Lande's Landing | The Key to Real Estate & Relaxation

4 Reasons to Sell Before the New Year

noreply@blogger.com (Phil Lande, CRS) — Mon, 11 Dec 2023 18:26:00 +0000

Real Estate with Phil December 2023

noreply@blogger.com (Phil Lande, CRS) — Fri, 08 Dec 2023 13:08:00 +0000

The Winter Buyer and Seller Guides Have Arrived

The Winter guides for buying and selling a home have arrived. Let’s connect so you can get the latest copies today.

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When You Sell Your House, Where Do You Plan To Go?

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Experts Project Home Prices Will Rise over the Next 5 Years

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3 Reasons To Sell Your House Before the New Year [INFOGRAPHIC]

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When You Sell, Your House Is a Gift That Keeps on Giving

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Thinking of Buying?

Download my free eGuide covering the things to consider when buying a home.

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Thinking of Selling?

Download my free eGuide covering the things to consider when selling your house.

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Winter Buying and Selling Guides are Now Available

noreply@blogger.com (Phil Lande, CRS) — Thu, 07 Dec 2023 21:16:00 +0000

First Time Home Buyer Guide

noreply@blogger.com (Phil Lande, CRS) — Tue, 05 Dec 2023 18:08:00 +0000

Brian Buffini's REAL ESTATE REPORT

noreply@blogger.com (Phil Lande, CRS) — Thu, 05 Oct 2023 18:03:00 +0000

noreply@blogger.com (Phil Lande, CRS) — Tue, 19 Sep 2023 14:09:00 +0000

Fall Buyer & Seller Guides are now available

noreply@blogger.com (Phil Lande, CRS) — Fri, 08 Sep 2023 02:24:00 +0000

noreply@blogger.com (Phil Lande, CRS) — Fri, 11 Aug 2023 12:29:00 +0000

Want to know what will happen in the #housingmarket for the rest of 2023? Here’s a snapshot of what experts project for a few key indicators moving forward. The average of the expert forecasts shows home prices will grow, mortgage rates may fall, and plenty of homes will sell. Want to know more? Let’s connect. #expertanswers #housingforecast #housingmarketforecast #2023realestate #stayinformed #staycurrent #realestate #homebuying #realestategoals #realestatelife #realestateagent #realestateexpert #realestatemarket #keepingcurrentmatters

noreply@blogger.com (Phil Lande, CRS) — Wed, 09 Aug 2023 13:28:00 +0000

Working from Home Increases Your Home Buying Options

noreply@blogger.com (Phil Lande, CRS) — Fri, 28 Jul 2023 13:55:00 +0000

Top Home Improvements with the Best ROI

noreply@blogger.com (Phil Lande, CRS) — Wed, 26 Jul 2023 01:42:00 +0000

Owning a home is a significant investment, and making strategic home improvements can not only enhance your living experience but also provide an excellent return on investment (ROI). While some renovations may seem appealing purely for aesthetic reasons, it's essential to prioritize those that will yield the best returns in the long run. In this blog post, we'll explore the top home improvements that offer the best ROI, allowing you to make informed decisions to increase the value of your property. 1. Kitchen Remodeling: They say the kitchen is the heart of the home, and it's also one of the most valuable areas to renovate. A well-designed kitchen with modern appliances and functional layouts can significantly boost the value of your home. Focus on updating cabinets, countertops, flooring, and energy-efficient appliances to appeal to potential buyers and improve your ROI. 2. Bathroom Upgrades: Next to the kitchen, bathrooms play a crucial role in influencing a home's value. Simple improvements like replacing outdated fixtures, upgrading faucets, adding energy-efficient toilets, and installing modern tiles can make a significant difference. A fresh, clean, and stylish bathroom can leave a lasting impression on buyers and increase the overall ROI. 3. Curb Appeal Enhancements: First impressions matter, and the exterior of your home is the first thing potential buyers will see. Invest in enhancing your home's curb appeal by painting the exterior, maintaining the landscaping, and updating the front door. Additionally, consider energy-efficient windows and proper insulation, which can save on utility bills and attract buyers seeking energy-efficient properties. 4. New Windows and Attic Insulation: Energy efficiency is a hot topic in the real estate market and upgrading your home's windows and insulation (particularly in the attic) can lead to substantial returns. Thermal windows and adequate insulation help regulate indoor temperatures, reduce energy consumption, and makes your home more attractive to environmentally-conscious buyers. 5. Minor Kitchen and Bathroom Upgrades: Not all kitchen and bathroom upgrades need to be extensive and expensive. Simple improvements like adding a fresh coat of paint, replacing cabinet hardware, updating light fixtures, and adding a backsplash can give these spaces a fresh look without breaking the bank. Such minor upgrades can still provide a solid ROI. 6. Deck or Patio Addition: Outdoor living spaces are increasingly popular, and adding a deck or patio can expand your home's usable square footage. Potential buyers often appreciate the opportunity to entertain and relax outdoors. Choose quality materials that complement your home's style and consider integrating built-in seating or other features to make the space more appealing. 7. Basement Finishing: If you have an unfinished basement, consider finishing it to create additional livable space. A well-designed basement can serve as an extra bedroom, a home office, a recreation area, or a home gym. Finishing your basement adds usable square footage, which can significantly increase the value of your home. When it comes to home improvements, prioritizing those that offer the best ROI is a wise decision. Focus on kitchen and bathroom upgrades, enhance your home's curb appeal, invest in energy-efficient solutions, and consider adding functional spaces like decks or finished basements. These improvements not only enhance your living experience but also attract potential buyers and ensure that your investment in your home is well-rewarded in the long run.

THINGS TO CONSIDER WHEN SELLING YOUR HOUSE ~ SUMMER 2023

noreply@blogger.com (Phil Lande, CRS) — Mon, 05 Jun 2023 19:23:00 +0000

Laying the groundwork for the best mortgage

noreply@blogger.com (Phil Lande, CRS) — Tue, 30 May 2023 22:00:00 +0000

With mortgage rates having doubled what they were in early 2022, getting the lowest rate possible could mean the difference in being able to buy a home or at the very least, makes it much more affordable. Some people are waiting for rates to come down and while they are expected to come down some this year, most experts agree that they'll never return to the three or even four percent range.

There are things that a buyer can do to be eligible for the best rate available. Obtaining the most favorable terms is based on the loan-to-value, your credit rating, and your ability to repay the mortgage.

While lenders can impose their own underwriting criteria, the basic qualifying guidelines are identified as the 4 Cs:

Capital - money and savings, plus other investments providing for down payment, closing costs, and reserves for unexpected expenses in the future. It could also include gifts from family members, grants, and down payment assistance.
Capacity - ability to pay back the loan. Lenders look at income, job stability, savings, monthly debt payments, and other obligations to approve a borrower for a mortgage. They'll ask for several years of tax returns, W2s, and current pay stubs. Self-employed borrowers require additional documentation. Some of the recurring debt can include car payments, student loans, credit card payments, personal loans, child support, alimony, and other debts which could include co-signing for another's debt.
Credit - your credit history and score exhibit your experience for paying bills and debts on time. While there are minimum credit scores for different types of mortgages, the best rates are only available to borrowers with the best credit scores. Credit ratings are established over time and borrowers need to improve their scores before they need to use them.
Collateral ... lenders look to the value of the home and other possessions when pledged as security for the loan.

Based on the Ability-To-Repay Rule, effective 1/10/2014, financial information must be supplied and verified; borrower must have sufficient assets or income to pay back the loan; and, teaser rates can no longer hide a mortgage's true cost. Even after a lender gives a loan approval to a borrower, they will generally run additional verifications a few days prior to the closing to make sure that nothing has changed that would affect their underwriting decision.

The financial preparation for homebuyers begins long before they start looking at homes. They need to be aware of their credit by asking for copies of their credit reports from the three major reporting agencies: Experian, TransUnion, and Equifax. Congress mandated consumers be provided this free service through AnnualCreditReport.com. Other websites may offer free services, but their real objective may be to encourage you to purchase additional services.

Once you've received the credit reports, read them to discover errors that could negatively affect your credit score. The website will tell you the process of correcting the errors which includes notifying both the credit bureau and the reporting party of the error.

Most borrowers understand that payment history is the major contributor to a credit score; it is expected of borrowers to pay on time and as agreed. Sometimes, borrowers are surprised to find out that if their borrowing approaches their available credit that it could actually hurt their score.

The credit utilization ratio is the percentage of credit used to that which is available. If you had $10,000 credit available and your balance of a credit card was $2,500, the ratio would be 25%. Ideally, lenders want your credit utilization to be below 25%. Again, this could be one of the things you work on before you meet with a mortgage officer.

Once you have an accurate credit report and have saved for the down payment and closing costs, you're ready to meet with a trusted mortgage professional who can take you through the process of preapproval. They may be able to suggest things you can do to raise your credit score to be eligible for a lower mortgage rate.

All lenders are not the same and there is a significant difference with the online lenders who have limited counselling advice and working with a local mortgage officer you can discuss face-to-face what your situation is and if it can be improved.

You may feel comfortable with more than one recommendation and your agent will be able to supply you with lenders who they are familiar with from their experience in situations like yours.

Handling an Appraisal Gap

noreply@blogger.com (Phil Lande, CRS) — Tue, 23 May 2023 22:00:00 +0000

An appraisal gap describes the difference between the sales price and the lower amount of the appraisal required by the mortgage being obtained by the buyer. It becomes an issue if the seller is not willing to lower the price or the buyer is not willing to pay the difference in cash.

Looking at the issue from the seller's perspective, "if the buyer wants my home and he can't get the loan he wants, he'll have to make up the difference in cash." The buyer might have a different view like "If an independent appraiser can't justify the price, I'm not going to pay more than appraised value."

Pay the difference in the appraised value and the purchase price in cash.
Solution - Assuming the buyer has adequate cash reserves and is willing to pay above appraised value, this will satisfy the lender.
Decrease your down payment percentage to apply toward the appraisal gap. It may trigger mortgage insurance which will increase your payment.
Example:
$400,000 Sales Price with 20% down payment of $80,000; Home appraises for $390,000
Possible solution ... buyer could take $10,000 of the $80,000 he was going to use for the down payment and make up the gap. That only leaves him $70,000 which is a good downpayment for this size home, but it may require that he pay mortgage insurance because the loan-to-value is more than 80%.
Renegotiate the contract with the seller. Assuming both parties are willing to negotiate on the terms, the seller could lower the price to the appraised value, or any other number of possibilities.
Include an appraisal gap clause - "Buyer and seller agree that if the appraised value comes in lower than the purchase price, buyer agrees to pay up to $XX,000 above appraised value, but not exceeding the purchase price."

An appraisal gap clause addresses what the buyer is willing to do within the parameters included. It provides limited comfort to both the seller and buyer to address the issue of the home appraising for a lower amount than necessary. This clause provides a way for the buyer to compete in a seller's market.
Terminate the contract.

Appraisals can be a confusing but necessary part of the process when the buyer needs a mortgage. I'm available to answer any questions and share our experience with you. Our goal is to be your source of real estate information.

Homebot ~ Perpetual Home Value Upedate

noreply@blogger.com (Phil Lande, CRS) — Mon, 22 May 2023 15:57:00 +0000

Make your home offer the most appealing

noreply@blogger.com (Phil Lande, CRS) — Tue, 16 May 2023 22:01:00 +0000

Sales in March 2023 were down 2.4% month over month and still down 22.0% year over year according to the NAR Housing Snapshot. The median sales price dipped 0.9% to $375,700 and there are 2.6 months supply of homes on the market compared to 2 months a year ago.

"Inventory levels are still at historic lows, and consequently, multiple offers are returning on 28% of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�.

It is still important to have a strategy for potentially competing with other buyers on the house you want to buy. The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation.

Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes. Include the written pre-approval letter along with the offer. When you are making an offer on a home, have the mortgage professional available to reassure the listing agent by phone who will convey assurance to the seller.

If you're concerned about multiple offers, make your best offer first because you may not get to counter and simply lose out to another buyer. Starting with a low offer and gradually coming up doesn't work in highly competitive situations. In some cases, a low-ball offer could cast a pall on any consideration of your purchase contract altogether.

The listing agent will calculate the expenses on the different offers for the seller to show them what their net proceeds will be on each contract. Some types of financing have more costs incurred to the seller. Asking the seller to make repairs or other financial concessions could lower their net even though your offer may be higher.

From a buyer's standpoint, contingencies provide options for things that may be uncertain like qualifying for a mortgage, discovery of major impediments to the condition of the home, and other things. To the seller, they are obstacles that may invalidate the contract causing the home to go back on the market. If the contingencies are necessary, try to make them as palatable to the seller as possible.

Instead of waiving your rights to make inspections, consider a very short inspection period to minimize the time the property is in limbo. Instead of asking for repairs, provide a simple "accept or reject" once the inspections have been made.

Try to accommodate the seller's desired closing and possession dates. Sometimes an earlier date may be more desirable for a seller and other times, it might be a later date based on the home they'll be moving into. Your agent can do some research and find a flexible alternative that may appeal to the seller.

Increase your earnest money deposit more than the minimum. It is a pecuniary indication that you are serious. Your agent can tell you what the amount should be and alternatives like increasing the earnest money after certain contingencies have been met.

Escalation clauses state that you are willing to increase your offer by a certain amount up to a specified maximum, subject to another bona fide offer being received before yours is accepted. Your agent will be able to further explain how these might work in your situation as well as share their experience with them in other similar negotiations.

You as a buyer and your offer to purchase need to be seen as the solution to the seller's situation in price, terms, and reliability to close. Working with an experienced agent with seasoned negotiation skills is key to your success in buying a home in a competitive environment.

The Cost of Waiting to Buy a Home

noreply@blogger.com (Phil Lande, CRS) — Wed, 10 May 2023 13:24:00 +0000

Protect yourself with a new construction inspection

noreply@blogger.com (Phil Lande, CRS) — Tue, 09 May 2023 22:01:00 +0000

Builders of new homes offer or are required to warrant their work for a specified period. Municipal inspections are generally required during different stages to "ensure the life, health, safety, and welfare of the public" but even if something is missed, the ultimate responsibility for building to code belongs to the builder, even if the municipal inspector misses something.

There are four basic stages of residential construction including:

The foundation stage begins with excavation, footings, foundation walls or slab, waterproofing, backfill, compaction and underground rough plumbing and electricity. Municipal inspections are done prior to pouring the foundation while items are visible.
The framing stage includes the wood or steel framing, exterior walls and roof sheathing, exterior trim and siding, windows, doors, and roofing. Depending on the municipality, there could be inspections of the rough framing separate from the roofing.
Next in this stage comes rough plumbing including water, waste, and vent piping, rough electrical, rough mechanical, ductwork, wiring, and electrical panel installation. Municipalities will usually inspect plumbing and electrical separately.
The wall insulation and drywall installation are done and inspected depending on the municipality before tape and texturing are done.
The final stage of construction includes flooring, cabinets, millwork, countertops, tile, mirrors, electrical trim, plumbing trim, and mechanical. Some builders will not install appliances and HVAC until the last stage to protect against theft. Municipal inspections are made in the final electric, plumbing, and mechanical.

A "Final Inspection" is done after all the periodic inspections have been completed and passed.

Defects that manifest themselves during the warranty period are the responsibility of the builder. Unfortunately, some things may go undetected until after the warranty expires leaving the repair expense as the sole burden of the buyer/owner.

A safeguard that the purchaser will not be out of pocket for repair expenses is a home warranty which shifts the liability to the warranty or service contract company. This is a negotiable item that can be paid for by the builder or the buyer. However, this warranty will have a time limit on it and to continue the coverage, the buyer/owner will have to renew it by paying the additional annual premium.

One more safeguard for the purchaser is to hire their own inspector, to conduct periodic inspections during the different phases of construction. Unlike an inspection made on an existing home, the inspector will have to visit the site multiple times during the process. For that reason, constructions inspections are more expensive.

When hiring an inspector for new construction, ask at what stages do they inspect. A typical new construction inspection might be at the end of the foundation stage, another at the end of the framing and rough plumbing, electrical, and mechanical, and the final inspection after the home is completed.

A provision allowing a buyer to hire their own inspector for periodic inspections should be included in the sales contract. Your agent can not only help you get that included but assist in negotiation of any issues that arise because of the periodic inspections.

If you value this extra level of protection in the purchase of a new home, it is important that you have your agent first accompany you to the models so they will be registered as your agent.

Why Home Prices Won't Come Crashing Down

noreply@blogger.com (Phil Lande, CRS) — Fri, 05 May 2023 22:00:00 +0000

The Magic of Owning a Home

noreply@blogger.com (Phil Lande, CRS) — Wed, 03 May 2023 17:59:00 +0000

Higher Interest Rates May be the Help You Need

noreply@blogger.com (Phil Lande, CRS) — Tue, 02 May 2023 22:00:00 +0000

Like opening and closing a faucet increases and decreases the water flow, lowering interest rates increases home sales and raising interest rates decreases home sales.

When home sales increase during periods of limited inventory, demand increases and prices go up. Contrarily, when home sales decrease, demand could lessen and prices moderate.

There is opportunity with higher rates because it affects sales and demand, which in turn keeps prices in check. By waiting for rates to come down, and no one knows by how much but certainly not to the 3-4% range, buyers' pent-up demand will affect the already low supply and cause prices to increase.

Let's look at a scenario where you could buy a home today for $400,000 with a 90% loan at 6.5% for 30-years with P&I payments of $2,275.44. If interest rates drop to 5.5% in one year but in that same period, the price goes up by 10%, the price would be $440,000 with a 90% loan at 5.5% for 30-years with P&I payments of $2,248.44.

The payment would go down by $27 a month but the price would have risen by $40,000 which would be equity of twice the down payment for the person who purchased a year earlier with a higher rate.

Purchase Price	Mortgage	P& I Payment	Equity EOY1
$400,000	$360,000 @ 6.5%/30 yr	$2,275.44	$84,023
$440,000	$396,000 @ 5.5%/30 yr	$2,248.44	$44,000

The takeaway in this example is that a person may experience more loss from unrealized equity during periods of high appreciation than waiting for a nominal drop in the interest rate. With rates being a deterrent to buyers that have led to sales slipping 22% year over year in March 2023, sellers may be willing to negotiate.

It seems counterintuitive but higher interest rates may be the help you need to buy a home.

Shopping Mortgage Rates

noreply@blogger.com (Phil Lande, CRS) — Tue, 25 Apr 2023 22:00:00 +0000

Nobel Prize recipient, Richard Thaler, in his research into seemingly irrational economic behaviors, "found that consumers generally search too little, get confused while evaluating complex alternatives, and are slow to switch from past choices, even if it costs them." "Why are consumers leaving money on the table?"

Based on this behavior, a borrower securing a mortgage might depend on their existing banking relationship or a single referral from a friend or agent rather than shopping multiple lenders.

When shopping for a lower mortgage rate, consider that not all lenders share the same business practices. Some may lure unsuspecting borrowers to a rate, knowing full well that they cannot deliver on it. After making a loan application and supplying information necessary for approval, they reveal that the rate is not available for "whatever" reason.

They're counting on the borrower wanting to get into the home because the closing date is near and they'll compromise by accepting the higher than quoted rate.

Shopping for a mortgage rate can result in savings because rates are set by individual lenders. To get an apples-to-apples comparison, the terms of the mortgage being shopped should be consistent among the lender candidates.

Consumers can make additional savings by not only shopping for better rates but for better terms and fees, which can vary widely among lenders.

The amount of savings can be affected not only by the difference in rates, but the size of the mortgage and the length of time borrowers expect to keep it without refinancing or selling.

Advertised rates are generally for A++ borrowers and the determination is the lender's based on many factors. It may be unlikely those rates are offered to you.
A recommendation for the best lender from a friend or family member will not necessarily be the best for you.
Instead of accepting the first offer received, shop for at least three to five offers.
Your personal bank may be convenient but it may not offer you the best rate, terms, and fees.
Ask if there is room to negotiate the rate or fees.

Ask your real estate professional for recommendations of several trusted lenders for you to shop a rate, terms, and fees.

Who Benefits from Selling a Home "As Is"?

noreply@blogger.com (Phil Lande, CRS) — Tue, 18 Apr 2023 22:00:00 +0000

A person's decision to sell their home comes with a lot of other decisions causing an owner to stress or procrastinate. Early in the process, the owner will consider selling the home "As Is" to avoid the looming issues that accompany selling a home.

From a seller's standpoint, "as is" means the buyer will purchase the home in its current condition without asking for any repairs. While it is convenient for the seller to take this approach, the normal trade out is the property will not result in the highest possible sales price.

Regardless of how the home is sold, the seller is required to disclose all defects which include repair history, condition of systems and appliances, water damage, pest infestation, radon, and other things that affect the value and livability of the home.

From a buyer's point of view, they may think there is something wrong with the home which could result in them avoiding the home completely or making a substantially lower offer to cover not only the known issues but also the unknown ones.

It would be reasonable for a seller to allow a buyer to make inspections to determine what the condition of the home and what kind of expenses they might be faced with. In some situations, based on provisions in the sales contract, the buyer, after making inspections, may decide not to continue with the contract which could extend the marketing time for the seller by having to find another buyer.

Selling a home "as is" is like wholesaling the property. A comparison could be trading your car to a dealer when buying a new one. The dealer will usually give you the best price for the new car but won't offer you a retail price for the trade-in. If the dealer were to give you a "retail" price for the trade-in, they would probably expect a "retail" price for the new purchase.

Even if the seller doesn't want to go through the effort to make major improvements, they still need to consider things that will ease the buyers' concerns about the home. These include a thorough cleaning, decluttering, yard cleanup, and repairs on known issues like leaking faucets, lighting, doors, and appliances to name a few examples.

If this path is taken, the cost to the seller will be not realizing the maximum sales price compared to comparable homes that have sold recently in the area that have been updated.

Sellers Pros & Cons	Buyer Pros & Cons
Not spend money to prepare the home	Lower purchase price
Won't maximize proceeds from the sale	Less competition from other buyers
Could sell quickly if priced properly	Financing could be challenging
May take longer to sell	Looking for an opportunity to build sweat equity
Effort finding/negotiating with contractors	Improve the property to your preferences
Investors looking to make a profit	There may be hidden problems
Making decisions on what the public wants

There are companies who will buy your home for cash. Their ads are very appealing to sellers because it solves their concerns about putting the home on the market. Realize these companies are not charities but "for profit" who expect to be able to recoup the money paid to you, pay all repairs, renovations, and sales expenses plus make a profit for the risk taken.

As a homeowner, you will always realize more of your equity by approaching it with a risk/reward analysis to determine how to sell it for the highest price with the least expenses. Your real estate professional will act as a fiduciary to put your best interests ahead of their own. It is worth the effort before embarking on an "as is" scenario.

A Lesson on Housing from the 80's

noreply@blogger.com (Phil Lande, CRS) — Tue, 11 Apr 2023 22:00:00 +0000

Doing nothing may be a lot more costly than doing something. With rates twice what they were in 2021 and the first half of 2022, many buyers are sitting on the sideline. For some, it has to do with not being able to afford the home they want at today's mortgage rates and for others, it is not willing to accept that the low rates that were available are not only gone, but may never be available again.

In the late 70's, rates were around 10% and in the early 80's went up to 18%. Interestingly, many buyers went ahead and purchased at those record level highs and refinanced a few years later when rates came down. By the end of the decade, prices had continued to increase so that buyers had a significant equity in their home.

Tenants who waited for the rates to go down didn't see savings because the price of homes had gone up. More importantly, they missed the opportunity to build equity in their home through amortization and appreciation.

If you purchased a $400,000 home today on an FHA loan at 6.3% for 30 years, your total payment with taxes, insurance, and mortgage insurance premium would be about $3,459 a month.

That payment could save you a little bit if you were paying $3,500 for rent. However, when you consider the monthly appreciation, assuming a 3% annual rate, and the monthly principal reduction due to amortization, the net cost of housing would be $2,229. You would be paying $1,270 more each month to continue to rent which would amount to over $15,000 in one year alone.

That loss would be about twice the amount of the down payment to get into the home. Furthermore, in seven years, at the same 3% appreciation, your $7,500 investment in a down payment would grow to $138,000 in equity in seven years. If the appreciation is greater than that, the equity would be much more.

You're going to be paying rent to live in a home; you might as well benefit from the equity buildup from amortization and appreciation that is only available to the owner.

The benefit of acting now is that sales are down which are affecting prices, although not dramatically. When the Fed gets a handle on inflation, and interest rates do moderate some, more buyers will be in the market and supply and demand will again cause prices to rise. Then, you can refinance to a lower rate but your investment in the home will be at a lower basis.

To run your own numbers, use our Rent vs. Own. If you have questions, call me and I'll explain how to use it and what to expect for the home you'd like to have.

Tell Me More About Closing Costs

noreply@blogger.com (Phil Lande, CRS) — Tue, 04 Apr 2023 22:00:00 +0000

There are fees and expenses associated with mortgages that must be paid by the closing date for closing costs, and pre-paid items, in addition to the down payment. These amounts can vary according to the type of loan, mortgage company, customary practices of the area, and the terms of the contact.

According to Freddie Mac, the amounts could vary between 2-5% which is considerable. Most buyers want a more specific number and that can depend on the conditions mentioned previously.

For buyers, the largest amounts are loan origination fees which is usually one percent of the amount borrower, points paid by buyer which are one percent or more of the mortgage amount, owner's title policy if paid by the buyer, and the pre-paid items mentioned above.

Certain types of mortgages allow the seller to pay specific closing costs for the buyer with full disclosure in the sales contract. For example, all the buyers' closing costs can be paid by the seller for VA mortgages up to 4% of the sales price. FHA and USDA allow sellers to pay up to 6% of the sales price to be used for closing costs and pre-paid items.

For conventional loans, underwritten by Fannie Mae or Freddie Mac, sellers can contribute up to 3% if the down payment is less than 10% and up to 6% if the down payment is 10-25%.

Asking a seller to pay a buyer's closing costs is tantamount to lowering the price of the home. In a highly competitive market, the seller may be less willing to pay a buyer's closing cost than in a soft market.

Settlement dates affect the amount of pre-paid interest. Mortgage interest is paid in arrears, after the money has been used. The principal and interest portion of the payment is allocated to pay for the interest on the principal balance for the previous month and the remainder is applied to reduce the principal of the loan. Each succeeding payment has less going to interest and more going to principal until the loan is fully retired.

When a buyer closes on the sale of a home, the first payment will not be due until first of the month following the next full month after closing. The buyer is also responsible for interest from the funding date, usually at closing. This amount is usually reflected on the buyer's closing statement, as interest to the end of the month. It pre-pays the interest from closing until the next first of the month.

If the buyer closed on the 2^nd of the month, the pre-paid interest would be far greater than if the buyer had closed on the last day of the month. To minimize this out of pocket expense, many times closings will be scheduled toward the end of the month.

Another large buyer's closing cost is property insurance. The lender will require that the home be insured for at least the amount of the mortgage being borrowed. Insurance must be paid for in advance, usually at closing. In addition to the annual premium, the lender may require an escrow account be established to collect 1/12 of the annual property taxes and property insurance to be paid with the payment so there is enough money in the account to pay them when they are due.

When setting up the account, the lender may require an additional two months of reserves for the insurance to be renewed in advance of the policy expiring.

The amount of reserves for the taxes depends on when the taxes must be paid. At closing, the seller will credit the buyer with the amount of taxes from January 1 to the closing date since taxes are also paid in arrears. The lender will probably have the buyer pay two to three months' taxes additionally at closing so the tax bill can also be paid before it is due. Some states give the taxpayer a discount for paying them in advance.

Your real estate agent will be able to give you an estimate of closing costs that should prepare you to purchase a home. The lender is required by law to supply you with a Loan Estimate within three days of receiving your loan application.

A Closing Disclosure will provide the final details of the mortgage loan you have selected. It includes loan terms, estimated monthly payment, and the fees and other costs incurred with the mortgage. You must receive it three business days before you close on the mortgage loan so that you can compare it with the Loan Estimate.