer with a seller, listing agents like to put a face to a name.

Watch the other buyers

You can tell a lot about the activity and marketability of a home by watching the other buyers. If you observe a lot of people walking in and out quickly, the home probably has some issues. Are the buyers hanging around, asking questions of the listing agent and huddling in the corner talking to their spouses or partners? If so, it could be a sign this is a well-priced and “hot” listing. If you’re interested, too, observing other buyers at the open house could help you learn about the competition.

Ask the agent questions

The real estate agent is there for a reason. It’s his job. If he is the listing agent, ask him questions. He is a direct line to the seller. He should know more than anyone about the property and the seller. Your agent can funnel your questions to the listing agent. But if you’re there, ask away. Watch the agent’s facial expression and reaction to your questions. If it’s a competitive market, ask questions such as: “Why is the seller selling?” “Is there a certain day to review offers or have you had a lot of showings?” In a slow market, ask how long the property has been on the market and what the seller’s motivations are. A good agent will engage you because it’s good for his seller.

Be open to meeting your future agent

When considering a new doctor, lawyer or CPA, you don’t get the chance to see them in their element until you’ve decided to work with them. Not true for real estate agents. Some of the best buyer/seller/real estate relationships begin at open houses.

A good agent is wearing two hats at the open house. In addition to watching the serious buyers and getting feedback for the seller, an active agent is also looking to interact with future clients.

Face to face, informal and relevant, the interaction with an agent at an open house is important. You can get a feel for a person just from a brief meeting. If you sense the agent could be someone you could work with, ask some open-ended questions, such as “How’s the market?” and “What areas do you cover?”

Why open houses have been around for decades

At any open house, there are people at every stage of the home-buying game, from just testing the waters to looking at homes daily, making offers and working closely with an agent. For someone new to the market, it’s helpful to know the best practices for visiting open houses and interacting with the real estate agent. For more experienced buyers, the open house is an opportunity to make a second or third visit, getting a closer look at the details and uncovering things you may have missed earlier. There are lots of reasons why open houses have been around for decades — and why you should take full advantage of them.

Take full advantage of the open house by asking questions to learn all you can about the home and listing.

Don’t Get Blindsided by Closing Costs

Have you ever decided to buy something, only to find out about additional costs at the end? The last thing you want is to be surprised by unexpected fees – especially at your closing.

You’ve made your financial calculations. Extra charges at the eleventh hour could make all your plans go bust.

But you can’t just skip the closing – that’s when the legal ownership is transferred.

Want to avoid being blindsided at your closing? Here’s how to plan ahead for closing fees:

What’s the deal with closing costs?
Closing costs typically run about 2% to 5% of the purchase price and are paid to lenders, attorneys and other third parties. Buyers often have more closing costs than sellers because most fees are related to the new mortgage loan.

Common closing costs for buyers:

  • Loan processing fees
  • Home appraisal and inspection fees
  • Property taxes

Common closing costs for sellers:

  • Mortgage payoff fees
  • Title transfer fees
  • Attorney fees for handling the closing

How can you lower the costs?
After applying for a mortgage, you’ll receive a Loan Estimate from the lender. It summarizes the loan terms, such as the loan amount, interest rate and all closing costs. Comparing Loan Estimates from different lenders is important.

Page 2 of the Loan Estimate also details the services you can shop around for, such as surveys, appraisals and title searches.

Are closing costs ever negotiable?
Yes. A seller or buyer sometimes agrees to pay part or all of the other party’s closing costs. This is something we can negotiate into the purchase agreement.

As for paying the closing costs? Some lenders will allow you to roll the cost into your mortgage. However, you’ll pay interest on it for the life of the loan. Paying cash upfront is a smarter option if you have the funds available.

Have more questions about closing on a home? Or are you ready to get your home search started? Reach out today.

7 home maintenance tasks sellers must do before listing

Proactive is the buzzword when addressing both cosmetic and mechanical components of a listing

It’s that time of year again, the 2019 selling season is upon us. If you have clients getting ready to put their home on the market, the task list to prep for the market can seem endless.

To make it easy, we walk you through the seven things sellers should do before putting that for sale sign in the ground.

Spruce up the exterior

Let’s face it, the exterior of the property is the first thing a buyer will see whether online or driving by. Now is the time to make sure it looks its best.

Walk around the entire exterior of the home, and conduct an assessment.

Consider pressure washing, painting, having the windows cleaned, cleaning out gutters, trimming back any overgrown or dead landscaping, cleaning the front door and changing out any worn door hardware that may look old and corroded. And make sure the front doorbell actually works!

Service the heating/cooling system

A home inspector is going to check this anyway, so beat ’em to the punch by having the system serviced and cleaned. When was the last time it was serviced anyway?

It’s better to take care of any repairs that may need addressing now versus waiting until a buyer decides to make an offer.

Do a light bulb check

Make sure all of the lightbulbs are working and free of dirt and debris. Yes, these need cleaning too — just make sure they are off. Don’t forget to check the outdoor lights as well.

Check the smoke detectors

Maybe sellers took the batteries out the last time they were playing Top Chef in the kitchen.

Now is the time to make sure that all smoke detectors are working and have new batteries. Replace any old ones as an inspector is likely to flag those during a home inspection and recommend that they be replaced.

Blue tape it

Conduct a thorough walk through of the interior of the home. If there are any nicks, dents or scratches on the walls and moldings, blue tape them so sellers can go through and have each area repaired.

The more wear and tear a home appears to have, the more the buyer is going to chip away at the asking price.

Deep clean, and declutter

Now is the time to give the home that deep clean it needs. Consider hiring a cleaning crew to tackle this; the more hands, the better.

Deep cleaning means wiping down all of the baseboards and moldings and cleaning cabinets, appliances (including the oven) and every corner from top to bottom including light fixtures and ceiling fans.

It’s also a good time to gather all those unwanted closet items together to donate as well as any unused furniture and decor. The less stuff in the house, the less there is to organize and keep clean.

Clear out the garage

Often overlooked when preparing a home for sale, don’t forget this space. Make sure the garage is clean, in good repair, organized and that you can actually walk through it.

Consider painting the floor or having an epoxy finish put down. And that ceiling? Buyers also look up when touring this space, so make sure any drywall cracks or loose seams are repaired.

Buyers recognize and appreciate homes that have been taken care of. Taking some time to invest in home maintenance before selling will likely yield a big payoff when it becomes offer time.

It’s not TV. It’s your bottom line.

TV shows make finding a profitable fixer-upper seem easy. But in the real world, there are real challenges and decisions to be made.  

Whether you’re buying an investment property or a starter home for your family, there are dozens of factors to consider. How much will it cost to renovate? Are home values rising or falling in the neighborhood? How in-demand is the area? 

Want to make sure your purchase isn’t a money pit? Ask yourself these four questions:

1. Does it have good bones?
We want to avoid expensive repairs that would eat into your bottom line. It’s vital to have structural elements like the roof, foundation, plumbing, electrical and HVAC system inspected. 

2. Is the price comparable to the area? 
The property may come at a fixer-upper price, but how does it compare to others in the area? Let’s also take a look at new developments or zoning laws that could influence future home values.

3. Does it need special inspections?
Fixer-uppers need to go beyond standard inspections. Things like sewer lines, septic systems and pools age with the property, so it’s important to have each evaluated. 

4. What does your contractor think?
Bringing a contractor on board early is essential when creating your renovation budget. We need to estimate the cost of any aesthetic changes or upgrades to avoid overimproving the home.

Remember, it’s not just the sticker price you want to consider when buying a fixer-upper, but the cost of the entire project. 

Do you need help finding the fixer-upper of your dreams? 
Together, we can evaluate the purchase price, factor in repair costs and determine the future resale value of the home. 

If you’ve already got your eye on a fixer-upper, or want help finding a contractor in our area, get in touch today.

Time for Heating Systems 101

If your current heating system yields cold hands and frozen toes — it might be time to upgrade.

Heating your home accounts for an inordinate portion of your utility bill, so it pays to choose the most efficient heating system possible. This doesn’t necessarily mean you should upgrade to a different type of system, however.

Generally speaking, it’s a bad idea to convert from forced air to central heating, or vice versa, since the benefits rarely justify the cost. Instead, upgrade to a more efficient version of your existing furnace or boiler when it’s too expensive to repair — but weigh your options carefully.

Here’s a rundown of the most commonly used heating systems, along with their advantages and disadvantages, to help you make the most appropriate choice for your home, climate and wallet.

Furnaces

Also known as forced air, furnaces are the most commonly used heating systems in the U.S. because they’re reliable and relatively inexpensive. Gas furnaces are rated for efficiency by their annual fuel utilization efficiency (AFUE) rating. This shows how much energy is successfully converted to usable heat.

If your furnace needs to be replaced, the silver lining is that modern furnaces are more efficient than ever, and some premium models even reach an AFUE rating of 97 percent. When purchasing a furnace, choose one that’s appropriately sized for your home so that it doesn’t put undue wear and tear on your system or waste energy.

ProsCons
Inexpensive to installReliable and low-maintenanceHave a long life span, especially electric modelsCan be retrofitted to filter and clean your home’s airAlready installed in most homes, thus easier to replaceCan produce and kick up more allergensWarm air is easily lost through ducts and within the houseGas furnaces can be dangerous, creating a risk of fire or carbon monoxide poisoningFurnaces powered by electricity are safer, but cost more to run

Boilers

Boilers use water to generate and distribute heat through pipes and radiators, heating the air, floors, wall and baseboards as it travels in a loop. They can be powered via natural gas, electricity or propane, and they use the following systems to distribute heat:

  • Steam radiators are the old-fashioned metal things you’ve seen along the walls in older buildings.
  • Hot water radiators are the newer reincarnation and allow more control and versatility.
  • Hydronic radiant floor heating treats the entire floor of a room like a giant radiator, using tubing under the flooring to distribute heat to toasty toes. While efficient, hydronic radiant floor heating is expensive to install and replace.

Like furnaces, boilers are rated by AFUE score.

ProsCons
Usually runs more quietly than forced air systemsDoesn’t kick up dust, which makes for much better air qualityCan be retrofitted to heat waterCan be more efficient than forced air systemsBoilers are often more expensive to purchase and install than forced air systemsWater can leak when the system is damaged or nears the end of its lifeMost boilers are powered by natural gas, which isn’t available in all areasAren’t necessary in areas with mild winters

Heat pumps

These extremely efficient systems take advantage of existing temperatures (either outdoors, underwater or underground) to heat, cool and humidify your home.

There are three types of heat pumps:

  • Air-source heat pumps are the most common and circulate refrigerant between the outdoor heat pump and indoor air handler.
  • Split ductless systems use one to four indoor air handlers, which are mounted high up on walls and controlled by a remote.
  • Geothermal systems are incredibly efficient because they take advantage of temperatures in the ground, pond or a well, but they aren’t practical or affordable for most homeowners.

When selecting a heat pump system, consider the size, noise output and efficiency rating. The heating efficiency is measured by heating seasonal performance factor (HSPF), and the cooling efficiency is measured by seasonal energy efficiency ratio (SEER).

ProsCons
Very efficient, saving lots of money in the long runCan be used all year for both heating and coolingCan be modified with a desuperheater, which assists in heating your waterNewer models are appropriate for colder climatesNaturally dehumidifies the home in summer, making it ideal for the SoutheastMore expensive than forced air or central heatingInappropriate for small lotsFans can be noisyRequires more maintenance than other systemsIn cold climates, you may require an auxiliary heating system that kicks in when temperatures become too low