Tag Archives: buyers


You have a lot to consider when shopping for a mortgage, and you don’t want unfamiliar lingo bogging you down. Before you begin the process of buying a new home, get comfortable with these five key mortgage terms.

  1. Fixed-rate mortgage: With a fixed-rate mortgage, your interest rate stays the same for the entire loan, which means your monthly payments do too. That predictability can help with budget planning, but fixed-rate loans sometimes come with a higher interest rate than other loans.
  2. Adjustable-rate mortgage (ARM): Your payments on an ARM stay the same for a set period but then change annually according to federal interest rates. While unpredictable on the back end, the initial rate is often lower than a fixed-rate loan.
  3. Closing costs: At your closing, you’ll be required to pay for various services associated with your purchase, like paperwork processing and credit reports. To avoid any surprises, carefully review the loan estimate form you receive from your lender. This document, which is sent to most borrowers within three business days of receiving an application, outlines your estimated closing costs.
  4. Escrow: When making an offer on a house, a homebuyer submits earnest money that goes into escrow, an account held by a neutral third party. Those funds are then disbursed once the deal is finalized. You may also pay into escrow if your lender requires you to pay a portion of your real estate taxes each month. That money is then used to cover the bill when it’s due.
  5. Private mortgage insurance (PMI): If your down payment is less than 20 percent of the full cost, your lender may require private mortgage insurance. You typically pay PMI along with your mortgage, though it drops off once your loan balance reaches a certain marker (usually 80 percent of the original loan).

Learning these and other relevant terms can help expedite the process of getting a mortgage, leaving you to focus on finding the perfect home.

Half of Renters Are Struggling to Afford Rent

The rental affordability crisis is showing signs of worsening: Nearly half of all renters are struggling to pay their monthly payments, according to a new report by Harvard’s Joint Center for Housing Studies.

Financial experts usually recommend keeping housing costs around 30 percent of a person’s monthly income. However, the number of renters considered “cost-burdened” – those who spend more than 30 percent of their income on rent – is rising and topped 21.3 million people last year, according to the report. Even more concerning, more than 26 percent are considered “severely cost burdened” and spend more than half of their income to pay for rent.

Read more: Why Renters Can’t Make the Move

Rental costs are skyrocketing across the country, much faster than wages. Inflation-adjusted rents climbed 7 percent from 2001 to 2014. In that same time period, household incomes fell 9 percent, according to the report. Demand for rentals is high, which has pushed vacancy rates down, and given landlords more reason to raise prices.

“These trends have led to record numbers of renters paying excessive amounts of income for housing, with little prospect for meaningful improvement,” according to the report.

The median rent for a new apartment climbed to $1,372 last year, a 26 percent increase from 2012.

It’s not just low-income households that are struggling to keep up too. The number of burdened households with an income of $45,000-$74,999 surged to 21 percent in 2014 from 12 percent in 2001.

The gap between rental costs and household income is widening to unsustainable levels across the country, according to a study released earlier this year by the National Association of REALTORS®. And as more renters face steeper costs, it may put them even further away from home ownership. NAR evaluated income growth, housing costs, and changes in share of renter and owner-occupied households over the past five years in metropolitan statistical areas across the U.S. Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, according to their research.

Source: “Half of All Renters Can’t Afford the Rent,” CNNMoney (Dec. 9, 2015)

The Buying Process

Via: Texas Association of Realtors

Buying a home can get quite detailed. Here are the steps to take to ensure you’re prepared for the exciting road ahead.

Choose a Texas REALTOR®                                             

Why?  A Texas REALTOR® will help you with all the following steps and more.  He or she will save you time and money by researching properties based on your criteria, helping you secure the best mortgage rates, counseling you on the offer amount and terms most favorable to you, and negotiating on your behalf. Ask your friends and relatives for their recommendations, or use the Find a Texas REALTOR® search.

buyers agent

Decide What You Want

Before you start looking, make a list of what you want. Then assign each item a priority. Some areas to consider are:

  • Location: How close do you want to be to your job, shopping, the kid’s schools, or entertainment?
  • Type of home: A single-family house typically provides the most space and gives you fewer restrictions on customizing your home. But a condo offers amenities without yard work—for a price.
  • Age of the home: Existing homes have mature yards and established neighborhoods; however, they require more maintenance. Although new homes aren’t always without problems, they usually require less maintenance initially. Of course, you may have to put in landscaping and endure nearby construction.

Know What You Can Afford                          credit questions

Consider these factors:

  • Downpayment: Most loans require a downpayment. The amount varies, but 20% of the purchase price is typical. If you’re a first-time buyer or fall below certain income thresholds, you may qualify for affordable-housing programs.  Generally, a higher downpayment means better loan terms and a lower interest expense on the mortgage.
  • Qualifying for a loan: A lender will determine how much he thinks you can afford based on your income, employment history, education, assets (e.g., bank account balances, other property, insurance policies, pension funds), and debt.  Check your credit report before the lender does to clear up any problems.
  • Your comfort level: You don’t have to spend $200,000 on a home just because the lender says you can afford a $200,000 home.  Do some math and determine what you’re comfortable spending.

Make an Offer

You’ve figured out your home-search criteria and what you can afford. Now find a house and make an offer.  Your Texas REALTOR® is invaluable in this part of the process that involves many steps, including:

  • Preparing a contract and the myriad details on it
  • Handling negotiations with your best interests in mind
  • Juggling inspections and option periods.

    Secure Financing

    Unless you’re paying cash for the home, you’ll need a loan. Keep in mind the true price of financing goes beyond the interest rate alone.  Consider items such as points, total lender fees, term of the loan, and penalties for early payment.  The lender will likely require an appraisal to verify that the home is worth the cost of the loan as well as a physical survey.  Repairs may be required.  Insurance must be purchased.  All these conditions and others must be satisfied before a transaction can close.

    Close the Deal                                        FTHBA2

    After weeks or even months of research and decision-making, you close the transaction, usually at the title company’s office. The title agent ask you to sign many, many documents and will explain each one.  You’ll present a cashier’s check to the seller, sign another document that itemizes closing costs (the lender will have given you an estimate in advance), and pay your share of the closing costs.  In return, you will receive a deed, transferring ownership rights to you.

What is the CFPB?

Hello my future home owners!

I don’t know if you have heard but there is a new sheriff in town when it comes to your finances and that sheriff is the CFPB (Consumer Financial Protection Bureau).


What are their jobs? Well let me tell you.

Consumer Financial Protection Bureau

Educate: An informed consumer is the first line of defense against abusive practices.

Enforce: Supervise banks, credit unions, and other financial companies, and we enforce federal consumer financial laws.

Study: Gather and analyze available information to better understand consumers, financial services providers, and consumer financial markets.

Now you may be asking, “Well how will this effect my home purchase?” The simple answer is that after August 1, 2015 there will be some major changes to the way your mortgage loan is handled. This is all for your protection but the new process may lead to longer closing periods. The normal closing periods are about 30-45 days. After August 1, 2015 you may have to wait 60+ days.

If you want to know more feel free to visit the CFPB website at: www.consumerfinance.gov

The Ins And Outs Of Seller-Financed Real Estate Deals

In my opinion, before getting into any Owner Financing situation, whether you are the buyer or seller, you should educate yourself on the risk and speak with a Realtor so that your best interest are covered. Below are some reasons why..


Via: Investopedia
Are you a potential homebuyer having trouble securing financing? Are you a home owner who wants to sell but is having trouble finding a buyer?
As a buyer, getting a mortgage can be difficult if your financial situation doesn’t fit into neat little boxes – a predictable salary that can be documented with paycheck stubs and W-2 forms, a stable employment history with no interruptions and a gleaming credit score. And as a seller, closing a deal on your home can be difficult if borrowers are having trouble getting approved for loans. Wouldn’t it be great if you could take out the middle man and find another way to complete the transaction?

In this article we’ll focus on a little-known option – seller financing – that can help you buy or sell a house.

Tutorial: Mortgage Basics

How Does Seller Financing Work?
Seller financing is just what it sounds like: instead of the buyer getting a loan from the bank, the person selling the house lends the buyer the money for the purchase.

The buyer and seller execute a promissory note providing an interest rate, repayment schedule and consequences of default. The buyer sends his monthly mortgage payments to the seller, who gets to earn interest on the loan, perhaps at a higher rate than he could get elsewhere. If the seller chooses to sell the loan (more on that later), the buyer will send the monthly mortgage payments to the investor who purchases the loan. (For more on this subject, see Promissory Notes: Not Your Average IOU.)

Seller financing arrangements are often for a short term, such as five years, with a balloon payment due at the end. The idea is that the buyer will be able to refinance before then. Of course, arrangements like this can seriously backfire if you’re not careful.

Seller financing tends to be more common in markets where mortgages are hard to come by. There are two reasons for this:

If mortgages are easy to get, but an interested buyer can’t get one, the seller will be highly suspect of the buyer’s ability to pay. Hence, when loans are generally difficult to obtain, it’s more likely that there might be well-qualified buyers out there who are having trouble securing traditional financing.
When credit is tight, selling becomes more difficult, so home sellers are more likely to consider unconventional options.
Why Is Seller Financing Uncommon?
If you’re a seller, your first objection to this arrangement might be, “But I don’t have the money to lend to a buyer!” Your second objection might be, “I don’t want to become a lender. It’s too risky.” Another reason why seller financing is not that common is because most sellers need the full proceeds from the sale of their home to purchase their next home.

But according to Robin Daniels, a real estate investor and landlord in central Florida, “many sellers are afraid of selling with owner financing, but do not know that the note they hold is something that can be sold to someone else. This could happen the same day as closing so the seller gets cash right away.” In other words, sellers don’t need to have the cash, nor do they have to become lenders.

The other reason seller financing is uncommon is that people aren’t familiar with it.

Real estate investor Don Tepper of Solutions 3D LLC says, “There are actually dozens of other ways to buy: lease-option, lease-purchase, land contract, contract for deed, equity sharing, wrap mortgages – and the list goes on and on. Most buyers, and most real estate agents, don’t know how any of these work.” (To learn more about lease options, lease purchases and other options, read Rent To Own, Own To Rent and Rent-To-Own Real Estate Full of Pitfalls.)

Why Would a Seller Offer Financing?
A home seller might be willing to offer financing for a number of reasons:

to minimize carrying costs while waiting to find the perfect buyer and get a deal done quickly
to distinguish the property from other listings and get it sold faster, especially in a down market
to increase the possibility of garnering the home’s full asking price
to get a down payment to buy another property
to pay down debt
to ditch the monthly expense associated with owning the house
In other words, seller financing doesn’t just benefit buyers who don’t qualify for (or don’t want) traditional financing. It also benefits sellers, especially those who are particularly motivated to sell their homes.

Advantages for Buyers
Seller financing has many advantages for buyers:

1. The closing process can be faster.
Prudent buyers and lenders will always use the closing period to perform their due diligence. But with seller financing, the closing process can be faster. Willie Kathryn Suggs, the principal broker and owner of the Harlem-based real estate brokerage that carries her name, says that with seller financing, “The deal closes faster as there is no waiting for the bank loan officer, underwriter and legal department to clear the file – a process that in New York easily stretches to two or three months for a row house and longer for a co-op.”
2. Closing costs are lower.
Suggs also notes, “Buyers love [seller financing] because they can get in the home for less money. They do not have to pay the bank fees and appraisal costs.”

3. The down payment amount can be extremely flexible.
Instead of having to meet a bank or government-mandated minimum, the down payment amount can be whatever the seller and buyer agree to. This does not necessarily mean that the seller will accept a down payment that is lower than what the buyer would be required to pay elsewhere, but it’s always a possibility. (You might want to check out 4 Alternatives To A Traditional Mortgage.)

Disadvantages for Buyers
There are also a few potential problems to consider when investigating the option of using seller financing:

1. Buyers should expect to pay a higher interest rate than they would to a bank.
Buyers will have to pay an interest rate that makes the seller want to lend them money over investing their money elsewhere.

2. Buyers will still have to prove that they are worthy borrowers.
It’s one thing if a buyer and seller just want to remove the bank from the equation. However, if a buyer doesn’t qualify for a traditional mortgage, there might be a good reason for that -and a seller may not want to become that person’s lender, either.

3. Buyers need to make sure the seller owns the house free and clear or that the seller’s lender agrees to the seller financing transaction.
According to Jason Burkholder, broker/sales manager and real estate agent with Weichert, Realtors – Engle & Hambright, “most mortgages have a ‘due on sale’ clause that prohibits the seller from selling the home without paying off the mortgage. So if a seller does owner financing and the mortgage company finds out, it will consider the home ‘sold’ and demand immediate payment of the debt in full, which allows the lender to foreclose.”

4. The original seller might sell the promissory note.
It’s not really a big deal if this happens, but it means that the person the buyer thinks he will be making his payments to can change. The same thing happens all the time with traditional mortgages.

Making It Happen
If seller financing appeals to you as a home seller or buyer, how do you make it happen?

Add It to the Listing
As a seller, you can offer seller financing in your listing. Simply adding three words to your listing – “seller financing available” – will alert potential buyers and their agents of the unique option you are offering.
Make the Information Available
When potential buyers view your home, you can leave out an information sheet describing in detail the terms of the seller financing you are offering. It might also be a good idea to describe what seller financing is, since many buyers will be unfamiliar with it.
Ask the Seller to Offer It
Buyers who are looking for seller financing could try just asking for it. Todd Huettner, a mortgage broker and the president of Denver-based Huettner Capital, says, “The secret to getting owner financing done is to present it correctly. Rather than asking if owner financing is an option, buyers should present a specific option. For example, ‘My offer is full price with 20% down, seller financing for $350,000 at 6%, amortized over 30 years with a five-year balloon. If I don’t refinance in two to three years, I will increase the rate to 7% in years four and five.'”
Create a Comfortable Situation
Huettner further advises that buyers paint a picture to make the seller comfortable with offering financing. The seller will want to know why a buyer couldn’t qualify for a mortgage elsewhere, but is still credit-worthy. For example, Huettner says that a potential buyer might have good credit and a good down payment, but may have just started a new business and cannot qualify for a loan for two years. Likewise, sellers must paint a picture to make the buyer comfortable with the arrangement. They should thoroughly explain to the buyer what seller financing is, how it works and why the buyer should consider it.
Because seller financing is uncommon, the buyer and seller would be wise to each consult financial and legal experts who understand how it works before entering into such a transaction. These experts should look out for their clients’ best interests and guide them through the process.

Bottom Line
There’s more than one way to buy or sell a house. Just because your financial situation is a little more complex than traditional lenders prefer doesn’t mean you can’t buy. And just because banks aren’t approving borrowers easily doesn’t mean you can’t sell your house quickly – and for what it’s worth. Seller financing might be just the solution you’ve been looking for. (If you are still on the fence about whether to purchase a property, check out To Rent Or Buy? The Financial Issues.)
Read more: http://www.investopedia.com/articles/mortgages-real-estate/10/should-you-use-seller-financing.asp#ixzz3We91WMeI
Follow us: @Investopedia on Twitter

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Fear of Low Down Payments Mostly Unwarranted




Via; KCM Keeping Current Matters


After it was announced that Fannie Mae and Freddie Mac would again make available mortgage loans requiring as little as a 3% down payment, many people showed concern. Were we going back to the lower qualifying standards of a decade ago that caused the housing market crash? Won’t lower down payments dramatically increase the default rates? Will we again be faced with an avalanche of short sales and foreclosures?

The simple answer is – NO. Let’s look at the data.

While it was happening (2011)

Back in 2011, as we were just recovering from the worst of the Great Recession, many organizations were looking for the cause of the massive default rate on mortgages.

The National Association of Realtors (NAR), the Center for Responsible Lending (CRL), the Mortgage Bankers Association (MBA), the National Association of Home Builders(NAHB), the Community Banking Mortgage Project and the Mortgage Insurance Companies of America (MICA) issued a white paper on the subject titled: Proposed QRM Harms Creditworthy Borrowers and Housing Recovery.

Let’s look what the report says:

“In the midst of a very fragile housing recovery, the government is throwing a devastating, unnecessary and very expensive wrench into the American dream. First time homebuyers will have to choose between higher rates today or a 9-14 year delay while they save up the necessary down payment…

High down payment and equity requirements will not have a meaningful impact on default rates. But they will require millions of consumers, who are at low risk of default, to either put off buying a home or pay unnecessarily high rates. The government is penalizing responsible consumers, making homeownership more expensive or simply out of reach for millions. We urge regulators to develop a final rule that encourages good lending and borrowing without punishing credit-worthy consumers.”

The report actually studied the impact a higher down payment would have had on the default rates of loans written from 2002 through 2008. The report states:

“…moving from a 5 percent to a 10 percent down payment on loans that already meet strong underwriting and product standards reduces the default experience by an average of only two- or three-tenths of one percent… Increasing the minimum down payment even further to 20 percent… (creates)  small improvement in default performance of about eight-tenths of one percent on average.”

Today  (2014)

Just last week, the Urban Institute revealed data showing what impact substantially lower down payments would have on default rates in today’s mortgage environment. Their study revealed:

“Of loans that originated in 2011 with a down payment between 3-5 percent, only 0.4 percent of borrowers have defaulted. For loans with slightly larger down payments—between 5-10 percent—the default rate was exactly the same. The story is similar for loans made in 2012, with 0.2 percent in the 3-5 percent down-payment group defaulting, versus 0.1 percent of loans in the 5-10 percent down-payment group.”

Bottom Line

We believe that the Institute concluded their report perfectly:

“Those who have criticized low-down payment lending as excessively risky should know that if the past is a guide, only a narrow group of borrowers will receive these loans, and the overall impact on default rates is likely to be negligible. This low down payment lending was never more than 3.5 percent of the Fannie Mae book of business, and in recent years, had been even less. If executed carefully, this constitutes a small step forward in opening the credit box—one that safely, but only incrementally, expands the pool of who can qualify for a mortgage.”