Real Estate Search
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The Department of Housing and Urban Development recently released a series of how-to videos to help potential homeowners shop for a home, shop for a loan and close the deal.
Here is the first in the series of three videos, “Shopping for Your Home”. This goes over what a real estate agent is, the different types of real estate agents and who you go to about putting an offer in on a home.
1. Find the right person to work with
“A lot of buyers start on the Internet, which is very convenient,” said Steven Slotnick, a mortgage broker with Prospect Mortgage in Maplewood, N.J. “You can do the calculations yourself, and you can play out some what-if scenarios, and get an idea of what you can afford. But it’s impersonal. And if you have anything other than the most basic financial situation — been in the same job for several years, one savings account, one checking account — then you might have issues you don’t even know about that could hold up a loan.”
Slotnick said that the best recommendations for a mortgage broker or loan officer will come from someone who has successfully obtained a mortgage. “If they were successful, someone did something right,” he said. “Ask them who they used.” Realtors and real estate attorneys also can provide recommendations. The important thing, said Slotnick, is to find someone who’s asking the right questions.
“If they’re asking the important questions that go beyond what your income is — what kind of work do you do, how many children do you have, how long do you intend to stay in your house — then they probably have your best interests at heart.”
Those questions, he said, help the mortgage broker or loan officer understand what your monthly expenses are and how much of a mortgage you can really afford, which is the first step toward pre-approval.
2. Assemble the correct paperwork
Once you find someone whom you can work with, you will need to start gathering all the pertinent financial information. You can actually start pulling this together before you’re ready to go through the pre-approval process. The important thing is to know where all the information is.
According to Slotnick, at minimum you will need to be able to produce these documents to start the pre-approval process:
• One month of paystubs
• Two years of W-2s, or two years of tax returns if you’re self-employed
• Bank statements from the last two months
• If you are currently renting, proof of the last 12 months of rent payments
“With these documents, I can pull a credit report and get the complete picture of someone’s financial situation,” he said. “If they have a more complicated financial situation, as when someone is involved in a business partnership, the process gets more complicated. Then, we will start asking for more documents.”
3. Create a budget
Your loan officer or mortgage broker should also help you create a budget. “A good mortgage broker will look not just at your income, but your expenses, and find out how much you can really spend on a home,” said Huettner. “When we go through the finances, I ask the buyer what they feel they can afford each month. And I make sure they understand what they will need for closing costs and escrow, based on the mortgage they want. All of this will help a buyer determine how much of a mortgage they really can afford.”
4. Get more than one quote
You should definitely shop around for a mortgage, advises Slotnick. “The borrower should get two or three reputable quotes,” he said. However, there is no need to go through the entire scenario more than once. Instead, a buyer can contact other lenders with the information that they were pre-approved at a certain rate for a certain amount, and ask how other lenders compare. “Ask for their rates and closing costs, and see if there is a difference,” said Slotnick. “And if there’s a big difference among lenders, make sure you have those quotes in writing before you commit to one over the other.”
Slotnick says that a buyer can expect pre-qualification within 24 hours and a full mortgage commitment in about 10 days, he said. In the end, though, it’s the ability of the borrower to produce the right documents and answer all the questions that need to be answered. “The borrower’s thoroughness determines the length of the process,” he said.
“Even for people who have a very straightforward financial situation, it’s the fine details that can trip you up,” said Huettner. “You have to work with someone who is knowledgeable enough about the process that they will ask the right questions and be able to identify red flags before they get to the underwriter.” By Patricia Orsini
A solid game plan can help you narrow your homebuying search to find the best home for you.
When looking for your new house, make sure to take into consideration how long you plan to stay there. Image: Thinkstock Images/Comstock/Getty Images
House hunting is just like any other shopping expedition. If you identify exactly what you want and do some research, you’ll zoom in on the home you want at the best price. These eight tips will guide you through a smart homebuying process.
1. Know thyself
Understand the type of home that suits your personality. Do you prefer a new or existing home? A ranch or a multistory home? If you’re leaning toward a fixer-upper, are you truly handy, or will you need to budget for contractors?
2. Research before you look
List the features you most want in a home and identify which are necessities and which are extras. Identify three to four neighborhoods you’d like to live in based on commute time, schools, recreation, crime, and price. Then hop onto REALTOR.com to get a feel for the homes available in your price range in your favorite neighborhoods. Use the results to prioritize your wants and needs so you can add in and weed out properties from the inventory you’d like to view.
3. Get your finances in order
Generally, lenders say you can afford a home priced two to three times your gross income. Create a budget so you know how much you’re comfortable spending each month on housing. Don’t wait until you’ve found a home and made an offer to investigate financing.
Gather your financial records and meet with a lender to get a prequalification letter spelling out how much you’re eligible to borrow. The lender won’t necessarily consider the extra fees you’ll pay when you purchase or your plans to begin a family or purchase a new car, so shop in a price range you’re comfortable with. Also, presenting an offer contingent on financing will make your bid less attractive to sellers.
4. Set a moving timeline
Do you have blemishes on your credit that will take time to clear up? If you already own, have you sold your current home? If not, you’ll need to factor in the time needed to sell. If you rent, when is your lease up? Do you expect interest rates to jump anytime soon? All these factors will affect your buying, closing, and moving timelines.
5. Think long term
Your future plans may dictate the type of home you’ll buy. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in the home for five to 10 years? With a starter, you may need to adjust your expectations. If you plan to nest, be sure your priority list helps you identify a home you’ll still love years from now.
6. Work with a REALTOR®
Ask people you trust for referrals to a real estate professional they trust. Interview agents to determine which have expertise in the neighborhoods and type of homes you’re interested in. Because homebuying triggers many emotions, consider whether an agent’s style meshes with your personality.
Also ask if the agent specializes in buyer representation. Unlike listing agents, whose first duty is to the seller, buyers’ reps work only for you even though they’re typically paid by the seller. Finally, check whether agents are REALTORS®, which means they’re members of the NATIONAL ASSOCIATION OF REALTORS®. NAR has been a champion of homeownership rights for more than a century.
7. Be realistic
It’s OK to be picky about the home and neighborhood you want, but don’t be close-minded, unrealistic, or blinded by minor imperfections. If you insist on living in a cul-de-sac, you may miss out on great homes on streets that are just as quiet and secluded.
On the flip side, don’t be so swayed by a “wow” feature that you forget about other issues—like noise levels—that can have a big impact on your quality of life. Use your priority list to evaluate each property, remembering there’s no such thing as the perfect home.
8. Limit the opinions you solicit
It’s natural to seek reassurance when making a big financial decision. But you know that saying about too many cooks in the kitchen. If you need a second opinion, select one or two people. But remain true to your list of wants and needs so the final decision is based on criteria you’ve identified as important.
G.M. Filisko is an attorney and award-winning writer who has found happiness in a brownstone in a historic Chicago neighborhood. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate
Not all real estate practitioners are REALTORS®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics. Here’s why it pays to work with a REALTOR®.
1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.
2. Information and opinions. REALTORS® can provide local community information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
3. Help finding the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.
4. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.
6. Someone who speaks the language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.
7. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.
8. Objective voice. A home often symbolizes family, rest, and security — it’s not just four walls and a roof. Because of this, homebuying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they’ll every make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.
With low interest rates and home prices, a new report from Beacon Economics finds that buying a home is more affordable than it has been in roughly two generations.
Using median incomes and home prices, the company said that an average family would only need to spend 16.9 percent of their income on the mortgage payments for an average home. That’s the lowest level since the data used became available in 1969.
With affordability so high, researchers said that soon more buyers would enter the housing market, buying up surplus inventory and helping prices to recover from their recent declines.
“While prices may fluctuate modestly over the next several months, we believe the worst of the housing crisis is behind us,” adds Beacon Economics research manager Jordan G. Levine. “We expect prices to stabilize around current levels and likely be higher in the next twelve months.”
That trend of slowly stabilizing prices may already be taking place. According to the National Association of Realtors, median home prices in August were higher than the year before in more than half of the major cities tracked.
John Paulson: “The Best Time in 50 Years to Buy a Home”
Multibillionaire hedge fund operator John Paulson, the investment genius who made a killing going short subprime mortgages a few years ago recently spoke to a standing room only crowd at New York’s University Club about the U.S. economy and said the following about housing:
As this is the best time in 50 years to buy homes, Paulson advised his listeners, crowded into three separate dining rooms, to issue 30 year mortgages to buy a home as “your debt and interest payments get locked in at record lows, while the price of your home will rise.”
“If you don’t own a home, buy one,” Paulson recommended; “if you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.
Record Low Mortgage Rates Continue to Fall
Mortgage rates headed down again, after lingering at a record low for two weeks. The benchmark 30-year fixed-rate mortgage fell 5 basis points this week, to 4.45%, according to the Bankrate.com national survey of large lenders. In the 25-year history of Bankrate’s weekly survey, the 30-year fixed has never been lower. According to statistics compiled by the National Bureau of Economic Research, the last time mortgage rates were below 4.5% was in April 1953.
Home Purchase Mortgage Loan Demand at Highest Level Since May
U.S. mortgage applications for home purchases rose for a second straight week, with demand at its highest level since early May as potential homeowners took advantage of record low interest rates, data from the Mortgage Bankers Association industry group showed on Wednesday. The MBA’s seasonally adjusted purchase index, a tentative early indicator of home sales, increased 9.3%, reaching the highest level since the week ended May 7. The increase in purchase activity was led by a 17.2% increase in Federal Housing Administration (FHA) applications, while conventional purchase applications increased by 3.6%.
NAR: Pending Home Sales Increase for Second Consecutive Month
The number of contracts to purchase previously owned homes in the U.S. increased for a second month, a sign the housing market is beginning to stabilize. The National Association of Realtors’ index of pending home resales rose 4.3% in August, more than forecast, after a revised 4.5% gain the prior month.
Housing is “bouncing along the bottom, unable to gain any traction, but with little reason to believe it’s going to go any lower. All of the froth has been eliminated from the bubble and all we need now is for confidence to turn higher and job growth to accelerate,” said Eric Green, chief market economist at TD Securities Inc. in New York.
Case-Shiller Index Up 3.2% in July; Karl Case Says Housing Market Will Grow Slowly
The U.S. housing market has reached its lows and will expand slowly as the economic recovery remains subdued, said the S&P/Case-Shiller index co-creator Karl Case.
The index of property values in 20 U.S. cities increased 3.2% in July from 12 months earlier. The gauge is a three-month average, which means the July data are still being influenced by transactions in May and June that may have benefited from the government homebuyer tax credit incentive.
“It’s bouncing along the bottom, it stopped that free-fall. The combination of the tremendous drop in prices, the fall in interest rates, the government going all in and buying mortgage-backed securities to keep mortgage rates low, and the credit, of course – it’s not surprising that it’s come to an end.” Case said in an interview on “Bloomberg Surveillance” with Tom Keene.
Reuters Analysis: Three Reasons U.S. Homeowners Shouldn’t Lose Hope
Homeowners can take solace from three historical comparisons. To start with, relative to disposable income, houses are as cheap as they have been since records began 35 years ago. To get back to a fair value on this measure, according to the consultancy Capital Economics, prices would have to rise 11%. Second, adjusted for inflation house prices are now equal to their level in 2001, before the height of the property frenzy.
Finally, the second legs of house price declines tend to be far less painful than the first. The first wave of the Great Depression, for example, wiped 30% off property values before prices rebounded 20%. The second downturn after 1937 erased less than half of this upswing. Other housing market double dips in the United Kingdom and Sweden in the 1990s showed a similar pattern.
Of course, the American housing market has recently shown a disconcerting ability to flout historical precedent. But notwithstanding the IMF’s worries, there are now good reasons to believe that property prices are very close to hitting rock bottom.
Wall Street Journal Columnist: Why it’s a Good Time to Buy a Home
In a recent column that ran in the Wall Street Journal, financial journalist and author, Brett Arends, discusses why he thinks now is a particularly good time to buy a home.
Ø You can get a good deal: Will prices fall further? Sure, they could. You’ll never catch the bottom. It doesn’t really matter so much in the long haul.
Ø Mortgages are cheap: You can get a 30-year loan for around 4.3%. These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth.
Ø You’ll save on taxes: You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you’ll get a tax break on capital gains when you sell.
Ø It offers some inflation protection: No, it’s not perfect. But studies by Professor Karl Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year.
Ø Sooner or later, the market will clear. Demand and supply will meet. And a lot of the “glut” simply won’t matter: It’s concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won’t have any long-term impact on housing supply in your town.
Recently, foreclosures seemed to be on the rise as thousands of homeowners were being evicted from their home due to various financial difficulties. However, numerous top banks have stopped foreclosures in various states due to questionable foreclosure practices that have been implemented and may have been in error.
Financial institutions like J.P. Morgan Chase, GMAC Mortgage, and Bank of America are delaying foreclosures as there are examinations as to whether thousands of foreclosure documents were properly submitted and homes were justly foreclosed upon. Questions over these foreclosures have caused Fannie Mae and Freddie Mac to set forth instructions to review the foreclosure process so that each financial institution is in compliance with state law regarding these mortgage actions.
Various sources have reported that incorrect documents were filed against homeowners and need to be reviewed, which has many worried about the implications that these practices may have on the housing market. In what is termed as “robo-signing”, reports indicate that some executives at these financial institutions simply signed foreclosure documents without reviewing them to make sure that they are correct and in compliance with state law.
While this may be helpful for some homeowners who are facing or have faced foreclosure unjustly, there is concern over homeowners who may have purchased a foreclosed home and are claiming the first-time homebuyer credit. Fannie Mae and Freddie Mac, again, have taken action in order to settle this trouble within the housing market. Reportedly, Freddie Mac has given its mortgage servicers until October 18 to complete their review.
It’s hoped that these issues that have been raised by questionable foreclosures will not only force servicers to take more action when it comes to foreclosure prevention efforts, like home loan modifications, but will also tighten their foreclosure practices to make sure that they are in compliance with state law.
Understandably, some foreclosures that have been processed were legal and associated with homeowners who simply could no longer pay their monthly mortgage payment. However, in cases where executives signing off on these foreclosures did not review the foreclosure documents, it’s hoped that this “robo-signing” will be stopped and homeowners who may benefit from mortgage assistance plans will be given the option to do so.
Sizing up the true cost of buying a home can be complicated. On top of the home’s list price there are numerous fees and financing costs to factor in.
To complicate matters, the Federal Housing Administration is now hiking the insurance fees for the mortgages it backs.
FHA loans are generally used by first-time home buyers and require at least a 3.5 percent down payment. If you’re in the market for a new home and considering an FHA loan here’s what you should now.
Starting Oct. 4, the upfront fee on FHA loans will fall to 1 percent of the loan amount from 2.25 percent. However, that savings will be offset by a hike on the annual fee to 0.90 percent, from 0.55 percent.
Most homeowners roll both fees into their monthly payments. The combined effect of the fee changes will result in higher costs overall for most homeowners.
The exception is if a borrower pays the upfront fee out of pocket and only stays in the home for less than 3.5 years. That’s when the higher annual fee – typically paid monthly – starts eating into the savings on the upfront costs, notes Gibran Nicholas, chairman of the CMPS Institute, which trains and certifies mortgage professionals.
HOW IT ADDS UP
Let’s say a home costs $200,000and you take out a $193,000 loan. The current monthly FHA insurance premium of $88.00 a month would jump to $148.00 a month after Oct. 4. That $60.00 difference translates to about $7,200 over 10 years. That would offset the savings of $2,400 on the upfront costs.
WHY IT’S HAPPENING
The FHA is hiking fees to shore up its funds, which have deteriorated because of the foreclosure crisis. Recent legislation gave the FHA authority to hike the annual fee to as high as 1.55 percent of the loan amount. -AP