Tag Archives: Home Buyers

It’s Spring — Time to Clean Up Your Finances

It’s Spring — Time to Clean Up Your Finances

After one of the most brutal winters we’ve seen in years, it’s finally time to put away the down coats, spruce up the house and, yes, even tidy up your personal finances. Here are a few tasks you may want to tackle:

Clean up bad credit        

Money parachuting inHave you been subject to high interest rates? Denied a loan altogether? Been unable to rent an apartment or perhaps even land a job? If you have bad credit, then you’re aware of these consequences and others. Dedicate spring cleaning time as the annual time to review yourcredit report, and boost that all-important score.

Freshen your budget

We’re three months into the new year. How are you doing so far? Under budget? Over budget? Have you spent more or less than you planned in certain areas? If you’re close to your expectations, great, but if you have veered off track — perhaps because you’ve changed jobs or undergone another life-altering event — make any necessary adjustments now, before things escalate.

Plug financial holes

I’m not only talking about canceling memberships you’re not using, avoiding late fees, passing up valuable tax breaks, or revisiting your insurance policies to make sure the coverage is both adequate and affordable. I’m also talking about putting more money in your pocket by reducing your biggest monthly expense: your mortgage debt. Did you know that a 1 percent savings on your mortgage rate, in just one year, could save you about $2,400? That’s the equivalent of a week-long vacation for a family of four! Point being, even small amounts can make a big difference.

Pay it down

If you’re still carrying credit card debt, check the cards’ interest rates and balances. Then, make a plan to pay off this debt using a strategy that works for you, whether it’s targeting just one card first, transferring your balance to a lower (or 0 percent) card, or even making two minimum payments each month. Consider this example: If you’ve got a $2,000 balance on a card with a 17 percent interest rate, if you only make the minimum payment, it will take more than 21 years to pay off the balance. But if you make an additional payment of the original amount two weeks later, you’ll be debt-free in less than three years. How is this possible? Card issuers typically charge interest on a daily basis so the sooner you make a payment, the faster your average daily balance is reduced.

Get shredding

Spring is the ideal time to shred any old financial documents. While ATM deposit slips, withdrawal receipts and canceled checks that don’t pertain to your taxes can be thrown out as soon as you’ve verified that the transactions are accurately documented on your bank statements, you’ll want to keep tax records for seven years, pay stubs and bank statements for a year, and credit card statements for at least 45 days.    

by Vera Gibbons

Buying in a Competitive Real Estate Market

Buying in a Competitive Real Estate Market 

GetMedia-57

 

 

 

 

 

 

 

By Tracy Tkac

Washington Homes Group

www.WashingtonHG.com

 

The Washington, DC area housing market is quite competitive right now due to lack of inventory and pent up demand. Home sellers located in the closer-in communities to the city and many homes located in the city are receiving multiple offers for the sale of their home.

Preparation is the key to submitting the winning offer for your new home and buying in a competitive real estate market.

The components to a successful offer to purchase include;

  • Contract of Sale (including buyer signed disclosures provided by the seller)
  • Preapproval Letter
  • Financial Information Sheet
  • Earnest Money Deposit
  • (Possibly) Escalation Clause

 

Get Preapproved

Getting preapproved is a must when you’re in a competitive real estate market. Sellers look for the most qualified (and most likely to complete the sale) buyer. Not having a preapproval will severely hinder your ability to move quickly and make an offer when you find the house you would like to own.

 

Work with an Experienced Buyer’s Agent

Most people think that working directly with the listing agent will give them an edge in getting a property, but this isn’t the case because listing agents have a fiduciary duty to the seller. You wouldn’t think of going to court and relying on the opposition’s lawyer for advice. Buyer’s agents work for the best interests of the buyer; a buyer’s agent will guide you in locating the property and strategizing and negotiating the terms of purchase for your best result in purchasing your home and if a property is listed in the multiple listing system, the commission is paid by the. seller.

 

Go ASAP

If you’re interested in a property, you need to be there within 24 to 48 hours of the time it hits the market. If you’ve seen the house and you’re ready to buy, you should make your offer as soon as possible.

 

Make Your Offer Appealing

When there is competition for a single property, your offer has to be impressive.

Come in with your highest and best offer. Make an offer that is at least at market value, if not more. Consider using an escalation clause, which is a tool that makes your offer price increase to an amount predetermined by you in increments called “the escalator”, the sales price could escalate by those increments to the escalation ceiling; the top price you are willing to pay. It will only come into play if the completing offer(s) are higher than your original offer and the listing agent will have to prove the offering prices by sharing them with your agent and you before utilizing the escalating clause. 

Let the seller know you’re flexible.  Give the seller some appealing terms like; flexibility of occupancy, shortened inspection periods and the settlement date of the seller’s choice.

Don’t ask for seller concessions. 

Keep in mind that these tips don’t necessarily apply to all homes. Whether it’s due to the property, the pricing, or the area you’re interested in, some homes might not have as much competition. If you’re educated about the market, however, you’ll be able to spot when there’s competition and when there isn’t, and that can make all the difference in how you approach the sale.

In It for the Short Term

In It for the Short Term

Wealthy borrowers are drawn to loans with repayment periods of 10, 15 or 20 years

By

ANNAMARIA ANDRIOTIS
Jan. 30, 2014 8:46 p.m. ET

 

Affluent borrowers are falling out of love with long-term loans.

More wealthy borrowers are ditching the 30-year mortgage in favor of shorter repayment periods. The reason: lower rates that can save borrowers thousands of dollars in interest over the life of the loan.

Lenders say much of this demand is for refinancing. Rather than restarting the clock on a new 30-year mortgage, existing borrowers may be able to keep a similar monthly payment with a lower rate on a shorter-term jumbo.

Home buyers are also interested. As mortgage rates rise, affluent borrowers face a dilemma: sign up for a costlier loan or forget financing and pay all cash for the home. The latter option means giving up attractive tax benefits; borrowers can usually deduct interest payments on up to $1 million of mortgage debt.

A quicker repayment period provides a middle-ground solution. Affluent borrowers can tap into tax benefits while paying less in interest on the mortgage. They also have the means to handle the larger monthly payments that often result from squeezing a mortgage into a shorter term.

Izhar Cohen

While still high, demand for 30-year mortgages has been dropping. They accounted for 90.3% of private mortgages—those that lenders tend to keep on their books and which are comprised mostly of jumbos—that were originated during the first 11 months of 2013. That’s slightly lower than the same period a year prior and the lowest figure in the past seven years, according to CoreLogicCLGX -1.64% a real-estate analytics firm.

Meanwhile, shorter-term mortgages have been rising: 15-year mortgages accounted for 9.1% of private mortgage originations during the first 11 months of 2013, up from 8.9% during the same period a year earlier. That is the highest level in the past seven years.

To a large extent, the move away from the 30-year loan is a rate play. When rates were at record lows, borrowers could stash the cash they didn’t put into the home in other investments and earn a higher return than the interest they were paying out on their 30-year mortgage.

But as mortgage rates rise, it is harder to find those investments—especially for borrowers who sign up for 30-year mortgages, which typically have the highest rates. Rates on mortgages with a 20-year or shorter period, while rising, can be low enough to make this arbitrage possible.

“It’s a recent phenomenon,” says Mike McPartland, head of investment finance for Citi Private Bank in North America. “If clients notice distinct discounts for taking a shorter product… and if it suits their strategy, they’re going to opt into it.”

Rates on 30-year fixed-rate jumbo mortgages, which exceed $417,000 in most parts of the country and $625,500 in pricier housing markets like New York, averaged 4.56% during the week ending Jan. 24, while 15-year jumbo fixed rates averaged 3.76%, according to mortgage-info website HSH.com. That spread is larger than the same week one and two years prior.

Other repayment options are popping up as well. Wells Fargo WFC -1.54% rolled out pricing for 10- and 20-year repayment periods over the past couple of years. PNC Bank says affluent borrowers have expressed interest in these loans over the past few months.

In general, with shorter-term loans, borrowers stand to get rates that are from one-quarter to more than one percentage point lower than the 30-year mortgage. The smaller the repayment period, the larger that difference.

For jumbo borrowers, such a rate break results in significant savings. For instance, at the Princeton, N.J., office of Gateway Funding Diversified Mortgage Services, a mortgage banking firm, the starting rate on a 30-year fixed-rate jumbo is 4.5%, while the starting rate on a 10-year jumbo is about 3.4%. Over the life of a $1.5 million mortgage, borrowers will pay more than $1.2 million in interest with a 30-year period, compared with roughly $271,000 in interest with a 10-year term.

Gateway Funding says roughly 5% to 10% of the jumbo mortgages it originated in its Princeton office last year had 20-year repayment periods, and another 5% to 10% had 10-year terms.

Middlesex Savings Bank, a community bank based in Natick, Mass., says 20-year mortgages accounted for about 30% of their jumbo originations last year.

Lenders say that some of this demand is coming from baby boomers who are turning to shorter repayments to pay off their mortgage before entering their golden years.

Here are a few other issues to consider:

• Choose your term: Some banks will write almost any repayment period that a qualifying borrower requests.

• Watch out for rates: Some banks offer the same rate to every borrower who gets a specific repayment period, regardless of their income or credit, which could result in a more creditworthy borrower paying more than he or she would elsewhere.

Move-up home buyers need the timing to go right for their sale and purchase

Move-up home buyers need the timing to go right for their sale and purchase

Kristin and Jon Holmes

Dayna Smith/for The Washington Post – Kristin and Jon Holmes play with Sophie, their rescue Doberman, in the back yard of their home in Alexandria, which they recently purchased to provide more space for their pets.

 By Michele Lerner
When Kristin and Jon Holmes bought their 85-year-old rowhouse in the District’s Petworth neighborhood 21 / 2 years ago, it seemed big enough for the two of them.That was before they began bringing in pets through their animal-rescue work. The lack of outdoor space for the pets to run free made it clear to them that they would need to look around for a new place.
“Finding a home with a bigger yard was a driving factor in our move,” says Kristin Holmes of their impending relocation to Alexandria. “We have a rescued Doberman and two cats, and we’re also thinking of starting a family.”The Holmeses — who weren’t expecting the heavy competition they faced in Alexandria — know they’re lucky. Prospective home buyers have had a tough year in the Washington area market, forced into bidding wars for a limited number of homes available for sale.But for move-up buyers who must sell one home before buying the next, the process of juggling simultaneous transactions can be especially frenzied and daunting. If all the pieces don’t fall into place, in a worse-case scenario, they can wind up losing their dream home and their earnest money.

“The important thing is to decide if you would rather take the chance that you have to pay two mortgages, which can happen if you buy a place before selling your home, or to move twice, which you could be forced to do if you sell first,” says Megan Buckley Fass, a real estate agent with FranklyRealty.com in Northern Virginia.

Lenders are sometimes lenient when homeowners have the income and assets to qualify for two mortgages. But in many cases, they require homeowners to sell their home first or make an offer contingent on its sale. Fass says some of her clients opt to sell and move in with family or into other temporary housing to allow themselves more time to find a home to buy.

For prospective buyers who prefer not to move twice, the process can be particularly frustrating. Very few homeowners in a seller’s market are willing to accept an offer contingent on the sale of the buyers’ home when they can easily choose an offer without any contingencies. Yet realty agents have found some creative ways to pull off a move-up transaction.

Move-up buyers have more control on the other end: selling their current home.

They can make the sale of their home contingent on finding a home to buy and on a rent-back agreement that allows them to remain in the old home while they prepare to move, says Diane Schline, a real estate agent with Century 21 Redwood Realty in Arlington.“This can get you as much as four months to find a new home and to settle on it,” Schline says. “Many buyers would be willing to accept this if your home is in great condition and priced appropriately.”

In some circumstances, sellers may want to request a quick settlement so they have cash in hand for a purchase offer, says Sue Goodhart, an agent with McEnearney Associates in Alexandria. “They can then negotiate a 60-day rent-back during which time they would need to find a home, make an offer, settle on their next home and move,” she says.

Lenders limit a rent-back agreement to a maximum of 60 days, says Jessica Evans, an agent with Real Living/At Home in Washington. Any longer and the financing must be arranged as if the home is an investment property.

“It’s important to pick the most flexible buyer you can find,” says Frank Llosa, broker-owner of FranklyRealty.com in Northern Virginia. “You want someone willing to close quickly and to pre-negotiate home inspection items so you won’t be spending your time fixing every light bulb. You should even negotiate an appraisal waiver to lower the risk of your home sale failing to go through. Ultimately, you want to have closed on your sale before you buy your next home.”

Although the selling part of the move-up process is easier, real estate agents do have recommendations on the buying side, too.

Ron Sitrin, an agent with Long & Foster Real Estate in Washington, says move-up buyers should look for homes that have been on the market for 20 days or more.

“While that might not seem that long in a normal market, it will feel like a long time to the seller,” he says. “As a move-up buyer who wants to make an offer contingent on the sale of your home, you need to convince the seller that your home will sell faster than they can sell their home to a non-contingent buyer.”

Sitrin also suggests that buyers who want to trade up to a home costing more than $1 million may have more success if they are selling a property valued at less than that price point.

“There are more homes under contract [to be sold] than listed for sale under $1 million, so your home is likely to sell in less than 10 days,” Sitrin says. “There are more homes listed for sale than are under contract in the over-$1 million price range. Buyers who want to trade-up need to convince sellers that they’re better off accepting their contingent offer than waiting for another buyer to come along.”

Sitrin warns, though, that sellers can choose to keep their home on the market with a “kick-out” clause if the deal is contingent on the sale of the buyers’ home. With a kick-out clause, if there is another acceptable offer, the buyer has to move ahead on purchasing the home. Otherwise, the seller can accept the other offer.

Sitrin says buyers can negotiate a seven-day or longer kick-out agreement, which means the contract cannot be voided if they sell their old home within that timeframe.

Dina Paxenos, a real estate agent with Evers & Co. Real Estate in Washington, says staying flexible as a buyer can make the transition less challenging. Paxenos, who was both the listing agent and the buyers’ agent for the Holmeses’ move from Petworth to Alexandria, says they initially wanted to buy in the Del Ray neighborhood but found that homes there were going under contract almost as soon as they came on the market.

“Dina suggested we look in Seminary Hills, an area about two miles from Del Ray, and we found a home that was in better shape than the ones we had seen before and less costly,” says Kristin Holmes. “It wasn’t an initial ‘we have to have this house’ experience. But this house checks all the boxes of what we wanted in terms of our needs, and it was under our budget so we can add a larger master suite after we settle on it.”

The Holmeses made a full-price offer with a 30-day home-sale contingency and then increased the amount by $5,000 when the seller didn’t immediately accept the offer. They also offered the seller a rent-back deal.

Paxenos says the Holmeses’ strategy helped them make the transition from one home to the next without moving twice, which they were particularly concerned about because of their dog and cats.

“Their home in Petworth already looked great, and then they cleaned it and decluttered so it didn’t even look like they lived there,” Paxenos says. “It sold on the first weekend with multiple offers.”

It’s important for move-up buyers to be extremely well prepared so they can move quickly, Goodhart says.

“To make the transition work, your home needs to be ready to sell, and you need to have done all your preliminary home searching so you know what you want, where you want to live and your price range,” Evans says. “Buyers need to look at listings every day, be ready to see a new listing as soon as possible and submit an offer as soon as they want a place. Don’t wait for the offer deadline, because some sellers will accept the first offer they get if it’s above list price.”

Melissa Macs McGovern and Steven McGovern, move-up buyers who relocated from South Arlington to North Arlington with the help of Fass, began prepping their house for sale while looking for their next place. But they found the house they wanted faster than anticipated.

“Megan found us a house that was listed on a Friday night, and we were able to see it on Saturday morning before the scheduled Sunday open house,” Steven McGovern says. “We made an offer on it that was accepted before any competing offers could be made.”

The McGoverns’ offer was not contingent on the sale of their home, but they offered an additional $10,000 to the seller to delay settlement for two months so that they could be sure their home would be sold first.

“We have two dogs and the seller has dogs, so she liked the idea that she didn’t have to keep showing her house,” Melissa McGovern says. “I moved to North Carolina with the dogs while Steven worked with Megan and some contractors to get our home sold. It was pretty stressful for all of us, but we were successful in the end.”

In every move-up buyer transaction, real estate agents recommend having a backup plan, such as identifying a temporary place to live, in case the high-wire act of coordinating settlements fails. In many cases, however, with flexibility and plenty of preparation, move-up buyers can make the seamless transition from one home to the next.

5 Smart Moves for a First Time Buyer

5 Smart Moves for a First Time Buyer

GetMedia-47Tracy Tkac

Washington Homes Group

www.WashingtonHG.com

301-437-8722

To get you started in the right direction, and this is just a start, here are a few tips that you should consider.

Get lender-qualified and find a good real estate agent

To start off, keep in mind that there are  5 smart moves to consider for a first time buyer should  in the Maryland, Virginia and Washington, DC real estate market.

Make sure to get qualified by a lender or loan officer to see what price range you can realistically afford. It will waste your time and you may be disappointed to learn that a home is out of your budget after you fall in love with it.

Talk with some real estate agents to find the right person to represent you in your transaction. It is in your best interest to sign with a buyer- broker agent, it does not cost you anything as the seller pays all commissions. Your agent can recommend a couple of good lenders to speak with.Your realtor will be your guide and partner though-out the process, make sure they are committed to you fully and knowledgeable about the area’s in which you are looking and the process. There are many procedural deadlines and paperwork that must be kept to date on, any slack could cost you money.

Once you’re qualified and have your price range estimate in hand, you’ll be able to spend your time shopping in neighborhoods that you can afford. But remember: Just because the bank says you can qualify for a certain amount, that doesn’t mean you should spend that amount. Make sure you can actually afford the monthly payment, along with all your other bills.

For real estate sales professionals, you should get referrals for a full-time agent or broker who sells at least five or more properties per year and is well-educated on the process and location where you plan to live. You should call references, check that the agent’s state sales license is up to date and interview them to make sure you’ll be comfortable working with them.

Make sure you plan to be a long-term owner

Once you know your price range and have looked at some properties, it’s time to make sure that you believe you can find a property that you will own for a minimum of a few years or can rent out if circumstances change.  The truth is, long-term real estate ownership can be a great way to earn wealth, but short-term ownership may or may not be a wise investment depending on where  you are buying and market conditions. The most important thing you can do, is educate yourself.  Do your homework: Talk to go to first-time buyer seminars, check out online material and read some books to learn what to avoid in the buying process. The more you educate yourself, the better the chances you have of buying a good investment and a  wonderful place to live!

Know the Process

Your agent should tell your exactly what you can expect from viewing property, making an offer, negotiating terms, important contingencies to include in your offer, inspections, repairs, loan process, appraisal, walk through and finally settlement.

Take your time

Make sure you have a full understanding of what the marketplace has to offer in your price range and that you know what you’re doing and even though buying a home can be stressful, that you are as comfortable as possible with your decision.

 

 

Getting Ready; Five Tips For Home Buyers

GetMedia-42by Tracy Tkac

 

 

1. Get Loan Pre-Approval

 

This step is extremely important. It will help you to know what you can afford and determine if there are any glitches in your credit that need attention before buying. Talk with a few lenders to get rate quotes and to find one that fits your working style. After you are pre-approved, make sure to pay close attention to your finances and do not make any rash decisions or large purchases, such as a car, until after the purchase of your new home.  

 

2. Find An Agent

An agent will lead you through the process of the paperwork, negotiation strategies, inspections and ultimately settlement by placing offers, negotiating final prices and settlement terms and closing costs to settlement.

 Find a professional agent that is knowledgeable in the area in which you are looking to buy. In most cases in the MD, VA and DC area, if a home is listed in the MRIS, the area multiple listing system, then the commission is paid entirely by the seller- not the buyer. A Buyer Broker is an agent that advocating and working exclusively for your best interests.

By finding a knowledgeable real estate agent that you trust, you are likely to save money, purchase the home of your choice and have a smooth and successful transaction.

 

3. Prioritize Your Needs and Wants

While location and price range will dictate a lot about the home you will be looking for, you should also think about what amenities you hope for. Start big with the non-negotiables such as the specific communities you want to live in, the number of bedrooms and bathrooms you need, what style of homes you are interested in looking at, whether or not you need a garage, etc. After the larger must-haves are established it is easier to understand what is negotiable in the long run. If you are prepared beforehand you can assure that you are looking for everything that is necessary.

4. Look Into Potential Programs

In recent years there has been an increased effort by the government to try and stimulate home purchases. One of these efforts includes tax credits and benefits for first time homebuyers. During your home buying process, be sure to look and see if any credits or benefits are available for you. Some of these programs will allow savings on the initial purchase of the home and others will save money back in the form of a tax return. Either way, the saved money can be a major bonus and it is well worth the effort to find out. Your realtor and lender will help you determine if you qualify for any programs.

5. Inspect Your Future Home, Choose Your Settlement Company ect.

Research the companies you will want to use for your inspections and settlement. Your contract to purchase your home may be contingent on certain inspections such as termite, home inspection, radon or well and septic. Looking into the cost of these inspections and choosing what company fits your expectations will put in a position to be prepared to move forward. A choice of settlement company is generally the purchasers to make. There are many factors to consider, your agent will help you navigate the way to a successful conclusion!

 

 

The Advantages to a Mortgage Preapproval

The homebuying process can be exciting, but also stressful. When there are a large number of buyers in the market for real estate, the odds of being able to purchase your desired home can be low. However, getting a mortgage preapproval prior to home shopping can dramatically increase the odds of success.

Make Mortgage Preapproval Your First Step

A mortgage preapproval should be a homebuyer’s first step when purchasing a home. A borrower can choose to meet with a lender or get an initial preapproval via the Internet. The preapproval process is similar to the actual mortgage process and will, in fact, eliminate a lot of time after a home has been chosen.

When obtaining a mortgage preapproval, the borrower will complete a mortgage application and submit the necessary documentation to the lender. The lender will pull a credit report and examine the borrower’s credit.

Based on all of this information, the lender will determine the amount of funds that the borrower qualifies for. The borrower will receive a Conditional Commitment, which states the amount of funds that the lender agrees to lend provided that the conditions are met. While a preapproval is an important first step, it is not the final mortgage approval.

Impress Homesellers With Your Mortgage Preapproval

One of the advantages of having a preapproval is that this letter can be shown to real estate agents and sellers when looking for a home. By doing so, both the agent and the seller know that the borrower can qualify for a certain amount of funds. It is proof of the borrower’s financial standing and ability to proceed with the home purchase.

Another advantage is that some of the work that is involved in obtaining a mortgage is already done. The lender has already examined the borrower’s financial situation, including credit, income and assets. During the preapproval process, the lender will also discuss the most appropriate type of mortgage program that fits the borrower’s needs, whether it is a conventional loan or a government loan.

This is significant because not all sellers will accept a buyer who is using a government loan. Knowing the details of what type of loan is appropriate for the borrower, the agent can then show them homes that will fit their preapproval both for cost and type of funding.

How Mortgage Preapproval is Determined

The preapproval is determined by putting the information given to the lender through automated underwriting. In most cases, the preliminary loan file goes through a preprocessing before the preapproval is given to the borrower. Since there is an actual examination of the borrower’s documentation, the borrower will also receive a list of additional information that may be needed. The borrower can then submit this information while shopping for a home.

Once a home is found and the sales contract is signed, processing the loan is faster since most of the work for the credit file has been done. The final process involves verifications, ordering and receiving the appraisal, ordering title documents, obtaining insurance, etc. The final underwriting is the last step before the loan file is sent for closing.

The preapproval process is an important part of a home purchase. Since there is a lot of information involved in obtaining a mortgage, it eliminates many last minute problems that can arise. Obtaining a mortgage preapproval helps the home purchase process go smoothly.