Destin Real Estate

How Do You Buy a Home?

2008-02-12T14:53:00.000-06:00

Imagine trying to win a game of football without knowing the rules. You'd send your team out into the field not knowing the difference between quarters and innings. How many points would you get for a touchdown or a field goal? It wouldn't matter how professional you team was. If you didn't know how the game was played, even a grammer school team could beat you.

Real estate is much the same way. Buying a home is not like buying anything else. It's not like buying a car, or a computer, or a jar of mayonnaise. It has its own rules and its own procedures which, in most cases, are rigorously followed.

If you've bought a home before, you probably have an idea of how it's done. But if it's been some time since you bought, or if this is going to be your first purchase, the process may seem mysterious, even arcane.

In the next few blog I'm going to change all that. I'm going to look at the process of buying a home, giving some tips and revealing some traps as we go.

THE 12 STEPS IN MAKING A PURCHASE

1. You decide you want to buy (or at least want to look).
2. Along the way you talk with one or more agents.
3. You find the home of your dreams (you hope!) and make a written offer on a document called a purchase or sales agreement, usually for less than the sellers are asking. (Verbal offers aren't illegal, just unenforceable.)
4. If the sellers don't accept, they may make a counteroffer, which you may in turn decline and then counter.
5. The sellers eventually accept your offer, or one of your counters. (If the sellers don't accept, start over with Step 1.)
6. You agent or you open escrow. Used today in most states, it is a licensed and bonded company which acts as a neutral third party. The escrow receives all funds, makes sure that all documents are properly executed, and when all the conditions of the sales agreement (and the lender) have been met, transfers title to you, records the mortgage in favor of the lender, and gives the sellers their funds. Escrow typically lasts 30 to 45 days.
7. You secure your financing (if you haven't already).
8. You fulfill any other obligations you're committed to as part of the sales agreement, such as putting extra cash into the deposit and approving a contingency. The sellers do likewise, such as termite clearance, obtaining clear title, and clearing any contingencies they may have.
9. Your lender agrees to fund your mortgage.
10. You have a final "walk-through" inspection of the property.
11. You sign the final documents; the escrow records the documents and transfers the funds.
12. You get possession and the key.

If you have any questions or comments you can call me at 866-929-1369 or email me at Info@SoldByLaurie.com.

Laurie Hollowell-Meeker
Broker Associate
Keller Williams Realty Emerald Coast
151 Regions Way Ste 4A
Destin, Florida 32541
GRI, CRS, e-Pro

The Truth About the Mortgage Market

2008-01-29T09:33:00.000-06:00

For immediate release January 29, 2008

Phil Heppding
Mortgage Now

Destin, FL – With the recent news regarding the purchase of Countrywide Financial by Bank of America, many consumers are left with many questions about how this affects them and what they can expect going forward.

Subprime mortgages have now been credited for bankrupting well over 110 lenders and seriously damaging operations at many major mortgage firms. They've reportedly wiped out 5 hedge funds, tens of thousands of jobs, and have led to millions of foreclosures with millions more on the way. And, as if that weren't enough, subprime mortgages are also blamed for massive volatility in the stock, bond, credit, futures, and real estate markets here in the US and around the globe. Some say losses in the mortgage securities market alone could reach hundreds of billions of dollars this year. This means that, for any Americans looking to buy, sell, or refinance a home, they are confronting a very different market from the one that existed just 6-12 months ago. How did this happen? The recent real estate boom was fueled by a period of record home appreciation and historically low interest rates. Banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or "exotic" mortgages. These ideal lending conditions persisted for several years, supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street. Then, in 2006, a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today's tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. Many Americans who had tapped into their equity were suddenly tapped-out and overextended as home values fell. Foreclosures followed in record numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity domino effect we're now experiencing. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARM) holders will face payment increases of up to 30%-100% when their loans reset in the next 2 to 18 months. These loans make up less than 40% of the total mortgage market, but the negative effects, as we have seen, of increased foreclosure activity can have a ripple effect throughout the industry and around the globe.

The Emerald Coast market should see some insulation from these negative affects because the beginning of the tourist season is upon us. With this, many second home and investment home buyers will be ready to move on some of the great deals that are currently on the market.What does this mean to you and your mortgage? Sellers: If you're planning on selling your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and diminishing mortgage products could knock out as many as 15%-30% of potential qualified buyers. Now is not the time to sit and wait for the best possible price. Have a serious talk with your real estate agent. Having experienced buying/selling transactions in your area, he or she can help you price your home accordingly. He or she can also help ensure that your buyers are pre-approved and stay pre-approved throughout the entire transaction.Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it's taking longer and longer to complete a transaction. As of the week of January 14th, interest rates on fixed mortgage products are approaching 4-5 year lows. Remember, what you qualify for today could change tomorrow in a volatile market. For those looking to refinance, keep this in mind. There is no time to delay! Communicate with your lender. Don't do anything that could negatively affect your credit, and make sure you get all your documentation in on time.

Individuals with FHA and VA loans: If a homeowner currently has an FHA or VA loan, they may be eligible for a Streamline Refinance. The homeowner must have at least a 12 month history of on-time payments on their FHA or VA home loan. The process typically takes between 3-5 days to complete.

ARM Borrowers: If your ARM is scheduled to reset in the next 2-18 months, you need to schedule an appointment with a mortgage professional right away. Whether your ARM is subprime, Alt-A, or even if you have a pre-payment penalty, don't let a default or foreclosure situation sneak up on you. Did you know that your monthly payments can increase anywhere from 30% to 100% once your loan resets? At the very least, give yourself the peace of mind of knowing what your adjusted payment will be. Borrowers with less-than-perfect credit: Each week it seems lenders are shedding more and more mortgage products. Many lenders have stopped offering No-Doc loans and are reducing all forms of Stated-Income loans. While it might be challenging, borrowers with credit issues need to see a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals. Finally, there's an important concept to embrace: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. The correction we're experiencing now – while it seems harsh – is, in a sense, "natural" and directly related to the extremely loose guidelines and perhaps overzealous lending and leveraging during the boom cycle.

Phil Heppding is the Regional Sales Manager at Mortgage Now in Destin. Mortgage Now Inc. is a licensed VA, FHA and Conforming mortgage lender conducting business in over 20 states. Mr. Heppding can be reached at pheppding@mtgnow.com

What Information Do Institutional Lenders Generally Require?

2008-01-09T12:43:00.000-06:00

Institutional lenders will almost always ask the following questions:

How much cash and what liquid assets do you have? The lender will request a copy of your bank balance, your savings account balance, and an accounting of your stocks and bonds.
What type of work do you do for a living and what is your current income?
How many current debts do you have? All current debts in your family will be considered, as well as possible future debts, such as schooling and common necessities.
What us your credit history? This involves an investigation of your entire past with regard to loans and buying on credit.
Do you have adequate credit references? Borrowing from banks ranks higher than borrowing from finance companies.
What is your past banking experience? Your banks will be contacted for information regarding the size of your accounts, the length of time you have banked with them, and the average amount of money you have on hand in the accounts.
How old are you, your spouse, and your children? Age is considered because your earning potential usually declines when you get beyond a certain age.
How much do you wish to borrow and what repayment schedule do you desire?

Lenders ask for all of this information, and sometimes a whole lot more, because they want to make sure that they can resell their loans to other banks. They might sell their loans on the secondary mortgage market to other lenders, such as Fannie Mae, insurance companies, and pension funds, both here and abroad. Consequently, lenders verify almost every asset on your loan application and check out every negative credit rating, no matter how insignificant. The more documentation you give a lender in the beginning, the faster your loan will be processed.

You may speed up the loan processing by providing the lender with copies of your federal tax returns for the previous two yours, copies of your last three months' bank statements, and a copy of the current fire insurance on the property (in refinancing situations). You may speed up the loan processing even more by getting prequalified as a borrower before you actually need your loan, so that when you do need it, the lender will be able to move quickly.

If you have any questions or comments you can call me at 866-929-1369 or email me at Info@SoldByLaurie.com.

Laurie Hollowell-Meeker

Broker Associate

Keller Williams Realty Emerald Coast

151 Regions Way Ste 4A

Destin, Florida 32541

GRI, CRS, e-Pro

How Should I Prepare to Get a Loan?

2008-01-02T10:40:00.000-06:00

The first thing you should do, even before you begin shopping around for a loan, is to determine what is the greatest monthly payment you can make. The property you are buying is security for the loan, but you must be able to meet the monthly payments or the lender will have the right to foreclose. To determine your ability to pay back a home loan, lenders generally use a ratio based upon your gross monthly income being so many times the amount of the monthly mortgage payments. The commonly accepted rule of thumb for this type of evaluation is that your gross monthly income must be three or fourt times the monthly payments. For example, if your monthly payment is $900, then you monthly income from wages, dividends, interest, and bonsus should be between $2,700 and $3,600. Naturally, this rule of thumb will vary depending on inflation and on the lender's individual policy.

Of course, if you should be buying income property, something you intend to rent out, the income you can expect from the rents may be added to the rest of your monthly income in making a determination.

In addition to figuring out what you can afford to pay every month according to your income, you ought to think about setting aside some funds just in case you should suffer a financial setback sometime during the life of the loans. Many financial advisors recommend that borrowers set aside a three-month reserve of mortgage payments in a separate "peace of mind" savings account for use in case of "rainy days".

Next, you should know how lenders determine a loan, that is, how they figure the maximum amount they will lend on a property. Generally, they do it in one of two ways- as a percentage of the purchase price or as a percentage of the appraised value.

The property you intent to buy will always be appraised by the lending institution. They appraise it before they make a loan because they must protect their investors' money. They want to be sure that, if you should stop making the payments on your loan, they can get their money back by reselling your property.

Just remember that each lender's appraisal figure is somewhat arbitrary. There is no such thing as an exact property value. It is the lender's appraisal, however, on which they will base their loan commitment. One bank may consider that the same property is located in an up-and-coming area and thus offer you a larger loan, which is, of course, to your advantage. Another lender may consider that the same property is declining in vaalue or has no growth potential and thus offer you a much lower loan. Each lender has different self-imposed rules and regulations, but all of them base their appraisals on the probable market value if the property during the life of the loans.

Generally speaking, most loans are based on the purchase price, though occasionally a loan will be based on the appraisal fugure alone. Some lenders follow a policy of giving a loan commitment on whichever is the lower figure, the appraised value or the purchase price.

If you have any questions or comments you can call me at 866-929-1369 or email me at Info@SoldByLaurie.com.

Laurie Hollowell-Meeker
Broker Associate
Keller Williams Realty Emerald Coast
151 Regions Way Ste 4A
Destin, Florida 32541
GRI, CRS, e-Pro

Real Estate Closings - What does the Real Estate Agent do?

2007-12-29T15:12:00.000-06:00

If a real estate agent is involved in your purchase or sale, the agent will have specific duties to perform. Among the duties of your realtor will by the following:

Be sure the contract is signed and intialed by all parties on all pages.
Verify that all necessary disclosures have been given to the buyer and the seller.
Be sure contigencies in the contract are worded correctly.
Contact the attorney or escrow/title company as soon as the property is under contract.
Get deposit or "good faith money" to the closing agent or have it deposited into the broker's escrow account.
Be clear with the attorney about who will take care of what responsibilities.
Communicate as much information as possible to the attorney or closing agent to avoid any ambiguity.
Follow the time limit for home and termite inspections, getting signed approval from the buyer.
Assist the buyer in finding financing and be certain the buyer has applied within the time limit set in the contract.
Work with the escrow/closing officer to get the title commitment or title report distributed to all parties.
Obtain the seller's existing mortgage account number and lender information as soon as possible and give this information to the escrow/closing officer.
Fax the closing information to the attorney or closing agent as soon as it is available. (When contacting the attorney or escrow officer to ask questions or supply information, ask to speak to their assistant or secretary if they are busy. The secretary is often very useful in conveying information about the closing to the attorney and can respond to questions promptly.)
Obtain previous title insurance policy information as soon as contract is signed. Convey this information to the closing agent or attorney. Previous title policies save the attorney title search time and may save the buyer money on the new policy.
Obtain previous curvey information as soon as contract is signed to convey to the attorney. (Updating an existing survey can save time and money.)
Explain to the buyer that hazard/homeowner's insurance will be required at closing. Determine which insurance company buyer intends to use.
If the lender will be collecting escrow funds for insurance, it is necessary to provide this information to the escrow/closing officer.
Follow up so that the insurance agent gets the binder or policy to the escrow/closing officer or attorney prior to closing.
Deal with all issues regarding the closing as soon as they are raised. This will avoid delays at closing.
Perform final walk-through with the buyer. Write down any concerns or items needing repair.
Reconfirm closing day and time with the closing agent and with the buyer and the seller.
Review the final HUD-1 statement with the buyer and the seller before the closing.
Be sure the buyer has a certified check for closing funds or has made arrangements to wire money to the title company or closing agent.

If you have any questions or comments you can call me at 850-269-1369 or email me at Info@SoldByLaurie.com.
Laurie Hollowell-Meeker
Keller Williams Realty Emerald Coast
151 Regions Way Ste 4A
Destin, Florida 32541
GRI, CRS, e-Pro

What happens at a closing?

2007-12-20T13:14:00.000-06:00

The purpose for this blog is to answer real estate questions I hear from my customers. I will post a new blog often addressing questions that have to do with real estate transactions.

What happens at a closing?

After the contingencies of the purchase agreement have been met, the buyer's loan has been approved amd processed, and any agreed-upon repairs and inspections have been made, you will be notified that it is time to appear at the closing agent's office. The buyer will be asked to bring in a certified or cashier's check for the down payment money and the seller will be asked to bring in proper identification for notary purposes.

At the closing, an exchange of money for the deed to the property will take place. The buyer will sign closing documents and release any remaining money owing to the seller. This paymenr is usually in the form of a combination of cash together with a mortgage provided by an outside lender. The seller in turn will sign a deed transferring legal title to the property to the new buyer. The actual possesion of the property may occur at a later date, depending on the local custom in your area. The release of the money to the seller may occur a few days after the closing, depending on the closing agent's requirements for clearing funds.

Once completed, the deed will be recorded in the county recorder's office, together with any mortgage documents, and the buyer is valid as of the date of the closing. The seller will receive the balance of the funds necessary for the sale to take place.

If you have any questions or comments you can call me at 850-269-1369 or email me at Info@SoldByLaurie.com.

Laurie Hollowell-Meeker
Keller Williams Realty Emerald Coast
151 Regions Way Ste 4A
Destin, Florida 32541
GRI, CRS, e-Pro