If you’re a fist time home buyer, you’ll want to know the basics.  Here’s what you have to know…and…no worries, we’ll be with you all along the way:

There are several steps in the process that begin with mortgage qualification.

This is step one and has to be done before you begin your search. Here’s why:

When you find a home you like and want to make an offer on it, you’ll be required to provide an “Approval Letter.” This comes from your mortgage lender and is proof that you have qualified to buy a home in the price range published.  The lender will check your credit rating and that of any co-signer, will check employment history, debt to income ratio and will then tell you what you’re qualified to do.  For instance, you may qualify to have a mortgage payment that includes property tax and insurance of $1,200 per month.  Assuming the taxes would be about $175/mo and insurance about $65/mo, the difference of $960/mo = the mortgage payment for principal and interest.

Right now, with good credit and all other things positive as well, and a debt to income ratio (that includes the new mtge.) at or below 31% of income, you’d probably be able to get a 5% rate or even as low as 4%. At the 5% rate, your mtge would run $5.37 per thousand.  Using this example, $960 divided by $5.37 = a mortgage no higher than $179,000.  The rates you’re offered vary according to your income, time in the work you’re involved in, total debt-to-income, credit history and score.

To get FHA financing, the only way right now to get a minimum down payment of 3.5% of the purchase price is you have to have a minimum credit score of 640 and debt to income with any new mtge of 31%, and be in your present job no less than 6 months.  So, you have to add up any and all monthly debt payments you now have, including student loans, to see where you’re at in the debt-to-income ratio.

The mtge lender you work with will go over all this with you but you have to do this as a first step.  I have good sources for mtge rates.  My sources will provide you with free qualification information and tell you what programs you are eligible for.  There are “first time buyer’s” programs and help with down payment plans you may qualify for.

Once you’re qualified and know what you can do, you can start searching. The qualification process is usually less than a week.

Part two: My M.O. on the search process is to set up an automated search that comes directly to you. This is designed to put you at “the front of the line,” where you’ll get all new listings as they appear on the MLS (multiple listing service) the same day all realtors do.  That way, you can get to the homes you like sooner than anybody else and not miss out on the home you really like.

You can also search other sites and send me any homes you want more info on.  When you see homes that appeal to you, send me the MLS #’s or the address.  I then pull up records to see when the home was last purchased, see what they paid for it and get an idea as to how we’re going to position to get you a best deal.  After you get the additional info, for any that you’re still interested in, I ask that you drive by before I make an apt. to get inside.  This is to ensure you like the homes’ curb appeal, n’hood and setting.  Those that pass,

we’ll go see.

You receive 10% of whatever fee I’m paid for bringing the listing agent a buyer.  On a $300k home, that would probably be about $810, and you’d get this from me the day you close on the home.

Part three: When you find the homes you want to see, we arrange a day/time to see them.  It’s best to do this in the daytime, hence, most usually on a Sat. or Sun?  We can see 3 – 4 homes per hour, including driving time.  So, in a 4 hour period, up to 16 homes.

When you find one you want to buy, we write a “Purchase Agreement.”  That takes only about 20 – 30 minutes.  At this point, you need to tender “Earnest Money” that you pay to the listing company. This demonstrates your high interest in the home.  It just sits in their “Escrow” account at the bank and becomes part of your down payment. Your down payment has to be at least 3.5% of the purchase price. On a $200k home that would be $7,000 that you have to bring to the close.  Closing costs for getting the mtge and all services needed are usually in the 3-4 % range.  However, I always negotiate with the sellers to pay that for my clients.  If the sale is not consummated, you get your earnest money back.

I then submit the “PA” to the sellers for an answer.

The sellers will go with your offer, turn it down flat or “counter” your offer. For example: say a home is priced at $220k and you offer $185k.  They would probably counter your offer at the midway point?  We can also counter their counter.  And, so it goes.

Part four: Once an offer is accepted, you’ll want to have the home inspected for anything that may be problematic, like a bad roof, a furnace that doesn’t operate properly, foundation problem, etc. This will cost about $350 and you pay for it whether or not you buy the house. If the inspection turns up a problem, we would insist the seller make repairs or give us a discount to cover the repairs.  If it passes, I then send copies of the PA to your lender and a Title Company for processing.  (You can expect to close on a home, that is-get all the paperwork done, within a month, but it can take about 6 weeks.)

The accepted offer now goes to your Lender and to the Title Company.

Part five: The lender’s ‘processer’ will check your employment history again, do another credit check, run ratios and then, if you’re all good there, order an “appraisal” of the home to prove it’s worth what you offered.  With that in the ‘OK’ column, the day/time and location for the close is set up and you make arrangements to get off work to be at the close, get the keys and garage door openers.  I always attend closings with my clients, just in case there’s a last minute problem and they need my help.

When we write a “purchase Agreement,” I include some protection for you. I write addendums that say: a) if you don’t get your loan, you get your earnest money back  b) if you don’t get the rate we indicated you would get, you get your earnest money back  c) If the home doesn’t pass inspection or if the sellers won’t make repairs we request, the deal is off and you get your money back  d) if the home doesn’t appraise for what you offered, you get your money back.

Again, it all starts with your qualification process. I’ll help you with it.  My sources are major banks and Independent Mtge Brokers.  It’s all done over the phone at no cost to you.

The “hurdles” in the qualification process are:  1) your age 2) your credit history 3) your employment history 4) your debt to income ratio 5) your personal assets.

It’s the best time to buy in the history of Real Estate!

Call today to get your process started.  It doesn’t matter whether you’re ready to buy now, but you need to know what you can do, when you are ready.

Call Ed: 651-770-5000  Can’t hurt to talk?

Some of the best buys though, are much like the picture, beat up, rough to work on and in disrepair.  On the other hand, most are very good buys!  If you lack construction skills, no worries, there’s always the FHA 203k finance program; you can hire a certified contractor to do the work and add the cost into your loan…sweet deal, sweet as it can get!.

While the market threatens to continue on a down-slide and rates are the lowest ever, many would be buyers are still fighting lenders about their qualifications.  If that applies to you…know this; you have to have a practiced, skillful advocate to get you approved.  This is something we do all the time.  When you land here, you benefit from our years of experience and connections with outstanding Loan Officers.  We’ll get you to the sources you need.

Buyers are getting absolutely remarkable deals and terrific rates.  Buy now if you can!  don’t wait, thinking you save if prices continue to drop.  Prices will continue to drop but distress homes are disappearing fast too.

It was surprising to see that Lowes, posted a 44% earnings drop in Q3.  With all the foreclosure homes being repaired, I’d expect to see the supply chains showing huge sales and profit increases.

Fannie also posted a Q3 loss of 51.1B.  Wow!  It plans to get 7.5B from the govt ’cause it needs to pay the govt dividends for money it borrowed before.  It owes 2.5B for dividends.  Huh?  Borrow another 7.5B so it can pay 2.5B out?

Then…there’s the FHA, the agency that insures loans for the banks.  This agency pays a % of loans that default, back to the bank.  Nice…’cause if they didn’t do this, the banks would make even fewer loans.  But…who’s watchin the cash register?  Do you know about the FHA’s “Infinite Budget Authority?”  No?  You should…you’re involved, if you’re an American tax payer.  It’s really cool, here’s how it works: If the FHA messes up, you know, runs out of dough, they can draw on funds from the Treasury Department.  So who, you ask, monitors this activity?  What arm of the govt has to approve these draws?  Well…no one…they can just take the money, no congressional appropriation needed.  Wow! Wow!  Anyone know where a guy can get a small business loan like this?  No worries though.  Financial pundits expect the FHA will lose as much as another 50B in the coming years.  Nice to have this drawing account in place, ‘eh?

At least there’s an uptick in commercial building, and uptick to keep pace with the demand for more rental housing, as people continue to spill out of their homes via foreclosure.  Think it can’t get worse?  What do you think?  Drop us a line on all this, we’d love to hear from you!

Having problems with your Realtor?  Have you thought about firing the inept, lazy… shows you too many homes that don’t fit your parameters, only cares about his/her commission, hard to reach person?  Why not?

See, here’s the problem with too many people on a home search, they think they’re stuck with the Realtor they started with, when in fact, they may be not.  If you hired someone to fix your roof and they didn’t perform to your standards, you’d can them, right?  Take heart, in most cases, you can do this with an under performing Realtor as well, but you have to fight for your rights!

Think about it this way…the Realtor will likely get about 3% for getting your deal closed.  Here’s what the Realtor should do: help you find the home you want, drive you around to the homes, conduct computer searches, write the deal, set up a title company and attend the close with you.  All together, on the average, the agent will put in about 20-25 man hours, including all the above.

Let’s look at a typical deal, a home purchase for $350k.  The commission at 3% = $10,500.  That’s $10,500 divided by 20 man hours = $525 per hour! But, did the Realtor perform to your standards?  Did the agent send you hundreds of homes to search through, many of which did not even come close to what you wanted? If so, the agent was wasting your time!  Did you have to cater to the agent’s time schedule…or did the agent accommodate you?  Were you pressed to buy a home you looked at, but really didn’t know if it was what you wanted? Were your calls to the agent answered in a timely manner?  Did the agent offer you Lender resources, so you could shop the mtge rate, for a best deal? Did the agent run a comparable study, regarding the price you were going to pay, to protect your interest…you certainly didn’t want to pay too much?  Of course, the more you pay, the more the gent makes…right?

I’m working with two buyer’s right now.  We’ve seen some homes each may have purchased, had I not encouraged them to, “make sure you get this right, you don’t want to spend a quarter of a million dollars unless it’s the house you really want!”

If the agent you started with isn’t getting it done for you, or, expects you to run around to “open house’s,” and do your own searching, and have you call them to get you in to a house you found, so the agent can get the $525 per hour he/she is not entitled to…CAN THEM!

First, tell the Realtor you don’t care to work with them any more.  If you didn’t sign an “exclusive buyer’s agreement,” that’s all you have to do…tell them to take a hike.  If you did sign an agreement…and…the agent won’t release you, contact the Broker the agent works for and insist that your agreement be canceled.  The Broker may want you to come in and “work it out,” but tell them you have no desire to spend anymore of your precious time on this, you just want to end the arrangement.  Get it in writing!

In most states, the Broker can hold you to the contract, making you stay with them to the end of the agreement.  In that case, if it were me, I’d let them know, I’ll tell everyone I know about the mistreatment I experienced with the agent and the Broker.  That might influence them to release you.  The language in the agreement is critical…do you have any way to get out of the agreement.  If not, call an attorney to see what they would charge to write a letter on your behalf.  It may be worth a couple hundred bucks to get out of the deal?  Raise all the hell you can, don’t lay down for being mistreated!

Warning: if you do buy a home the agent showed you, you will probably be required to pay that agent the commission due them. If you do get released and start working with another agent, if you go back to a home the first agent showed you, and you do decide to buy it, the first agent will have a cause to claim “procurement,” and rightly so.  In that case, the agent you are presently working with would not get paid.  So be careful about this kind of issue.  If the first agent showed you a house you are still considering, tell the new agent you need something in writing that excludes that house from your arrangement with them.

An agent is working for you, not the other way around. Don’t sign an “Exclusive Agreement.”  If the agent is worth his/her salt, they should be confident you’ll stay with them, because they will perform to your standards.  Neither my partner nor myself, require our buyer’s to sign any agreement, we work on a handshake basis and tell our buyer’s; if at any point in the search and purchase process, they aren’t happy with us, they can fire us at will.  That’s only fair, don’t you agree? This applies to our home seller’s as well.

The deals out there today are the best you’ll ever see.  If you can buy, do it soon.  There are so many homes still in the bank’s hands, but waiting to see what comes on the market, could be a huge mistake.  If you find what you like, buy now…rates are great and you’ll have a very manageable mortgage payment.

Ed

Help me…I’m one of 4.5 million that got a letter saying ‘I may be qualified for a mortgage adjustment, for my underwater home.  They say; the bank may have taken advantage of me?

So what’s the deal?  The govt. has told the banks they need to send a letter to 4.5 million owners who may have been financially harmed in the “Robo” signing process.  They may be entitled to compensation as well.  Nice, ‘eh? The banks have begun sending the letters out.  NOW we’ll see some action!  (Not!)

The WSJ/11/2/2011, reported that the reviews cover 14 of the nation’s largest banks and are being overseen by the Office of the Comptroller of the Currency and the Federal Reserve.  Lenders have hired hundreds of employees to conduct the labor-intensive reviews, so says the journal. Sounds good so far…or does it?

This will, no doubt, be much like the original approach the banks had to take, as they didn’t have enough help to handle the enormity of the problem…hire hundreds to thousands of new employees, employees not trained to do what they had to do = big time slow down in the process + lots of errors and corrections = more lost time, etc.!

To qualify, the home owner has to have suffered “financial harm.” And…who’s to prove harm; the home owner, of course.  And…how many documents will have to cross hands?  And…how long will this take?  Another very expensive attempt by the Govt. to solve the problem, and hey…they’re trying, but the plan is not carefully thought out and organized.  Where will they get the new employees who will understand all this and who’ll be qualified to decide who suffered “financial harm?”

What it will do and do well, is slow down the entry of more foreclosure homes, harming the traditional sellers, as prices will continue to drop.  Oh boy?!

(Check out Martin Hutchinson’s, take on this one.  Google him up and read what he has to say.)

By  the way, this only covers people who bought before 3/’09.

Last month, new home bldg was down for the 4th straight month. And, 16 Trillion of home equity has been lost since ‘06.  With the unemployment problem, and many people living in fear that they’ll be the next to get their walking papers, where are the buyers?

If you can buy Real Estate now, you’d better get busy…find what you’re looking for and buy it.  Do you know, some sources are predicting the high side chance of a housing shortage, in the next 10 years?  If you buy now, and that does happen, you will have made a smart choice…your equity will really climb!

Another reason to buy; % rates have to go up. Even if they go down, say a half point, from 3.99% to 3.49%, that will only reduce a mtge payment by about 30 cents per thousand of mtge.  So, a 200k mtge could be $60 per month less, if you did wait and that did happen.  But…what if the rates go back to the 6% level by the time you buy?  You’d pay $1.23 more per thousand = $ 246 more per month, than at the 3.99% rate.  BUY NOW!

The other side of the coin, selling a home…if I wanted to sell, I’d get it on the market pronto, before a rate change is the next thing that slows sales down. If you don’t sell asap, you may have to wait it out for another five to ten years to get anywhere near the price you want.

An article I read said, Citi bank sent out 346 million credit card offers in the 3rd Q, this year.  Can you believe it?  The banks have all the answers?  Very weird, when over 55 banks were shut down by regulators this year…so far!

What’s your opinion on all this, how’s the economy working for you or your business these days…and…do you have any Real Estate stories you care to share with us?  Good or bad, we’d love to hear what you have to say.  Hit the “comments” below and let’s hear from you!

Ed

Halloween, Halloween, oh what funny things are seen…Witches hats, cold black cats, Fannie and Freddie too…Homes sinking, rates as well, and banks telling buyers to go to hell!

The Buyer’s market is shrinking a little and “traditional Sellers” are still in a ’sufferin’ state. What a dilemma for them, especially those who had (they thought), built up huge equity in their homes, so they could sell about now and use that equity for retirement.  And…what about those that made sizable down payments, kept their noses clean and have to move now, due to job relocation…trapped? It’s scary, this Real Estate market today.

Trick or treat?  Guess it’ll have to be more tricks, (by Fannie, Freddie, the Banks and the FED), but…no treats this year…and…maybe not for many years to come?

While, in my opinion, all the above, along with the Dodd-Frank debacle, are most to blame. And hey, I was there in 2002-2006, when buyers jumped on the “no doc loan” wagon, and bit off more than they knew they could chew…they can be included in the “blame game,” as well.  Take a look at the HARP program that projected four to five million people would refi by now; only 894,000 did…and…70,000 of those are still underwater…what a program hey?  The news media will say; “only 894k took advantage of the program,” a politico bunch of BS. They don’t tell us how many were turned down…and…not one of us know exactly what is required to qualify, do we?  Should we?  Does the media even know?

I read today, in the WSJ, that Obama, has a new program that will provide immense help to the mtge crisis. People whose mtge is insured by Fannie or Freddie (if your mtge is insured by someone else…or..not insured, you will not qualify), and…who have not missed more than one payment over the last year…and…who have not missed a payment in the last six months, will have a shot at this program.

Soooo, let’s look at this big deal.  If the banks are forced to refi a huge number of the loans, reducing them to market value, that will greatly reduce the balance sheet of these banks, making their stock less attractive.  Yes…no?  Then, if they are forced to do all this refi thing, and reduce their balance sheets, how excited will they be to make new loans?   Will we see another pulling back and/or stricter qualifying conditions for potential buyers? I’d bet on it.  The mess is a mess to recon with, and before the govt comes along with any new deals, these should be carefully thought out and wrung out before put into effect.

How do the banks treat people now, regarding refi? I have a client, great young gal, has a key executive position as an Underwriter for a large re-insurer.  Over the past five years, she has corrected her credit rating from a very low number to the high 700’s.  Not bad ‘eh?  She’s paying over 6% on a 200k mtge, on a home that’s probably, at best, worth 150k to as low as 135k.  The bank won’t play!  What?!  The bank won’t play.  They say she makes too much money.  So through the maniacal approach by the banks, back in the 2000 to 2006 era, they inflated the value of her home to a fantasy level, in a greedy play to expand their vaults, they now tell her she doesn’t count…she can keep paying the 6+% rate.  Your call here…is this fair trade, and…America at its’ best?  Huh?

Really, folks, when we read that the govt, or the FED, is doing this or that, do we get any solid, clear details?  Do they think we’re all jerks, dumbbells staggering around?  Why not send your opine to some of these sources…let’s get on their backs…hey media, give us the whole story, without your opinionated BS.

On a more positive note; we have been helping buyers get outstanding deals on distressed and traditional homes.  We have the tools, experience and skills to get you where you want to be with a home purchase.  In any market, but especially this market, you also need good loan, title, and inspection professionals who can help you to your goal; we have that all in place for you too.

We welcome all opinions and stories about your Real Estate results, good or bad.  How ’bout it gang, got anything you care to contribute?

Hope this is a good day for you!

Ed Klein