Seven Things Your Agent Should Know About Your Mortgage Approval

Most experienced real-estate agents are aware about all the nitty-gritty’s of the mortgage loan approval process, but there are certain vital details that tend to get overlooked. Eventually, these can result in a delay or denial of the purchase. Some of the aspects that can undergo a change, and can impact your home loan financing are:

  • New regulation

  • Appraisal guidelines

  • Updated disclosures

  • Mortgage rate pricing-premiums

  • Credit score or bad credit rules

  • Rescission deadlines

  • HOA insurance requirements

  • Secondary approval layering

  • Property type

  • Title

  • Property flip rules

  • Others

Seven Important Things

The current-day lending environment is highly volatile and it is crucial for home-buyers to obtain a full mortgage loan approval that very clearly defines all the contingencies related to an individual home buyer’s situation. Ideally, these are the things you should be looking at before you spend time looking for new home with your real estate agent. These are the things your agent should always keep in view while you are being shown new properties, which will help in easy mortgage approval:

  • Property Type- High-Rise, Town House, Condo, Single Family Residence, Shoe House or Dome Home

  • Residence Type- Understanding whether you have to sell your 1st home before buying another
  • Mortgage Rates / Lock-in- Typically, mortgage rates have a 30-day lock-in period. If you are looking for a new mortgage rate, you will have to switch to a new mortgage lender

  • Headline News or Employment- This relates to income security, periods of unemployment and job changes

  • Title or Property Flip- If a property has been bought by an investor and then sold within 30-90 days of the purchase; it’s called a property flip. Some lenders have stringent rules around these kinds of transactions and will take this into consideration in the mortgage loan approval process

  • Homeowner’s Association Insurance- Certain lenders need that Condos & Town House communities have enough insurance & reserves coverage related to specific ratios on the units that are owner-occupied vs. rented ones

  • Appraisal Ordering Procedures- There are frequent changes to appraisal ordering guidelines as regulators implement numerous new consumer-protection laws created in an effort to prevent foreclosure epidemics in the future

Though there are a number of things that your agent will have to look into and keep in view, these 7 points are important to understand. And as a buyer, if you want easy mortgage approval, it becomes all the more important for you to be aware of these things too. Contact ResMac Home Loans for any other mortgage-related information you need.

 

What Do Appraisers Look For When Determining A Property’s Value?

Most homeowners are under the impression that the actual value of their property is determined once the appraiser conducts a physical property inspection. The fact is that the appraiser already has quite a fair idea about the value of the property even before they schedule the appointment to look at it.

The bright spot is that you don’t really have to worry about getting the place cleaned up in order to up the value of your property. Though a clean house will definitely make it simpler for the appraiser to clearly notice all the improvements, any “clutter” that you have around the house is not really going to affect the appraisal unless it is damaging to the structure itself.

Factors that Matter

The important things that will be addressed in the appraisal are:

  • Site- The location, topography, view, external factors, zoning, landscaping features, lot size and highest & best use

  • Design- Quality of the construction and finish work, any fixed appliances/defining features

  • Condition- The age of the structure, renovations, deterioration, additional features and upgrades

  • Health & Safety: Code compliance and structural integrity

  • Size- The Above-grade & below-grade improvements

  • Neighborhood- Does the property conform to the neighborhood?

  • Parking: Carports, garages, shops etc

  • Functional Utility: Is your property functional in terms of style & use?

Things to Focus On

The appraisers are going to look at things like the condition, overall design, upgrades, finish, functional utility, defining features, number of rooms, square footage and health & safety items. Ensure that all the smoke and carbon monoxide detectors are in working order.

This is important because 50% of weightage in the appraisal is given to the security factors in the property. The appraisal should be carried out by a licensed and qualified appraiser who is familiar with the neighborhood & the type of home that you are buying/selling/refinancing.

Note- For conventional loans that have originated on/after 1 May 2009, neither the homeowner nor the lender can decide which appraiser will inspect the property. The person will be chosen at random from a common pool of licensed & qualified appraisers. For latest updates and information, contact ResMac Home Loans today.

 

Understanding the Difference Between an Appraisal vs Neighborhood Listing Prices

Many homeowners wonder why there is such a big difference between their appraised value & the selling-price of other similar homes on their street. The key distinction lies in the purpose of these 2 evaluations and the people who are conducting them.

Appraisals

The primary purpose of an appraisal is to ensure that a third-party verifies the most-likely sale price of the property, based in its market value and condition. Typically, an appraisal is meant to be a very realistic determination of the value of that home if it were to be sold in its current condition in the current market. In addition to this, the appraisers have to follow the rules that are supposed to even out the subjective-process of deciding what the value of a home is. Appraisers look at factors like:

  • Location

  • The above ground size

  • The room and bathroom count

  • Style of the home

  • Amenities

  • Condition of property

  • Amount of time it takes for a particular home to sell

  • Whether values are increasing/decreasing/steady

Appraisers also look only at the comparable sales within a specific distance, usually 1mile except in the rural areas, & within a certain period of time.

Listing Prices

Listing prices are determined on the basis of very different factors- are set by interested & emotional sellers and influenced by a real-estate agent. When sellers list their homes, they aren’t held by any specific rules. In certain situations, they may take the amount they paid for the home, what they spent on improvements and add a profit.

Sometimes, they list their property based on the amount that is required to pay the closing costs, the real estate agents & cover the mortgage amounts. If a particular home is selling for a very low price, this is generally because the owners might have to move in a hurry and want to make their price very competitive. Foreclosed properties could also be listed at lower prices.

In some cases, asset managers may be making decisions from a completely different part of the country, which may explain the disparity in prices. And so, there are really no set rules when it comes to determining the actual value of your home. In the end, the opinion of the lender who is securing that particular property for a mortgage is what matters. For all types of mortgage-related information, contact ResMac Home Loans.

 

Five Myths About Home Values

When the economy is booming and home values are on the rise, homeowners rarely question appraisals too much. But in times of recession, when property values are on the downtrend, most homeowners & listing agents tend to question & pick apart appraisals. But the actual appraisal process has not undergone much of a change since the boom and bust in the housing space that took place between 2001- 2009. Take a look at 5 topmost appraisal myths:

  • I have put in $15,000 into a property very recently- Why is the appraised value not higher than that?”

It’s a misconception that every improvement carried out in a property will add to its value. Even with significant cosmetic repairs, there are times when the property value may be comparable to a foreclosure right next door, rather than the value of a new home that is a block away. The electrical, air and heating are priority, square footage and the number of beds and baths comes next while genuine cosmetic upgrades are on the lowest rung of the home improvement ladder

  • My home is comparable to some properties right in the neighborhood- but it’s being valued at much less”

If a homeowner is planning on selling a house that has added $150k in upgrades to the flooring, built-in cabinets and the kitchen, it might be much more beneficial to show that property in magazine ads or in an open house. The fact is that the homeowner might be stuck with a much lower appraisal (even lower than comparable properties right across the street).

This happens because the appraisers always use properties from that same neighborhood to first establish a value. In simple words, the seller ended up over-improving their home for that specific neighborhood

  • I just invested $50,000 in a pool- why does that not count for anything?”

Professional landscaping and pools rarely ever see a value-add that matches up exactly to the amount that has been spent on that improvement. This value is also largely based on the comparable sales in a particular neighborhood.

  • How can very similar homes a particular neighborhood appraise for vastly different values?”

This is a very common question that crops up for older neighborhoods where there may be drastic price differences for homes that are modeled similarly. Square footage and additional rooms might be the primary reason for a particular property appraising much higher than another.

When an appraiser determines the value of a property, the size, square footage, improvements, location, neighborhood amenities and market trends are taken into account. Contact ResMac home Loans, to understand more about how an appraisal works.

 

How Do Mortgage Companies Value A Property That Has Not Been Built Yet?

It’s obviously easier to picture the process of estimating value on an existing property in a neighborhood that has a history of home sales, but the task of determining the value on new construction projects does pose some challenges.

Appraisals on homes that haven’t been built yet generally require the contractor and home buyer to supply more documentation in order to get a more accurate estimate of the property’s value.

The main purpose of this article is to give an overview of the appraisal process for a home buyer that is building a home vs purchasing standing inventory.

For some, building a new home can be both exciting and overwhelming.  Watching a project transform from idea to completed home with a front yard, white picket fence and a custom red front door is a rewarding experience.

Even if you are paying attention to all of the information from the beginning, there are still several details that have a tendency to catch even experienced builders off guard.

Game time decisions have to be made as cabinets and corners line up differently than the initial drawing could show, flooring doesn’t match the wall colors, or the sun hits a window the wrong way at dinner time.

While the last minute updates may cost you more money, they might also have an impact on the value of the property.

What Does An Appraiser Need For New Construction?

Plans –

The plans or construction drawings are usually done by your builder or architect. It lays out the floor plan of your home, sizes of rooms and square footage of your home.

They should include a floor plan layout, front elevation, real elevation & side elevations, mechanical and electrical details.

Specifications / Descriptions Of Material –

A “Spec” sheet has the type of construction materials you will be using. For example, whether your home will be built with standard 2 x 4’s or 2 x 6’s.

It also contains the type of insulation, roofing and exterior products that will be used in the construction, as well as floors, counter tops and appliances for the inside dressing.

Cost Breakdown –

The document that breaks down all of the costs associated with the construction, including land, building materials and labor.

A lender can generally provide you with blank forms for the spec and cost breakdown if your builder does not have them.

Plot Plan –

Shows where your home will sit on the site, any accessory buildings, well and septic locations, if applicable, and the finish grade elevations and direction of the drainage.

Once the lender has obtained the above information from you, they will forward a copy to the appraiser. It is the appraiser’s job to determine what the future value of the home will be once it is completed, per your plans, specs & cost breakdown.

Even though an appraiser will use the cost approach in the appraisal report, it is not the value that will ultimately be used by the lender.  The market approach to value, which uses existing sales of homes similar in size, quality, construction and location is the most common approach that lenders want for new construction.

The more complete and detailed your plans, specifications and cost breakdowns are, the more accurate your appraisal will be.

Once your home is complete, the appraiser will be asked to go out and inspect the home. They will report back to the lender what they have found, whether your home was completed according to the plans and specifications originally given, and if the value is the same as originally given in the report.

Sometimes the value has to be adjusted due to changes that were made during construction which may have affected the value of the home.

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Frequently Asked Questions:

Q:  Where can I obtain a set of plans?

Most builders have basic plans they work from, and make modifications specific to their clients’ needs. When building a custom home, it’s generally a good idea to work with a reputable architect.

Q:  Is there a form I can use for the list of specifications?

Yes, HUD has a generic form that most lenders use and it will give the appraiser most of the details they need to complete your appraisal. Anything not listed on this form can be added by you separately on an additional sheet.

Q:  Can I use my contract with the builder for the cost breakdown sheet?

In most cases, the lender will accept the contract, however, they will want the builder to provide a cost breakdown to ensure that the builder has accurately bid your home.

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Related Appraisal Articles:

Assembling Your Home Buying Team – Knowing The Players

Choosing a Home-buying Team

Buying a first home can be a complex process and there are a number of steps involved. The good news is that there are many professionals who can help and guide you through the mortgage approval process. These are the different professionals who will play a role in the home buying process. But it has to be understood all of them will not be involved in every stage. Your home buying team may include:

  • Real estate professional

  • Housing counselor

  • Attorney

  • Lender

  • Escrow officer

  • Housing inspector

  • Title insurance officer

  • Insurance agent

  • Surveyor

  • Appraiser

Important Functions

These are the different professionals you may have to deal with in the mortgage approval process. There will always be situations in which you will need and seek some impartial advice. This is where a housing counselor comes into the picture. These counselors work with nonprofit organizations and can provide one-on-one counseling sessions as required. They may also be able to provide you with information about the process involved in buying a home online.

Getting the Right Advice

There are so many different professionals that you will be hiring & working with right through the home-buying process that you will definitely want someone to support you and provide you with some sound and impartial advice. The real-estate agent plays a very crucial role in the entire process and he/she is trained to sell properties. The person will provide you complete information about the type of properties that are available and will look for something that falls within your budget.

Legal and Insurance Professionals

If you are getting a mortgage loan, you will go to a lender, complete the application form and give the lender all the information and paperwork they require. The lender will then check all the documentation and decide whether you are a good credit-risk. In certain states, it is a legal requirement that the real estate contract be written by a lawyer.

Attorneys will also review the terms of the documents that are being signed or help in settling disputes, if any. In addition to all these professionals, the escrow officer, the Title Insurance Officer, the housing inspector, Appraiser, Surveyor and the Insurance Agent will have a role to play at some point of the mortgage approval process. You should get all the information you can from them and understand the scope of their job while you are buying a first home. Call ResMac Home Loans for knowing more about how to get the best home buying team.

 

Important Factors To Consider When Getting Financing On A Foreclosure, Short Sale or New Construction

There are a number of foreclosures and short sales in the market and when you are planning on buying a home, they may present a lot of value. But there are certain problems associated with them that homeowners should be aware of before applying for foreclosure sale financing:

  • Property Condition- Homeowners who are facing a foreclosure or want to short sell their house generally do not have the money to maintain the property well or pay for the mortgage. This can cause problems for you, if you are planning on getting an FHA loan. These require that the property should be ready to move into

  • Timing Challenges- Typically, a short sale process has very awkward timeframes for approval of the purchase contract and loan closing. Every bank has different rules; however the approval can take 7-120 days. Since there is no fixed timeframe for approval of a short sale, timing of the loan submission, rate locks & the closing can become very challenging. When you are buying a short-sale property, you should be prepared for loads of paperwork

  • New Construction- If you want to make use of FHA financing to buy new construction – there are a number of different issues that might crop up. You must have a CO- Certificate of Occupancy and if this is not available, you will not be able to go to the FHA and may have to opt for a renovation loan

  • Builder’s Certification- You might need a 10-year warranty, termite inspection, well test and septic inspection, when applicable while buying a home

  • Construction Permits- You will require specific documentation (in a certain combination), to satisfy the lender and the FHA. It is important that you work with a knowledgeable loan officer while buying any new construction with financing from the FHA

The Right Support

If you decide to use conventional Freddie Mac/ Fannie Mae financing you will still have some hurdles to navigate, but they will be a little less than the ones you encounter with the FHA. But the down payment will be higher and there are more stringent credit qualification guidelines.

Regardless of whether you plan on a FHA loan, renovation financing or conventional financing, it is crucial that you have a strong home-buying team who can help and support you through the negotiations and tons of paperwork. For more information on financing for foreclosures, contact ResMac Home Loans.

 

Four Possible Reasons To Refinance

A mortgage is generally the largest debt most homeowners have to manage.  It’s a good idea to give your personal real estate finance portfolio a check-up at least once a year.

Since there are many reasons a homeowner may choose to refinance, we’ll take a look at the four most common.

1.  Mortgage Rates Drop:

Typically, the most common reason that homeowners refinance their mortgage is to secure a lower interest rate. Interest rate and loan amount determines the total cost that a borrower will pay. The lower the interest rate, the less the overall cost will be. Interest is calculated on a daily basis and usually paid back to the lender on a monthly basis.

2.  Lower Payments:

Lowering a mortgage payment can be achieved by lowering the mortgage rate, lengthening the loan term, combining two or more loans or removing mortgage insurance.

3.  New Mortgage Program:

Refinancing an Adjustable Rate Mortgage (ARM) to a new Fixed Rate Mortgage (FRM), combining a first and second mortgage or paying off a balloon loan are three possible reasons to explore a refinance.

4.  Debt Consolidation:

If there is sufficient equity, sometimes paying off consumer debt by combining all debts into one lower monthly mortgage payment can significantly reduce the short-term deficits in a budget.  However, it’s important to keep in mind the total cost of that debt by adding it into a 30 year mortgage payment.

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Frequently Asked Refinance Questions:

Q:  Do I have to refinance with my current mortgage company?

No, you may choose any company to refinance your mortgage since the new loan will replace the existing mortgage.

Q:  Is it easier to refinance with my current mortgage company?

It is possible your current mortgage company may require less documentation, but this could add additional cost or a higher interest rate. Do your homework and shop around to make sure you’re getting the best deal.

Q:  Will I automatically qualify if I’ve never made any late payments?

No, you will have to qualify for your new refinance. However, certain programs will allow for reduced documentation like a FHA to FHA Streamline Refinance.

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Related Article – Refinance Process: