Vermilion Realty Blog » Buyers

Flood Insurance Extended

Don Grafues — Sat, 03 Jul 2010 12:53:03 +0000

In the evening hours of June 30 Congress voted to extend the National Flood Insurance Program until September 30. Buyers of property within a 100 year flood plain are now able to buy flood insurance and obtain financing for their purchase.

Resource: REALTOR®Mag

Congress Did It With Only Hours To GO

Don Grafues — Thu, 01 Jul 2010 17:50:00 +0000

Congress last night passed an extension to the closing date for 1^st time home buyers with valid purchase agreements in escrow. The program‘s closing date was due to pass in a few hours when Congress voted to extend the date to September 30, 2010. This resulted in a large sigh of relief by the 180,000 to 200,000 buyers waiting to close on their purchase contracts and counting on the tax credit.

Tax Credit Deadline Approaching With No Extension

Don Grafues — Tue, 29 Jun 2010 12:29:56 +0000

Extension of the tax credit deadline may be at risk.

To qualify for the tax credit buyers had to close on the transaction by June 30. Some of the issues facing 1^st time buyers include; lenders are taking a long time to decide on short sales, appraisals are low and property inspections are revealing issues

We have an issue with a buyer who applied for a USDA loan but when Congress delayed funding the program, USDA suspended lending for a period of time. Now they are trying to catch up but meanwhile, our borrower is probably going to miss the June 30 deadline to qualify for the tax credit.

Congress is looking at extending the closing deadline to September 30 but the votes are not yet there. If the deadline is not extended, approximately 200,000 buyers will fail to qualify. With the loss of the tax credit it is expected that some of these buyers will withdraw from the contract to purchase putting more homes on the market.

Resource: REALTOR®Mag

Get Ready To Own #5

Don Grafues — Fri, 25 Jun 2010 12:12:49 +0000

This is the fifth and final post of our series and is titled

“7 Steps to Take Before You Buy a Home”

By doing your homework before you buy, you’ll feel more content about your new home.

Most potential home buyers are a smidge daunted by the fact that they’re about to agree to a hefty mortgage that they’ll be paying for the next few decades. The best way to relieve that anxiety is to be confident you’re purchasing the best home at a price you can afford with the most favorable financing. These seven steps will help you make smart decisions about your biggest purchase.

Decide how much home you can afford

Generally, you can afford a home priced 2 to 3 times your gross income. Remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care if you plan to have children.
Develop your home wish list

Be honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite counter tops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.
Select where you want to live

Make a list of your top-five community priorities, such as commute time, schools, and recreational facilities. Ask your REALTOR® to help you identify three to four target neighborhoods based on your priorities.
Start saving

Have you saved enough money to qualify for a mortgage and cover your down payment? Ideally, you should have 20% of the purchase price set aside for a down payment, but some lenders allow as little as 5% down. A small down payment preserves your savings for emergencies.

However, the lower your down payment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment. Your down payment size can also influence your interest rate and the type of loan you can get.

Finally, if your down payment is less than 20%, you’ll be required to purchase private mortgage insurance. Depending on the size of your loan, PMI can add hundreds to your monthly payment. Check with your state and local government for mortgage and down payment assistance programs for first-time buyers.
Ask about all the costs before you sign

A down payment is just one home buying cost. Your REALTOR® can tell you what other costs buyers commonly pay in your area—including home inspections, attorneys’ fees, and transfer fees of 2% to 7% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as window coverings and patio furniture for your new yard.
Get your credit in order

A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.

You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, Experian, and TransUnion. Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit card debt.
Get pre-qualified

Meet with a lender to get a pre-qualification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.

If you’re self-employed, you’ll need your current profit and loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.

Consider your financing options. The longer the loan, the smaller your monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically. Be sure to calculate your affordability at both the lowest and highest possible ARM rate.

This article was written by G.M. Filisko, an attorney and award-winning writer who wanted a successful closing on a Wisconsin property so bad that she probably made her agent rethink going into real estate. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Resource: National Association of REALTORS®

Get Ready To Own #4

Don Grafues — Thu, 24 Jun 2010 12:38:34 +0000

This is the fourth post of our five part series and is titled

“7 Tips for Improving Your Credit”

Here’s how to clean up your credit so you get the least-expensive home loan possible.

Boost your credit score by paying the balance on your credit cards in full, and on time, every month.

Getting the loan that suits your situation at the best possible price and terms makes home buying easier and more affordable. Here are seven ways to boost your credit score so you can do just that.

Know your credit score

Credit scores range from 300 to 850, and the higher, the better. They’re based on whether you’ve paid personal loans, car loans, credit cards, and other debt in full and on time in the past. You’ll need a score of at least 620 to qualify for a home loan and 740 to get the best interest rates and terms.

You’re entitled to a free copy of your credit report annually from each of the major credit-reporting bureaus, Equifax, Experian, and TransUnion. Access all three versions of your credit report at www.AnnualCreditReport.com. Review them to ensure the information is accurate.
Correct errors on your credit report

If you find mistakes on your credit report, write a letter to the credit-reporting agency explaining why you believe there’s an error. Send documents that support your case, and ask that the error be corrected or removed. Also write to the company, or debt collector, that reported the incorrect information to dispute the information, and ask to be copied on any materials sent to credit-reporting agencies.
Pay every bill on time

You may be surprised at the damage even a few late payments will have on your credit score. The easiest way to make a big difference in your credit score without altering your spending habits is to diligently pay all your bills on time. You’ll also save money because you’ll keep the money you’ve been spending on late fees. Credit card or mortgage companies probably won’t report minor late payments, those less than 30 days overdue, but you’ll still have to pay late fees.
Use credit carefully

Another good way to boost your credit score is to pay your credit card bills in full every month. If you can’t do that, pay as much over your required minimum payment as possible to begin whittling away the debt. Stop using your credit cards to keep your balances from increasing, and transfer balances from high-interest credit cards to lower-interest cards.
Take care with the length of your credit

Credit rating agencies also consider the length of your credit history. If you’ve had a credit card for a long time and managed it responsibly, that works in your favor. However, opening several new credit cards at once can lower the average age of your accounts, which pushes down your score. Likewise, closing credit card accounts lowers your available credit, so keep credit cards open even if you’re not using them.
Don’t use all the credit you’re offered

Credit scores are also based on how much credit you use compared with how much you’re offered. Using $1,000 of available credit will give you a lower score than having $1,000 of available credit and using $100 of it. Occasionally opening new lines of credit can boost your available credit, which also affects your score positively.
Be patient

It can take time for your credit score to climb once you’ve begun working to improve it. Keep at it because the more distance you put between your spotty payment history and your current good payment record, the less damage you’ll do to your credit score.

Get Ready To Own #3

Don Grafues — Wed, 23 Jun 2010 12:25:58 +0000

This is the third post of our five part series and is titled

“4 Tips to Determine How Much Mortgage You Can Afford”

By knowing how much mortgage you can handle, you can ensure that home ownership will fit in your budget.

Watch six surefire ways you can get your finances in order before you buy a home.

Home ownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.

Instead of just taking out the biggest mortgage a lender qualifies you to borrow, consider how much you want to pay each month for housing based on your financial and personal goals.

Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?

Still not sure how much you can afford? You can use the same formulas that most lenders use, or try another of these traditional methods for estimating the amount of mortgage you can afford.

The general rule of mortgage affordability

As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.

To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of home ownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.

Factor in your down payment

How much money do you have for a down payment? The higher your down payment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.

The lower your down payment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

Consider your overall debt

Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.

Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.

Use your rent as a mortgage guide

The tax benefits of homeownership generally allow you to afford a mortgage payment—including taxes and insurance—of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.

Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.

However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

Get Ready To Own #2

Don Grafues — Tue, 22 Jun 2010 12:30:21 +0000

This is the second post of our five part series and is titled

“Understanding Real Estate Representation”

Whether you’re buying or selling, it’s important to choose representation that meets your needs in the transaction.

When it comes to representation in a real estate transaction, there are several options available.

You have choices when selecting representation in a real estate transaction. Here are five tips for understanding which type of legal relationship with a real estate professional, called an agency relationship, will best protect you when you buy or sell a home.

Buyer’s agency

When you’re buying a home, you can hire an agent who represents only you, called an exclusive buyer’s representative or agent. A buyer’s agent works in your best interest and owes you a fiduciary duty. You can pay your buyer’s agent yourself, or ask the seller, or the seller’s agent, to pay your agent a share of their sales commission.

If you’re selling your home and hiring an agent to list it exclusively, you’ve hired a selling representative—an agent who owes fiduciary duties to you. Typically, you pay a selling agent a commission at closing. Selling agents usually offer or agree to pay a portion of their sales commission to the buyer’s agent. If your seller’s agent brings in a buyer, your agent keeps the entire commission.
Sub-agency

When you purchase a home, the agent you can opt to work with may not be your agent at all, but instead may be a sub-agent of the seller. In general, a sub-agent represents and acts in the best interest of the sellers and sellers’ agent.

If your agent is acting as a sub-agent, you can expect to be treated honestly, but the sub-agent owes loyalty to the sellers and their agent and can’t put your interests above those of the sellers. In a few states, agents aren’t permitted to act as sub-agents.

Never tell a sub-agent anything you don’t want the sellers to know. Maybe you offered $150,000 for a home but are willing to go up to $160,000. That’s the type of information sub-agents would be required to pass on to their clients, the sellers.
Disclosed dual agency

In many states, agents and companies can represent both parties in a home sale as long as that relationship is fully disclosed. It’s called disclosed dual agency. Because dual agents represent both parties, they can’t be protective of and loyal to only you. Dual agents don’t owe all the traditional fiduciary duties to clients. Instead, they owe limited fiduciary duties to each party.

Why would you agree to dual agency? Suppose you want to buy a house that’s listed for sale by the same real estate brokerage where your buyer’s agent works. In that case, the real estate brokerage would be representing both you and the seller and you’d both have to agree to that.

Because there’s a potential for conflicts of interest with dual agency, all parties must give their informed consent. In many states, that consent must be in writing.
Designated agency

A form of disclosed dual agency, “designated agency” allows two different agents within a single firm to represent the buyer and seller in the same transaction. To avoid conflicts that can arise with dual agency, some managing brokers designate or appoint agents in their company to represent only sellers, or only buyers. But that isn’t required for designated agency. A designated, or appointed, agent will give you full representation and represent your best interests.
Non-agency relationship

In some states, you can choose not to be represented by an agent. That’s referred to as non-agency or working with a transaction broker or facilitator. In general, in non-agency representation, the real estate professional you work with owes you fewer duties than a traditional agency relationship. And those duties vary from state to state. Ask the person you’re working with to explain what he or she will and won’t do for you.

Get Ready To Own

Don Grafues — Mon, 21 Jun 2010 12:03:02 +0000

Monday through Friday of this week we will publish five posts with basic information for first time buyers, The series is titled “Get Ready To Own”. These post articles are provided by the National Association of REALTORS® as a service to you and it’s REALTOR® members.

The first post in this series is titled “Keep Your Home Purchase On Track” and immediately follows this introductory message. Then check back Tuesday through Friday for the balance of the posts.

Resource: National Association of REALTORS®

Get Ready To Own #1

Don Grafues — Mon, 21 Jun 2010 12:02:58 +0000

This is the first post of our five part series and is titled

“Keep Your Home Purchase On Track”

You’ve found your dream home. Make sure missteps don’t prevent a successful closing.

If a contract requires you to have a home inspection, schedule an appointment immediately.

A home purchase isn’t complete until you make it to the closing. Until then, the transaction can fall apart for many reasons. Here are five tips for avoiding mistakes that cause a home sale to crater.

Be truthful on your mortgage application

You may think fudging your income a little or omitting debts when applying for a mortgage will go unnoticed. Not true. Lenders have become more diligent in verifying information on mortgage applications. If you fib, expect to be found out and denied the loan you need to fund your home purchase. Plus, intentionally lying on a mortgage application is a crime.
Hold off on big purchases

Lenders double-check buyers’ credit right before the closing to be sure their financial condition hasn’t weakened. If you’ve opened new credit cards, significantly increased the balance on existing cards, taken out new loans, or depleted your savings, your credit score may have dropped enough to make your lender change its mind on funding your home loan.

Although it’s tempting to purchase new furniture and other items for your new home, or even a new car, wait until after the closing.
Keep your job

The lender may refuse to fund your loan if you quit or change jobs before you close the purchase. The time to take either step is after a home closing, not before.
Meet contingencies

If your contract requires you to do something before the sale, do it. If you’re required to secure financing, promptly provide all the information the lender requires. If you must deposit additional funds into escrow, don’t stall. If you have 10 days to get a home inspection, call the inspector immediately.
Consider deadlines immovable

Get your funds together a week or so before the closing, so you don’t have to ask for a delay. If you’ll need to bring a certified check to closing, get it from the bank the day before, not the day of, your closing. Treat deadlines as sacrosanct.

Tax Credit Denied?

Don Grafues — Fri, 18 Jun 2010 12:06:04 +0000

REALTOR®Mag offers suggestions for 1^st time home buyers in applying for the tax credit. If you have claimed mortgage interest on prior tax returns your tax credit may be rejected. The interest could be on a time share, mobile home or other real property yet you still qualify for the tax credit. The article provides guidance on how to be proactive if you are applying for the credit on your 2010 tax return. It also tells you how to work with the IRS if you were rejected on your 2009 return.

Resource: REALTOR®Mag