Will new rules make it harder to get a mortgage? from MoneyWatch 12/17/2013

ByIlyce Glink                                                                                          MoneyWatch                                                             December 17, 2013, 6: 45 AM

Planning on buying a home next year? Be warned: A mortgage may be harder to get, at least in the early months of the year.

“You’ve heard all the stories about how difficult it is to get a mortgage and all the documentation required — there’s going to be a lot more of the same,” said Ron Haynie, senior vice president of the Independent and Community Bankers Association.

A slew of new mortgage regulations will take effect between Jan. 10 and Jan. 20 next year. The most noteworthy of these for borrowers is the ability-to-repay rule and the qualified mortgage, or QM, rule, which together establish new standards and practices for mortgages that lenders must follow.

While not every loan has to be a QM loan, lenders have a good reason to make them that way: QM loans, when done right, shields lenders from legal liability if loans sour, said Bob Davis, vice president of the American Bankers Association.

Although many mortgages today already meet the new QM standards, about 20 percent don’t, Davis estimates. Those could no longer be available next year as lenders get skittish about making non-qualified loans.

QM loans prohibit a number of mortgages that were generally bad for consumers, including “balloon,” interest-only and negatively amortizing loans. The new rule also limits the “points” — the fees or prepaid interest on a mortgage — to just 3 percent of the loan’s value. They also set qualifications that borrowers must meet, and that’s where the mounds of paperwork comes in.

Lenders will be looking at a borrower’s income and assets, current employment, the would-be monthly mortgage payment with interest, any other additional mortgage payment such as a second lien, the monthly payment of other mortgage-related obligations such as property taxes and homeowner’s insurance, current debt, monthly debt-to-income ratio and credit history.

The rules also set a standard debt-to-income ratio of 43 percent that all borrowers must meet. That means that your current monthly debt payments — credit cards, auto loans, student loans — and your monthly mortgage payments cannot exceed 43 percent of your monthly gross income.

“By putting that line in the sand of 43 percent, there will be people who are probably very good credit risks, but because they’re over that 43 percent threshold they won’t get a loan,” Haynie said. “That’s going to be tough for some folks.”

The upshot: Low- and middle-income borrowers, self-employed people whose income varies and anyone weighed down by debt may find it more difficult to get a mortgage.

What if you don’t qualify?

There is, however, a silver lining for those who don’t qualify for a QM loan. Fannie Mae and Freddie Mac will still accept non-QM loans, so as long as lenders craft loans they can sell to the housing finance agencies. That means borrowers who doesn’t meet all the QM standards can still get a loan.

“There will also be some lenders that will make loans that will not be considered QM, but initially they’re going to be extremely cautious,” Haynie said. “It’s an unknown risk until that ability-to-repay action from the borrower hits the courts, and that won’t happen any time soon.”

Lenders will have to see how court cases play out when a borrower that defaulted claims in court that the lender did not follow QM and issued a bad mortgage.

“Since there is substantial new liability if they get it wrong, the way banks will protect themselves — all lenders, really — is they will be a little more conservative in their underwriting,” Davis said.

Lenders are likely to exercise the greatest caution in the first six months after the rules take effect, as firms grapple with new computer systems and train staff to company with the regulations, Davis said.

Not everyone in the real estate industry expects the news rules to restrain lending. Stan Humphries, chief economist at Zillow, thinks the QM rules will have no effect on the real estate market.

“As [interest] rates rise, lenders are going to loosen standards in order to attract customers,” he said, adding that the dip in refinancing in recent months means lenders need to find new customers to fill the void.

Humphries also pointed out that most mortgages today are backed by Fannie or Freddie. However, even though the two are exempt from the rules, the Federal Housing Finance Agency directed the pair to limit their purchases to qualified mortgages, though they will still accept loans that exceed the 43 percent debt-to-income ratio.

The rules also do not dictate standard acceptable credit scores or loan-to-value ratios, so there is still wiggle room for lenders to loosen their standards next year.

Posted in Uncategorized

Home Warranties

HOME WARRANTIES:   More often than not these days when we sale a home after the new buyers move in we’re seeing some sort of mishap.  Could be due to the change in how things are ran, but we are finding more than ever those Home Warranties are paying off.  A previous client of ours just posted on her facebook:  “Well after 3 trips and ordering multiple parts furnace is finally fixed!!! Home warran…ty is definitely legit! Saved us $1750.00. Thank the good lord that we were covered!…..”   As your buyers agents we can help negotiate that perk for you or if your already own a home you might consider a home warranty for your current home.  They range anywhere from $325 – $500 per year but can end up saving big if something goes wrong.
Posted in Uncategorized

Should I Take My Home Off the Market During the Holiday

When you look at your holiday calendars you may find the months already overloaded with seasonal obligations — shopping, entertaining, children’s pageants, charity work, decorating the house, and so much more. If you are also trying to sell your home, you are under extra pressure to keep your home in “show ready” condition. And that could be the last thing you need before the holiday spirit is broken.

It is understandable why you would be tempted to take your home off the market during the holidays. And the list of justifications is long. If you are too busy, buyers may be also, and you may find your efforts unrewarded by enough showings. And what if you do get an offer? You may be faced with the possibility of packing and moving during the busiest time of the year. Besides, you can give your house a rest, and it will have better momentum after the holidays. Better to just pack it in and start fresh in January, right?

NOT!  Taking your home off the market during the holiday season is a mistake! The house sure isn’t going to sell off the market! What is the advantage of that? So you’re busy. Let your Realtor do the work. You can leave in the morning, go to work, go shopping, and let your Realtor take care of things.

The holidays are one of my best-selling periods. Why? Because most people take off work sometime during the season. The husband and wife are both off and want to see houses and if they are looking during the holidays, they must be serious buyers. Last year, before we came out of the real estate slump, one of my sellers thought we should give the house “a rest” during December but I talked them out of it. I had several showings, got an offer and executed the contract on Christmas eve!!.

Before you take your home off the market, consider the following points:

  • Although buyer activity may appear to slow down, the buyers who are actively looking during the holidays are that much more serious. The home market is no more affected at Christmas than during other “busy” periods. If that were so, the market would shut down throughout the year as families concentrate on spring weddings, June graduations, summer vacations, and autumn back-to-school activities.
  • Many buyers deliberately choose to shop for a home after the busy spring and summer rush. They know that it will be easier to look, and that negotiations will be less stressful. They may not have children, or they may have grown children, so moving to accommodate the school year isn’t a consideration. Finding the right home at the right price, however, is.
  • Relocating families often don’t have a choice in when they can leave for their new destination. Although 68 percent of transferring families have children, many families have to transfer during the middle of the school year. These families are that much more motivated to get their families settled in before either before the January semester begins, or to arrange for the move during spring break in March. If you sign a contract by New Year’s Eve, the timing couldn’t be more perfect.
  • At Christmastime, our culture focuses on family and the home. Preparing for the indoor activities of winter is one of the most enjoyable periods of family life. Allowing buyers to view your home during this most hospitable of seasons lets them better picture their own family life in the attractive environment you have created
  • When is your home ever more beautiful and inviting? You have cleaned and decorated, and your home looks like a picture postcard.

If the results are good enough for family and friends, they will surely be good enough to impress your buyers. Get the family team on board to do a five-minute blitz pick-up every morning to keep holiday messes to a minimum.

With reduced inventories and motivated buyers, you will have all the members of the MLS on your team. You may find you have more showings than you would if your marketed your home during a busier time of the year.

If you do get a contract, you can arrange the terms to suit your needs. If moving during the holidays isn’t an option, you can put in the closing date of your choice…..it’s a good problem to have!

Written by  Realty Times

Posted in Uncategorized

10 Ways to Prepare for Homeownership

1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.

2. Develop your home wish list. Then, prioritize the features on your list.

3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.

4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment?  Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.

5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications. How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.

7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.

8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.

9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.

10. Contact a REALTOR® at Layton Real Estate  785-883-2379. Here you can find an experienced REALTOR® who can help guide you through the process.

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.

Posted in Buying a Home Tagged with: , , , , , ,

8 Reasons Why You Should Work With a REALTOR®

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.

Reprinted from REALTOR® Magazine (Realtor.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2008. All rights reserved.

Posted in Buying a Home, Selling a Home Tagged with: , , , , , , ,

Avoid 11 Mistakes That Could Cost You Hundreds… Even Thousands of Dollars!

Selling your home can be an exhausting experience. Last minute walk-throughs, inconvenient calls, price adjustment, and the possibility of being stuck with two mortgages are real concerns.

If you are not completely prepared, you could end up losing hundreds, even thousands of dollars in profit.

The difference between a profitable smooth transaction and a break-even, miserable experience is often a fine line. In the majority of cases, it comes down to the subtle know-how of your professional.

By utilizing the knowledge of a qualified real estate professional, you’ll ensure the quick, profitable sale of your home. This report is designed to arm you with the knowledge to avoid 11 common mistakes that cost sellers serious money.

Refusing to Make Profit-Inducing Repairs

It always costs you more money to sell “as is” than to make repairs that will increase the value of your home. Even minor improvements will often yield as
much as three to five times the repair cost at the time of sale. Your agent will be able to point out what repairs will significantly increase the value of your home. Seemingly small fix up jobs can have quite an impact.

Not Considering Other Financing Terms

Cash is not always the most advantageous transaction. Income level, tax benefits, and current legislation are all critical factors when considering purchase terms.
Professional real estate agents are experts at home transactions and can lead you down the path that will give you the highest yield.

Provide Easy Access for Showings

Accessibility is a major key to profitability. Appointment-only showings are the most restrictive, while a lock box is the least. However, there are certain
considerations to take into account: your lifestyle, time frame for the desired sale, and the relationship with your agent. The more accessible your home is, the better the odds of finding a person willing to pay your asking price.

You never know if the one who couldn’t get a viewing was the one that got away. By developing a trusting relationship with your agent, he/she will show the home with your best interests in mind.

Priced Too Low/Priced Too High

One critical reason to find the right professional is to make sure the property is priced appropriately for a timely and profitable sale. If the property is priced too
high, it will sit and develop the identity of a “problem property.”

If it’s priced too low, it could cost you considerable profits. The real estate market has subtle nuances and market changes that should be re-evaluated by your agent every thirty days to help you maximize your return.

Relying Solely on Traditional Methods to Sell Your Home

The agent who is innovative and willing to offer new strategies of attracting home
buyers will always outperform agents who rely on traditional methods. Demand around the clock advertising exposure, innovative lead generation methods, and lead accountability. These services exist and should be offered on your home sale.

Market Timing/Seasonal Selling

Just as a broker who continually follows the trends of a stock, your professional agent continually follows trends of your home market. They will know if the
market cycle is poised to net you the most money. Avoid believing that property sales are seasonal—property is always selling.

Refusing to Make Cosmetic Changes

The prospective home buyer’s first impression is the most important. An unbelievable amount of home sales have been lost to unkempt lawns, cluttered
rooms, bad stains, unpleasant odors—all seemingly little things. Imagine you were the home buyer and clean your place from top to bottom, military style.

Wasting Time with an Unqualified Prospect

Your agent’s responsibility is to screen a prospect’s qualifications before valuable time is lost. Be sure to align yourself with the right professional and eliminate
negotiating with unqualified prospects.

Don’t Test the Market

Never put your property online to sell unless you are serious. The right professional will find and bring you buyers; and if you are harboring indecision,
you will blow the sale.

Believing You are Powerless to Make a Difference

Be a part of the team! Take an active role with your agent to see what you can do to facilitate your sale. Networking with professional peers and personal
friends often results in the sale of a home. It’s surprising how many homes are sold this way.

Believing All Realtors are the Same

With all the intricate details and critical decisions to be made concerning your home sale, should you rely on anyone but a top-producing professional? Many
friends and family members have been estranged as a result of failing to meet expectations. Don’t make the same mistake when choosing your agent.

Your home sale is a time-consuming, effort-related, difficult task. Maximize your profit by utilizing a capable professional.

Posted in Selling a Home Tagged with: , , ,

5 Things You Must Absolutely, Positively Know Before You Buy Any Home!

Don’t Get “Pre-Qualified”

Do you want to get the best house you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only
one bargaining chip in the negotiations . . . and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.

In years past, we’ve always recommended that buyers get “pre-qualified” by a lender. Getting pre-qualified means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on your answers, the lender pronounces you “pre-qualified” and issues a certificate you can show to a seller. Sellers are aware that such certificates are WORTHLESS, and here’s why. None of the information has been verified! Often, unknown problems surface. Some of the problems I’ve seen include recorded judgments, child support payments due, glitches on the credit report due to any number of reasons (both accurately and inaccurately), down payments that have not been in the clients’ bank account long enough, etc.

So the way to make a strong offer today is to get “pre-approved.” This happens after all your information has been checked and verified. You are actually APPROVED for the loan, and the only loose end is the appraisal on the property. This process takes anywhere from a few minutes to a few days, depending on your situation. But it’s VERY POWERFUL, and a weapon we recommend all our clients have in their negotiating arsenal.

Sell First, Then Buy

If you have a house to sell, sell it before selecting a house to buy. Often contingent sales don’t always work out right, unless it’s with a new home builder
who has other houses to sell and can afford to put one on a contingency.

Let’s pretend that we go out looking for the perfect house for you. We find it and you love it! Now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that’s a risky deal, since he might pass up a buyer who doesn’t have to sell a house while he’s waiting for you. So he says okay, he’ll do the contingency but it has to be a full price offer. As you can see, you paid more for the house than you could have because of the contingency. Now you have to sell your existing house, and in a hurry! Otherwise, you lose the dream house. So to sell quickly you might take an offer that’s lower than if you had more time.

The bottom line is that buying before selling might cost you TENS OF THOUSANDS of dollars. We always recommend that you sell first, then buy.

If you’re concerned that there is not a house on the market for you, then go on a window-shopping trip. You ca n identify possible houses and locations without falling in love with a specific house. If you feel confident after that, then put your house on the market.
Another tactic is to make the sale “subject to seller finding suitable housing.” Adding this phrase to the listing means that when you do find a buyer, you will have some time to find the new place. If you don’t find anything to your liking, you don’t have to sell your present home.

Play the Game of Nines

Before house hunting, make a list of nine things you want in the new place. Then make a list of the nine things you don’t want. We call this “NINE OF THIS AND
NONE OF THAT.” You can use this list as a scorecard to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you’re comparing dozens of homes.

When house hunting, keep in mind the difference between “skin and bones.” The bones are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The skin represents easily changed surface finishes (like carpet, wallpaper, color, and window coverings). Buy the house with good bones, because the skin can always be changed to match your tastes. We always recommend that you imagine each house as if it were vacant. Consider each house on its underlying merits, not the seller’s decorating skills.

Don’t Be Pushed Into Any House

Your agent should show you everything available that meets your requirements. Don’t make a decision on a house until you feel that you’ve seen enough to pick
the best one. Go to the Multiple Listing computer with your agent to make sure that you are getting a complete list of homes for sale and not just the home that the agent “wants” to show you.

In the late 1980’s, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised their clients to make an offer on the spot if they liked the house. That was good advice at the time. Today there isn’t always this urgency, unless a home is drastically under priced, and you’ll know if it is. But keep in mind, if you wait too long, there is always a chance of the house selling before you get your offer to the seller. If you really like a house, get an offer written, and make sure your agent writes in the proper clauses to get you out of the offer.

Don’t forget to check into the school districts of the area you’re considering. Information is available on every school (such as class sizes, % of students that go on to college, SAT scores, etc.). You can get this information from your agent or directly from the school.

Stop Calling Ads!

A word of caution—agents create ads solely to make the phone ring! Many of the homes have some drawback that’s not mentioned in the ad, such as traffic noise,
power lines, or litigation in the community. What’s not mentioned in the ad is usually more important than what is.

For this reason, we want you to be very careful when reading ads. Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about.

So whether you decide to work with us or not, pick an agent you feel comfortable with and enlist the services of that agent as a buyer’s broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you’re no longer just a shopper.

Did you know that many homes are sold without a sign ever going up or an ad ever being put in the paper? These “great deals” go to those people who are committed to working with one agent. When an agent hears of a great buy, who do you think he’s going to call? His client (who he has a legal obligation to work hard for) or someone who just called on the phone and said “keep your eyes open”? So, to get the best buy on a property, we always recommend that you hire your own agent and stick with him/her.

If you should have any questions about this report or any real estate related questions please don’t hesitate to contact us.

Posted in Buying a Home Tagged with: , , , , , , , ,

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