What Is A Non-Arms Length Transaction?
This is a fantastic question. Most real estate transactions completed are considered to be an Arms Length Transaction. This means everyone involved is acting independently and have no relation to one another. It i…
We all love to save money! Some of these you may have already incorporated, but I bet you did not know some of these helpful hints!
Via Karen Rittenhouse (Triad Residential Solutions):
30 Ways to Save Money on Utilities
1. Check it out! In many area…
This is such a great analogy of homes that I thought it worthy of a reblog! I love the way Debe is able to take her previous occupation and apply it to the sale of a home!Via Debe Maxwell – Search Charlotte Homes for Sale – Charlotte NC Neighborhoods (…
Not only do families suffer during a turbulent financial situation, but too often the pets of these families suffer as well. If you or anyone you know is unable to care for their pets, please make sure they have proper information on what they can do t…
Considering Strategic Default? Consider This
There has been a long debate over Strategic Default over the last few years. Many discussions from both sides of the equation, some are for, some are against.
Back in November I wrote a post about Strategic…
Short Sale vs. Foreclosure ~ How it Affects Your Credit Score
Many homeowners are still facing tough financial situations. Although there have been positive reports on housing and employment, families are still struggling in todays economy. San Diego has been one of the hardest hit and with the announcement last week of General Dynamics laying off over 1200 employees from NASSCO in July, many will still face the challenge of meeting obligations.
There are many misconceptions as to which may affect your credit score in a more detramental way. Short 
Sale or Foreclosure. According to Fair Isaac, the developer of the software that calculates a score, if the mortgage debt is delinquent, the delinquincy is what causes the credit score to decrease. Both a Short Sale and a Foreclosure are considered “not paid as agreed” and will be scored accordingly and equally.
If you are faced with the potential of being in a position of not being able to make your mortgage payment, the first step would be to contact your lender immediately to see what the alternatives are. Many lenders are participating in new government backed program which was enacted as of April 5, 2010 for Loan Modifications and Foreclosure Alternatives.
If you need assistance or have questions on Loan Modification please give me a call. If you and your lender have determined a Short Sale as the alternative, I am available to assist you through the process.
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to Subscribe to All Possibilities Throughout San Diego or contact me at 619-838-4408.
Selling Your Home ~ The Listing Agent
So you have decided to sell your home. For what ever the reason, you have determined now is the time. How important is it when making a decision on a Listing Agent? In my opinion, this decision is the most 
important in the process. If your Listing Agent does not do a good job, your house will not sell.
Don’t be fooled by an agent who is willing to list your home for the highest price. By overpricing your home, it has the potential of sitting on the market for an extended period of time. You want to SELL your home, not just LIST your home! Ask for the numbers that support the sales price. A good Listing Agent will be able to provide you comparable sales in your neighborhood that justify your asking price. The same goes for a home priced too low. This may guarantee a quick sale, but have you gotten a fair price?
What should you look for when interviewing a Listing Agent?
By taking the time to understand the process and finding a Listing Agent that will work for you will enable you to sell your home for the highest price possible while keeping the transaction on course. An experienced Listing Agent will properly advise you with all the required disclosures while keeping real estate transactions from falling apart, or being brought into court. When selling your home, make sure you have a Listing Agent that will work for YOU, not their pocketbook!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to Subscribe to All Possibilities Throughout San Diego or contact me at 619-838-4408.
Appraiser Can’t Find Comps
I received a phone call from Kevin, a local appraiser here in San Diego yesterday who wanted some information on a listing I had recently closed. Not too strange of a phone call, right? He wanted to know 
condition, any special features, confirm there were no concessions…Of course I helped him out. I would want someone to do the same for one of my buyers trying to obtain a loan.
Then he dropped it on me. Words I have not heard for a LONG time. “I am having difficulty coming up with comps for this property I am appraising……everything I find has sold much higher than the property I need to appraise!”
“KEVIN!” I said, “You may just have to give it a value that is HIGHER than the sales price!” He actually sounded a little stressed. “I know, I think I may have to…” Not too bad of a problem for anyone other than the seller and seller’s agent really. Maybe they needed a quick sale.
GO KEVIN!
Things are looking up when the Appraiser Can’t Find Comps because sales in the area are higher! Haven’t heard that one in a while!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to Subscribe to All Possibilities Throughout San Diego or contact me at 619-838-4408.
The Termite Report
One of the inspections you will most likely get when purchasing a home is a Termite Report. Also called a Wood Destroying Pests and Organisms Report. This report is designed to tell you if the home you are about to purchase has termites or other pests; such as beetles; that may damage the structure.
What are termites?
Termites are small, ant-like insects that feed off of the cellulose in wood. These little pests will burrow and tunnel through wood, eating their way through your home. If they go untreated, they can cause complete destruction of the wooden structure. Not good news.
There are different types of termites. Subterranean Termites which live and move in the ground. Any earth to wood contact provides the perfect setting for the termites to make a buffet of your home. There are also Dry Wood Termiteswhich will colonize in non decayed wood which has a very low moisture content. They will obtain entry to the wood, the queen will lay the eggs and the damage begins. There are also Damp-wood Termites and Powder-post Termites but the most common in California are the Subterranean and Dry Wood Termites.
How are they treated?
There are different types of treatment for each of the different types of termites. The treatment will also depend on the seriousness of the infestation. There are both chemical and non chemical treatments for termites. Fumigation is the most common and effective way to eradicate Dry Wood Termites, although 
microwave and heat are also effective as non chemical treatment.
Subterranean Termites are treated with a soil treatment that requires application directly to the soil in, under and around the structure. Often times the soil treatment may only be applied where the infestation is found and not around the entire building. You may want to get clarification on which procedure is being used to treat the Subterranean Termites found in the report.
Understanding the Report
The scope of the termite report is to identify for the client any condition or damage which is related to termite infestation, wood destroying beetle infestation and fungus infection. Fungus infection is also known as Dry Rot and is caused when the moisture content of the wood exceeds 20 or 30%. This creates a 
fungi that feeds off the cells of the wood. Fungiis treated with borates which are injected into the wood. This treatment will kill the fungi, however, it does not add strength to damaged wood. Most often time the Termite Company will recommend replacement of wood infected with Dry Rot.
Any items found with damage will be identified as either Section 1 items or Section 2 items. Section 1 items are any conditions existing from termite damage, water damage, Dry Rot or active termite infestation. Section 2 items are identified to alert the client of a situation that could lead to future 
damage. Most lenders will require any Section 1 item to be corrected prior to the close of escrow. VA loans will require clearance of both Section 1 AND Section 2 items.
Once the problem has been identified as either Section 1 or Section 2, the company that has prepared the report will usually recommend the proper work necessary to remedy the problem right under the item found. The remedies may include fumigation, localized treatment, wood replacement and further inspection.
Once you have received the termite report, be sure and take the time to review and understand the process necessary to correct the problem. If you have any questions, please be sure and speak to your REALTOR® to help you understand the work being performed. Depending upon how the purchase contract has been written will determine who is responsible for paying for what work to be done. Most times the seller will agree to correct Section 1 items and the buyer would then be responsible for any Section 2 items 
they would like corrected. Prior to the work being completed, make sure all parties understand which items are going to be repaired. If you have determined that you would like the Section 2items completed, make sure that is communicated prior to the work being ordered complete.
After the work has been performed, the Termite Company will go back out to the property and inspect the work that has been completed properly and issue a Termite Clearance.
The Termite Report is an important part of your inspection process. Understand the treatments, the necessary repairs and the type of warranty offered after any work has been completed. Your investment is worth it! Get a Termite Report!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Another Carlsbad Home Pending
With the countdown coming close for the First Time Home Buyer Tax Credit to expire, buyers are making their moves!
My listing at 2352 Altisma Way in Carlsbad has gone pending this week! With a total of 5 days on the market, I can tell the pressure to get into a home is on!
Are you looking for San Diego Real Estate? Let me help you find it before the First Time Home Buyer Tax Credit expires on April 30!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Flipping a home is not as easy as you see on TV! There are some strategies and planning that need to be addressed prior to making an offer on a property you are considering flipping. Deena Cottingham has nailed it with this post. Thanks for the great information Deena!
Home Flip . . . or Flop?? Common mistakes to Avoid when selling a House for profit!
Spring is on the horizon, and with it, it seems like there is a lot more hope in many real estate markets. Here in Calgary, new home starts have nearly tripled compared to this same time last year! That is certainly good news.
With the general consensus being that perhaps the market has seen its bottom, with a slow rise in prices expected, it is a more promising scenario for home flippers to get back at buying and selling real estate for profit.
However, the house flipping industry has seen its share of casualties! If you are contemplating fixing up a house with the intent to sell it for a profit, be on guard against the following common mistakes:
1) Selecting the Wrong Property
Rule #1 for real estate isn’t location, location, location for nothing! You might get a better “deal” upfront on a property that has been difficult to sell – and the seller is now desperate – but be careful you won’t be in the same boat later on. This includes poor location, overall quirkiness, unusual floor plan for the area, or anything that is not easily fixed and would prevent the majority of people from wanting to buy it. Not sure? Consult a professional first.
2) Falling in Love
Getting emotionally involved with the house is one of the most common mistakes amateur home flippers make. Never lose sight of the fact that this is a business deal, pure and simple. Don’t make decisions based on what you’d like to see or you’d like to have in the home. If you won’t get at least double your money back on that tile or appliance decision, don’t put it in!
3) Underestimating the Time Value of Money
The longer you hang onto that property, the more it eats away at your profit. Many home flippers decide that they are going to do some work themselves to “save” on costs (been there, done that!). BIG mistake. Unless you are expertly proficient at the task, hire a professional to do it. They will do a better job, have fewer delays, get it done faster, and won’t create additional problems. (Anyone know what I’m talking about?!)
4) Over Renovating
This is a combination of #2 and #3 above. Your goal is to sell that property quickly, for the maximum profit possible. You are not creating your own dream home. If the maximum profit is attainable with only paint and new carpet, don’t replace the kitchen and bathrooms. Sure you it would look nicer and you might be able to sell it for more, but if your return on investment is lowered . . . and the job starts taking a whole lot longer . . you are making less money on the venture.
You’re better off to sell it with less done to it, and re-invest that money into your next project.
5) Pricing to Cover your Costs
When it’s all said and done, the property is only worth what it’s worth. Regardless of the decisions you made, how much you spent, or how much your carrying costs have added up to, you cannot sell the property for more than its fair market value. Listing high will just take longer to wear you down to that fair market price — increasing your carrying costs more and putting you further into debt.
And once a property has sat for more than a month or two, buyers start to think they can low-ball an offer because they figure you’ll be a more desperate seller (and you are, aren’t you?). That is, if they’ll even look at the overpriced listing in the first place. Many won’t.
Instead, follow the first 4 rules as best you can, and then just sell it. If you aren’t going to make as much money as you had hoped, chalk it up to a lesson learned . . . and move on. No buyer is going to overpay because you made poor decisions along the way.
6) Not Budgeting for Professionally Marketing the Home
Lastly, in order to have your best chances at a quick sale (remember, time is money), don’t forget to get the professionals to help you do this task, as well!
Since your flip is likely to be vacant, get it professionally staged. Home staging will help give those empty rooms scale and purpose; help tell a lifestyle story which also helps create an emotional connection; and will help distract the buyer’s eye from any minor flaws left in the property (don’t hide . . . distract!).
A professional Real Estate Agent will help you get maximum exposure for your property, and give buyers peace of mind about entering into a deal with you. They will also be able to advise you appropriately, preventing other costly mistakes in the negotiating and closing phases of the deal.
Home flipping is a great way to earn a decent income, and can be a lot of fun. Having been there myself, though, I can say that it’s not as easy as it looks on TV, kids! If there is a mantra for house flipping, it should be education, education, education! Know what you’re getting into.
Happy Flipping!
Deena Cottingham
GreenApple Staging & Images
Serving Calgary and Okotoks, Alberta©GreenApple Staging & Images, 2010
All information is copyrighted and may not be used, borrowed or copied without written permission.
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Multiple Offers ~ Make an Offer They Can’t Refuse
With California property values being at the lowest in years, a First Time Buyer Tax Credit of $8000, a 
Move Up Credit of $6500 and low interest rates we have seen a market that has become quite competitive. Multiple offers on properties have become the norm in the San Diego Real Estate Market.
Frustration has hit many of the buyers that are anxious to get into a home as they make offer after offer; only to lose out. The competition is grueling. Many buyers are up against investors with all cash offers or are not moving quick enough to get in the game.
So what does it take to get a deal done? First and foremost, work with a REALTOR®. An experienced REALTOR® can help you navigate through the market, provide you with the tools and knowledge to make a competitive decision and will provide strong negotiating skills. Your REALTOR® has access to closed comparable sales and understands what it takes to write a competitive offer.
In putting together a competitive offer, there are some things you will want to consider:
• Loan Pre-approval~ By having a pre approval for a loan prior to writing your offer, you will be in the best position to know the highest amount you can make your offer. In addition, many sellers are requiring that a pre approval be submitted with your offer.
• Purchase price~ Consider looking at homes with a purchase price below the amount you are pre approved for. This will open up a wider range of homes as well as provide some wiggle room to offer more than the asking price if need be. Prior to offering more than the asking price, consult your REALTOR® to confirm the comparable sales will support the increase in price.
• Who is your competition? With many investors out there presenting all cash, no contingency offers, be prepared to present your highest and best offer from the beginning. Your REALTOR® will be able to assist you in determining how your offer should be written
• Bank owned property ~ Don’t assume just because the property is owned by the bank it will be an easy property to acquire. Often times these properties are listed below market value and many people want to get a good deal. Investors are watching these properties and move quickly in order to flip the property for a profit. Be prepared to make a strong offer. This may entail offering a larger down payment or no closing cost assistance. The more attractive your offer can be, the more competitive you will be in a multiple offer situation.
• Short Sales ~ When making an offer on a Short Sale property, understand the process. In many instances if the seller’s lender is unaware the property has been listed and requiring a short sale. The seller and listing agent will prepare a package for the lender to review for short sale approval. Once the seller has accepted an offer, it will be contingent upon the lender (or lenders if the seller has more than one loan) approval. The time period for approval can range anywhere between 2 weeks and 6 months or longer. Be prepared to wait. Understand the lenders may come back with a counter, even after a long wait period. If there is more than one lender, the 2nd lender may not agree with the amount offered by the first. This makes the negotiation period even longer. In working with Short Sales, you will want to work with a REALTOR® that is experienced in the process.
• Low Ball Offers ~ Don’t assume that in the current market situation it is a good time to make low ball offers. Perhaps you have been watching a property that has had multiple price reductions. Remember, you are not the only one who has been watching this. There may be any number of reasons the property has had price reductions. Work with your REALTOR® to understand the situation and prepare a competitive, attractive offer.
The more prepared you are, the more you are educated, you will be able to work with your REALTOR® and make an offer they can’t refuse!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Selling Your Home~Tips On How To Get Top Dollar
For any number of reasons, you have determined now is the time to sell your home. You want to get the highest amount possible for the place you have called home.
Selling your homeis more than putting a sign in the yard. It is about finding a ready, willing and able buyer to make an offer that meets your vision of what your home’s value is. The first tip is to find a REALTOR® that you are comfortable working with. By having and experienced REALTOR® on your side is the first step in getting top dollarfor your home. Your REALTOR® can provide you with valuable tools and marketing in getting your home sold for the highest price. Granted, there are some outside factors that set the value of your home such as comparable sales, which your REALTOR® will be able to provide you with.
In addition to hiring a great REALTOR®, YOU, the SELLER can do some things to bring about the highest price for your home.
your home does not have curb appeal, they may just drive on by. Even if you do not have the funds to landscape your yard, trim the bushes and trees, pull weeds, and keep the lawn manicured. Plant some flowers. 
a challenge to continue to live your life and have your home on the market. Get every member of the family on board! You never know when someone will want to see your home. Put dishes in the dishwasher, keep the kids toys picked up, make the beds, and clean the cat box. All of these things distract the buyer from seeing what they have come to see; the house!These tips are just a few things YOU, the SELLER can do to get the highest price possible for your home. Together with your REALTOR®, you can work as a team and will have the perfect prescription for a quick, profitable sale! Happy Selling!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
This is a great article on things you can do to ensure getting your security deposit back.
Landlords and Property Managers take note as well. It is a good idea to do an initial walk through with renters. Bring a checklist, go over conditions and note any discrepancies. Both parties should sign and acknowledge.
Then, once the tenant gives notice they are leaving, a move out walk through can be done. Bring the move in checklist and compare! See what areas may need attention. This gives both parties the opportunity to review the condition of the property so there are no questions.
The security deposit is requested to protect the property in case of damages. Neither party wants to have to use it!
The Malibu Real Estate Resource Guide
Malibu California Real Estate ׀ Malibu Homes for Sale & Lease ׀ Malibu Land
Reclaim your security deposit: 10 ways for tenants to ensure a money-back move-out
Getting back a security deposit is no small matter; for most people it’s several hundred dollars that will help them settle into a new place. Here are 10 tips for getting back your deposit, in the order they should occur while renting:
1. Make a move-in checklist. Do a walk-through of the unit, noting any damage, such as carpet stains, damp spots on the ceiling or missing outlet covers. Turn on the appliances, flush the toilets and run the faucets. Photograph the unit, then give your landlord a copy of the checklist and photos. In the unlikely event you have to go to court to seek your security deposit, you’ll need them.
2. Ask permission before making changes. Some landlords are adamant about tenants not changing the unit; others don’t mind as long as it’s back to its original condition on move-out. Even though you believe yourself to be a skilled painter or interior designer, not everyone will share your taste, so ask before you redecorate.
3. Report problems promptly. If you wait until move-out, you may be charged for damage caused by unreported problems, such as leaking toilets. Repairs at short notice will cost more to undertake, which will be reflected in the amount deducted from the security deposit.
4. Return the unit to its original condition, or better. This is the top reason that people get charges against their security deposits. You’re supposed to leave the house in the exact same condition or better than it was when you moved in.
5. Re-read your lease. This is a legally binding contract, and laws vary widely. A month before you give notice to move out, read the lease in full. Review the information on your security deposit, especially any fees that may apply.
6. Give the required notice. If your lease says you must give 60 days’ notice in writing, a phone call as you’re walking out the door won’t cut it. And if you leave before the lease is up, don’t expect the landlord to take your security deposit as the last month’s rent.
7. Do another walk-through.Get out your move-in checklist and schedule a walk-through with the landlord, Cronrod says, to show that the unit has been left in the same condition as when you moved in. Take pictures again. If you have to fight for your deposit, you’ll have proof to back up your claim.
8. Return the keys.This is a common charge deducted from security deposits, Sygit says. Deliver them in person and get a receipt.
9. Don’t leave anything behind. This includes clothes, furniture, food and trash.
10. Provide a forwarding address. Tenants are not entitled to their deposit upon moving out. Many state laws give landlords up to 30 days to return a security deposit – meaning a current address is crucial to receiving your deposit money.
If the landlord doesn’t return your security deposit, and you believe you are entitled to it, take your case to small claims court. Most states require that the landlord list the expenses that are deducted from your deposit. If the charges are in error, if your pictures prove that [the unit] was like that when you moved in, if you have receipts for all your rent payments, go for it. Rip-off landlords need that feedback.
Bobby Lehmkuhl ׀ Bobby@4Malibu.com׀ 310.365.7696 ׀ Broker Lic. #01457517
Danielle Dutcher ׀ Danielle@4Malibu.com׀ 805.341.8769 ׀ Broker Lic. #01463653
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although information has been gathered from sources believed to be reliable, please note that individual situations can vary, therefore, please consult a professional for specific advice.
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Santee Notary Public
Friday as I drove around town looking for a Notary Public I wondered to myself, does EVERYONE have this much difficulty finding a Notary Public in East County? 
Well, I got news for you. Not only am I a great REALTOR, but I am also a Notary Public!
When the local banks started calling me for their Notary Public needs, I was told that their Notary Public was out on maternity leave, did not pass the test or no longer worked there. So I was happy to oblige! I am regularly out and about town, and could always swing by the bank to help them in their time of need. I really had no idea how difficult it was to find a Notary Public, until I needed one!
I have been a Notary Public since 1991. I took the Real Estate Salesperson test and the Notary Public test in the same year and started doing business! Over the years, I have been the Notary Public on hundreds new home buyers loan documents, Notarized Powers of Attorney, witnessed signatures, you name it, I have done it!
Don’t drive all over town. I am here in East County and will come to you in most cases. Don’t do like I did, and spend all of the gas and guessing where I could find a Noraty Public. Give me a call if you are looking for a Santee Notary Public!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Home Inspections~Not only for the buyer!
If you are considering selling your home or currently have it on the market, have you considered a pre-listing Home Inspection? You may ask, why should I spend the money when the buyer is going to get a home inspection anyway? Let’s examine this a little further. You have spruced up your home, given it a fresh coat of paint, planted some flowers in the yard and gotten rid of the clutter. Heck, you may even consider staging the property. Why do you need a pre-listing Home Inspection?
With a pre-listing Home Inspection a Certified Home Inspector will come to your home and perform a detailed inspection of the home and potential areas that may require repair. So how does this help you?
The most important thing in selling your home is finding a ready, willing and able buyer to purchase your home. Once you have an accepted offer, one of the contingencies in the contract is the buyer has the right to inspect the property. If there are items found the buyer’s inspector that they do not want to deal with, they can cancel the contract. You are back to square one. Perhaps there are items found by the buyers inspector that will be very costly to repair. You may not be in a position to repair these items. You may be asked to reduce the purchase price or to credit money at close for the cost of the repairs. This will cut into your bottom line. If you can not come to an agreement, the buyer can cancel the contract. Back to square one.
If you find out prior to an offer of any major problems requiring repair, you will be in a better position to negotiate the best price to sell your home for. In addition, it shows the buyer that you are pro active in selling your home and have made any repairs found in your home inspection and will give the buyer 
assurance the home is sound. Additionally, what a great selling tool for your REALTOR to be able to show potential buyers!
If you do decide to get a pre-listing home inspection, don’t forget the golden rule, you must disclose! Anything you find out in your home inspection, must be disclosed to potential buyers. Again, this may not be a bad thing. It puts you in a position of power. The power to sell your home at the best price, with or without the repairs! If the buyer agrees to the price and already knows repairs have been made or which items may need reepair, you are in the drivers seat!
Don’t get hit with the unexpected and risk the deal going south. Know what you are working with before you get into contract! Consider a pre-listing Home Inspection, it’s not only for the buyer!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Escrow-Who Does What in the process? Whether you are a Buyer or a Seller, the purchase or sale of a home in California goes through Escrow. Escrow is the process of transferring property from one party to 
another. In this process, each party will have items in which they are responsible for.
Escrow Company Responsibility:
Seller Responsibility:
Buyer Responsibility:
Lender Responsibility:
No matter what your role is in the process, make sure your responsibilities are completed in a timely manner. This will ensure the Escrow process can remain on track for your closing date. If you have questions about what you need to do, make sure you talk to your agent or Escrow Officer! Everyone is working toward the same goal; Closing the deal!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
On January 21, 2010 FHA announced one of the many policy changes that will affect home buyers. How will these changes affect you? Let’s take a moment to review.
In the mortgagee letter released on January 21, the first change to be implemented will be the increase of the Upfront Mortgage Insurance premium from 1.75% to 2.25%. This will affect any loan application with an FHA Case Number issued on April 5, 2010 or after. This increase in mortgage insurance premiums has 
been set in place to cushion against rising defaults on FHA insured loans. This money will enable the department to increase their reserves while protecting taxpayers from another bailout of a failing agency.
The amount of the Upfront Mortgage Insurance Premium will still be financed into the loan amount, however, it will increase the monthly payments as the amount borrowed will increase. This will have a small affect on qualifying. For example, on a $250,000 loan, currently the Upfront Mortgage Insurance Premium would be $4375 and after April 5 would increase to $5625.
Additionally, FHA has announced there will be changes which will be implemented by summer on the following items. The mortgagee letter clarifying the changes has not yet been released, but is expected in February.
In addition to these changes, FHA has placed stricter requirements on Lenders making FHA loans to ensure that Lenders are making good credit decisions. FHA will monitor the default rates of loans originated by approved lenders and if the lender is exceeding default limits, their FHA approval will be revoked.
All in all, how will these changes affect you? The increase in Mortgage Insurance and proposed change in MMI will have a small impact on qualifying due to a minimal increase in payment. The seller concessions decreasing will affect the ability to negotiate the payment of closing costs by the seller, but in the big picture, it will also protect the consumer from inflated home values, as usually the concessions were worked into the purchase price of the home.
The good news is most of these changes are a bit in the future! In order to take advantage of the tax credit, you must be in contract before April 30th and close no later than June 30th 2010. So avoid all of the changes, take advantage of the tax credit and find your dream home today!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Looking for money? Well of COURSE Stephanie, who ISN’T looking for money? Well, if you are a California Home Buyer looking for money to assist with down payment or closing costs, you are in luck! There is money available for you!
The National Homebuyer’s Fund Inc. has put together a program for California residents to assist buyers in purchasing a home by providing money that may be used for a down payment and closing costs. This 
program is called ACCESS.
Check out the highlights:
Here you thought you could not own a home because you have no money! Well, stop looking for money! The ACCESS program may be just the thing you have been looking for if you have been looking for money!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Loan Modification is not always as it Appears! I was so surprised last week when I received a call from a friend of mine regarding her mother’s trying times. As a senior who is self employed, the economy, health and family issues have created a difficult financial situation.
Mom has been living in this home for over 30 years. She has raised her children, started a business and is now helping raise her grandchildren in this home. Unfortunately, with the market changes, she has 
negative equity in the home. Recently Mom has had to have surgery which has caused her to be unable to work. One of her children has moved into to help with the monthly bills and her recovery but is still struggling to make the mortgage payments. Sounds like Mom is a perfect candidate for a Loan Modification!
For many months Mom has been making partial payments and the lender has been accepting them! Mom received a call from the lender last week stating don’t bother to make any more payments, we are starting the foreclosure process. WHAT? No Loan Modification attempt? They asked about Loan Modification and were told they do not qualify. But why? You do not meet the guidelines. With more prodding and pushing this is the only answer they were able to get.
Confused, they called to find out what more they can do. We determined that the loan on the property is not currently serviced by FNMA or FHLMC which are the servicers that are required to participate in the Home Affordable Modification Program. (HAMP) Most other servicers are participating, however, see the Making Home Affordable Website for numbers to call to find out if the servicer is currently participating.
With that information in hand, Mom contacted a free HUD-approved housing counselor to see if she would still be able to qualify for the HAMP. After meeting with the HUD counselor, Mom found out the 2nd that she has on the property is not showing on her credit report and the debt is not being counted against her 
income! So it currently looks like she has $100,000 of equity in the property that is not really there, and a hefty payment that is not currently being counted as part of her debts!
The counselor says there is hope! Mom still may be able to get a Loan Modification! The counselor referred Mom to an elder advocate that will be able to negotiate more than the HUD counselor can! By not giving up and not taking “NO” for an answer may help Mom keep her home!
Loan Modification is not always what it appears! If you have been told by your lender that you do not qualify for a Loan Modification, be sure you take the time to explore all of the options before giving up!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Mortgage Guidelines have changed dramatically over the last few years and John Jones has provided a fantastic summary of the changes that have occurred over the last few years. This is valuable information I thought should be shared.
Since the beginning of the financial crisis, several significant changes have occured with mortgage guidelines. A summary of these mortgage guideline changes is imperative to helping consumers understand what changes that have taken place over the last few years may affect their ability to obtain a new mortgage loan.
Contrary to popular belief, the guideline changes have involved a lot more than just higher credit score requirements. In fact, one could argue that credit scores have perhaps been the least significant factor that has changed. This assumption is perhaps my biggest reason for writing this article. Many buyers I encounter today, especially those who monitor their credit score and know they have good credit, are under the false impression that mortgage guidelines are essentially the same as they were a few years ago with the exception of higher credit score requirements. This leads them to assume that they will automatically be approved for a loan.
Perhaps they were able to obtain a mortgage quite easily a few years ago, or perhaps they simply do not understand that credit score is only one of a long list of factors that mortgage lenders consider. The main reason for their misunderstanding is because the media has oversimplified the complexity of the mortgage crisis and constantly portrays it as being caused by “banks giving loans to people with bad credit”. So it’s logical to most people to conclude that credit score requirements have been the only factors that have changed.
Unfortunately this is far from the case. That doesn’t mean that it’s impossible to get a loan nowadays, but buyers need to be aware of the other changes that have taken place with mortgage guidelines. Simply having a good credit score no longer guarantees a loan approval like it did a few years ago.
The subprime mortgage market at one point made up more than half of the mortgage market in the US. Today, it accounts for just a small percentage. Fannie Mae, Freddie Mac and Ginnie Mae now account for over 90% of the mortgage market, with the remaining share consisting largely of jumbo loans held in bank portfolio and hard money loans, which are private mortgage loans made by a variety of different entities.
In other words, FHA, VA, USDA and Fannie/Freddie Conventional loans are about the only game in town, aside from jumbo loans and the small share of hard money lenders that make loans on their own terms. Of course, hard money lenders usually demand much higher fees and interest rates than the government agencies since they are able to provide a loan when nobody else will.
The government agencies guarantee loans made by banks, they do not loan the money themselves directly to consumers. But they purchase the loans from the banks once the loan has been made to the consumer. So banks will typically not lend outside of these guidelines since they do not wish to hold these loans on their books. They would rather transfer the risk and make loans to new customers by sellling them to Fannie Mae or Freddie Mac.
Here’s a summary of changes that have taken place in mortgage guidelines over the last few years:
MOST SIGNIFICANT CHANGES:
ELIMINATION OF VIRTUALLY ALL STATED INCOME AND NO DOC LOANS
Stated income loans were originally designed as a way to simplify the mortgage approval process for self-employed borrowers who had to provide a significant amount of paperwork (tax returns, etc). Over the last several years, many lenders dropped the down payment requirement for stated income loans from 20% all the way down to 0% while at the same time eliminating the requirement to actually verify the borrower had a business in the first place.
Then came “no doc” loans, where the borrower simply had to provide their name and a social security number. At one point, a buyer with a 680 credit score could purchase a $750,000 home with no money down with no verification of employment, income or assets. Needless to say, these loans mostly resulted in foreclosure and massive losses to the investors.
WHAT’S DIFFERENT NOW?
Most states have passed laws that completely outlaw stated income loans. Furthermore, banks realize that loans made to individuals that can’t document their income through traditional means (W-2′s, tax returns, etc) have a much higher instance of foreclosure. Fannie Mae no longer purchases stated income loans. The only option most homebuyers have who can’t document their income is to seek financing from a hard money lender who is willing to take the higher risk. The rates and fees are typically much higher than government insured loans.
MANY 100% FINANCING PROGRAMS HAVE BEEN ELIMINATED
A few years ago, subprime loans allowed buyers with credit scores as low as 560 (in some cases 500) to obtain a 100% loan. Also, there was a loophole in the FHA guidelines that allowed buyers to obtain a “gift” from the seller to circumvent the 3% down requirement. Fannie Mae also had a variety of 100% loan programs.
WHAT’S DIFFERENT NOW?
Fannie Mae now requires a minimum of 3% down. FHA down payment requirements have been increased to 3.5% and the loophole allowing sellers to pay their down payment has been eliminated. 100% subprime loans have been gone for several years now, and 100% stated income loans have been retired to the graveyard of history.
PROGRAMS THAT STILL ALLOW 100% FINANCING include the USDA loan program and the VA loan program. Some government grants also may be used for down payment, but these usually have very strict income requirements. The USDA loan has some specific loan guidelines and, more importantly, geographic restrictions. 100% VA loans are still available to qualified veterans. And surprisingly, the guidelines for VA loans have changed very little. This is likely due to the fact that VA analyzes income more closely than other types of loans, which has led to fewer losses compared to subprime and conventional loans.
GUIDELINES FOR BUYERS WHO WANT TO KEEP THEIR CURRENT HOME AS AN INVESTMENT PROPERTY, SECOND HOME OR SELL THE HOME AFTER CLOSING ON THE NEW ONE
A few years ago, most buyers who wanted to purchase a different home (move-up) or even downsize to a smaller home would simply lease their current home and provide a copy of this lease to their lender to offset their mortgage payment. Then once the foreclosure crisis picked up steam, lenders began to notice that a significant amount of foreclosures were occuring on homes where buyers had purchased another home and simply let the first home go into foreclosure. This was even happening on many buyers who had perfect credit. This tactic, known as “buy and bail”, began causing a massive amount of losses to mortgage companies. Even many buyers who intended on keeping their home as an investment property or who were planning to sell the home shortly after closing on the new one began falling behind because of a slowdown in the market.
WHAT’S DIFFERENT NOW?
Homebuyers who want to keep their current home may not be able to simply show a lease to offset the payment. Fannie Mae, in most cases, requires the buyer to prove they have at least 30% equity in their current home in order to offset the current payment with a lease. They also may be required to show at least six months payment reserves for both the current and new home. FHA also requires 25% equity, unless certain conditions exist (such as moving to an area that’s not within reasonable commuting distance). Proof that the first month’s rent and/or security deposit has been obtained is often required as well. Homebuyers that are upside down on their current home or who do not meet these equity requirements may still be able to obtain a new loan provided they qualify with both mortgage payments.
RESERVE REQUIREMENTS
During the subprime boom, many lenders relaxed or completely eliminated requirements that borrowers have reserves in the bank after closing. Statistically, buyers are much more likely to have problems paying their mortgage without at least some cushion to fall back on in case of a financial hardship, such as job loss, etc.
WHAT’S DIFFERENT NOW?
While most loans do not have specific requirements for reserves, some lenders now require reserves for buyers with lower credit scores, as well as in certain situations where the overall risk of default may be higher. A good example is buyers that are keeping their current residence, as described above. In general, buyers who have little or no reserves will find it harder to obtain a mortgage.
DEBT TO INCOME RATIO LIMITS
The debt-to-income ratio is defined as the ratio of total monthly obligations compared to total gross monthly income. So a homebuyer who makes $5000 per month but has $2500 per month in debts, including the proposed new house payment, would have a debt ratio of 50%. Debt ratio requirements during the subprime boom were often allowed to exceed 60 or 70% and were completely ignored in many cases.
WHAT’S DIFFERENT NOW?
Fannie Mae recently changed their maximum debt-to-income ratio to 45% from 50%. Many lenders may also have an arbitrary requirement regardless of whether or not the loan program guidelines do or not. The automated underwriting systems have tightened the maximum debt-to-income requirements in many situations. While credit score may help to increase a buyer’s allowable debt ratios, having a high credit score alone does not guarantee an approval.
OVERLAY (ARBITRARY) GUIDELINES
This is perhaps becoming the most significant change that is affecting many loan applicants. An overlay guideline is essentially a guideline imposed by a lender that is over and above the loan guidelines themselves. For example, FHA does not have a minimum credit score requirement per se. However, I’m not aware of any lenders that do not have some kind of minimum credit score for FHA buyers. Why do lenders do this? Because even though an agency such as FHA or Fannie Mae may guarantee a loan, that doesn’t mean the lender will not incur a loss if the buyer fails to make their payments. Therefore, lenders will often analyze the loans they’ve originated in the past and impose certain requirements that may be over and above the requirements set by the federal agency that insures or guarantees the loans.
WHAT’S DIFFERENT NOW?
Most lenders have a minimum credit score requirement of 600-620 for FHA loans. Also, some lenders may either require a second-level signature from upper management on loans that are deemed to carry a higher risk of default, such as for buyers with high debt ratios, low reserves, a spotty employment or income history or buyers that are purchasing a home that’s in an area where real estate values have declined significantly.
OTHER CHANGES:
HIGHER INTEREST RATES FOR BUYERS WITH LOWER CREDIT SCORES AND LESS MONEY DOWN
Fannie Mae began this trend a couple of years ago by instituting “loan level price adjustments” for buyers with less than 740 credit scores and who were putting down less than 40% down (yes, 40%). Although the adjustments to the rate are very minor at this level, buyers with less than a 680 credit score and less than 20% down may see a significant adjustment to either their rate or to their closing costs. And since many buyers assume the rate they see advertised is the rate everyone gets, they may budget the cost for their new home based on a rate that is not obtainable based on their situation. Furthermore, many companies are now imposing rate adjustments to buyers seeking government loans (FHA, VA and USDA).
MORTGAGE COMPANIES THAT ADVERTISE RATES ON THE INTERNET, TV AND RADIO DO NOT TAKE THESE PRICING ADJUSTMENTS INTO ACCOUNT. Most advertisements disclose somewhere in their fine print that the rates they advertise assume a credit score of 740 and a 20% down payment. So don’t assume the rate you see is the rate you’re going to get until a loan officer has a chance to fully qualify you by obtaining a full credit report and also an analysis of your current situation and income.
TOUGHER APPRAISAL REQUIREMENTS
Lenders require an appraisal to be conducted on virtually all home purchase transactions to ensure that the price a homebuyer is paying for a home can be justified with recent sales data. This protects lenders collateral position in case of foreclosure. In past years, loan officers would simply call their favorite appraiser and request an appraisal.
Because of perceived conflicts of interest with this process, a new process was created called the Home Valuation Code of Contact, which restricts loan officers and production staff from communicating directly with an appraiser. The result has led to longer waiting periods to obtain appraisals and sometimes inaccurate appraisals since the management companies often select appraisers that are unfamiliar with an area. Since the appraisals are now ordered through appraisal management companies, this extra step means extra time (and money in many cases) for home buyers.
LONGER WAITING PERIODS
The Federal Reserve recently amended the Truth In Lending laws. Buyers now must wait at least seven days to close after the full terms of their proposed loan have been delivered and disclosed to them. Furthermore, if the terms of the loan change (which is sometimes not the fault of the lender and may be the result of a change outside of everyone’s control), the buyer must wait another three days to close.
While this may seem like nothing to worry about, keep in mind that the sales contract in Texas calls for a certain specific closing date. If the buyer fails to close by this date, even as the result of a federally mandated waiting period, the seller has the option of terminating the contract at their sole discretion in the State of Texas. These waiting periods can often become an issue and put buyers at risk of potentially losing the contract on their home if they wait too long to select a lender. The days of five day closings are a thing of the past, and the process of the new appraisal requirements can also cause additional delays as well. The bottom line is that homebuyers need to shop for their loan well in advance of shopping for a home to avoid any potential delays.
So in conclusion, the changes that have taken place in mortgage guidelines over the last few years have been a lot more than just higher credit score requirements. In fact, the minimum credit score of 620 that most lenders require to obtain an FHA loan is not much higher than it was a few years ago. The most significant changes have occured in the more detailed guidelines that most buyers may not even realize exist. And while it’s certainly safe to say that many changes have taken place, it’s certainly not impossible to obtain a loan if these situations can be overcome.
But waiting until the last minute to consult with a lender is a mistake that will cost many homebuyers the opportunity to qualify for a home loan. If you are considering purchasing a home, please contact me today so I can evaluate your situation and put you in touch with a lender that can consult with you at no charge to evaluate your options.
John Jones, Realtor
The Kaul Group – Keller Williams Elite, Dallas / Park Cities
8201 Preston Road Suite 265
Dallas, TX 75225
Dallas, TX Real Estate and surrounding areas of Richardson, Plano, Addison, Frisco, Carrollton, Farmers Branch, Garland, Allen and Irving.
Dallas, TX neighborhoods and subdivisions of Lake Highlands, White Rock Lake, Lochwood, Eastwood, L Streets, M Streets, Hollywood Heights, Lakewood, Coronado and Gastonwood, Forest Hills, Preston Hollow.
Copyright 2009 by John Jones, All Rights Reserved. You may reblog or republish with links back to this post.
* THIS ARTICLE WAS ORIGINALLY PUBLISHED AT http://dfwhomefinder.info *
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
You may be in a position where you need to sell your home but in doing so, you would have to either come in with money or short sell the house. So you may be thinking of what other alternatives may be available-like renting your house out.
Chris Comberrel has some interesting statistics on the advantages or disadvantages you may want to consider when making the decision to rent out your home.
A client of mine paid $590,000 for a 1,100-square-foot condo in The Woodlands, Texas two and the half years ago, but housing values have fallen so far that she figures such a move would lock in a $200,000 loss.
She has moved back into a home she still owns in the historic Houston Heights and would love to unload the condo.
The good news is that there is a light at the end of the tunnel. A real estate agent recently informed her that the condo can fetch $3,300 a month in rent. That’s enough to cover her mortgage and property taxes. She decided to lease out her condo until values rebound.
“It’ll be a tax writeoff,” she says.
No less a financier (and former do-it-yourself tax preparer) than Treasury Secretary Timothy Geithner is leasing out his Mamaroneck, N.Y. home after failing to get for it a bid he was willing to accept. If you’re one of the hoard suffering real estate buyer’s remorse, you too may be able to turn a modest profit renting out your albatross of a residence. How can that be? Thank the trove of tax breaks for residential landlords.
The first step in figuring out whether renting makes sense is to find out how much your place is worth. An appraisal is a must, but written statements from a few Realtors will do while they agree on the value and stipulate how much is attributable to land and how much to the building. (The appraisal, as you’ll see later, is essential for two separate tax calculations.)
The next step is to see how much the property will fetch in monthly rent and weigh that against the costs and tax consequences. As a landlord, you can’t claim mortgage interest as an itemized deduction on Schedule An of your tax return. Instead, you deduct interest costs, plus property taxes, monthly condo fees, insurance and anything you pay to a property manager (most charge 10% of rent) against rental income on Schedule E. You can also expense travel and other costs you incur to look after the property.
The other big tax deduction for landlords is depreciation. The tax code allows you to divide the value of your building (but not the land) by 27.5 and to claim the result as an annual depreciation expense. Here’s the first place that the current appraisal comes in. When you convert to a rental, your depreciation is based on the cost of the property plus improvements or its market value at the time of conversion–whichever is less.
She must use the $390,000 fair market value of her condo, not the $590,000 she paid. Assuming that 10% of the $390,000 is attributable to land under her building, the depreciation expense comes to $12,764 annually (and reduces her cost basis by the same amount). Other expenses added and the total is likely to exceed her $39,600 gross annual rental revenue. Almost any residential landlord with a mortgage is going to be in that boat.
The amount by which expenses exceed rent is a tax loss that can be used to shelter up to $25,000 in other income–say, from your salary–if your adjusted gross income is $100,000 or less. (The same cutoff applies to both singles and couples.) Above $100,000 the break is phased out, and it disappears completely at $150,000.
If you happen to be a real estate professional–defined as someone spending at least 750 hours a year, and at least 50% of his working time, in the business–then your career managing property becomes an “active” one and your losses are fully deductible against other income. If you fail the income test or to qualify as a pro, your rental losses don’t go entirely to waste. The net loss gets carried forward and deducted if and when you dispose of the loser real estate or you have gains from passive investments. These gains could be from selling the property in question at a capital gain or from owning other passive investments, like oil wells.
Note that “passive” is a term of art in the Internal Revenue Code and does not cover portfolio investing (stocks and bonds). So if you collect $30,000 from stock dividends and have a $30,000 loss on Schedule E, you can’t net one against the other. But you can wise up, sell the stocks and use the proceeds to pay off the mortgage. At that point you’re probably out of the loss column on the rental and pulling real cash out of the property. A good part of the cash return will be sheltered from taxes by your depreciation deduction.
How are gains taxed when you sell a converted property? A lot depends on timing. If you lived in the property for at least two years and then rented it out for less than three, you may be able to use the provision that excludes $500,000 in gains from the sale of a principal residence, per couple, from tax. (You’ll still owe gains tax on the amount claimed as depreciation.) If you sell at a loss, the only deductible portion is the loss occurring after you converted the house from personal to income-producing use. The appraisal is crucial here.
My client is hoping that sales prices will rebound in two years. Assume instead that they slide and she clears only $340,000, or $50,000 less than what her Realtors said her condo was worth when she converted it to a rental. Her tax basis in the property will be $364,500 (the $390,000 minus $25,500 for two years of depreciation). She’d be left with a $24,500 capital loss she can use to shelter taxable gains on other investments. Also, she could then claim any passive losses she couldn’t use before.
Renting does present problems. You must either maintain a property yourself or pay someone else to do it. Tax and real estate experts warn against hanging on to real estate if rent falls far short of your pretax, out-of-pocket costs. In other words, look to the tax benefits to sweeten the deal, not drive it. As always don’t take my word for it, check with your tax expert or CPA to assist you in your specific situation.
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
One of the questions that comes up in purchasing real estate is how to hold title to Real Property. In making this determination, there are many items you will want to consider; especially if there are multiple parties buying property together. Take the time to understand how each will affect you in the areas of your ability to transfer title, disposition of property in the event of a divorce or death or exposure to creditor claims. In addition, the manner in which you hold title may also affect property taxes, income taxes, 
inheritance and gift taxes as well as probate issues upon death.
If you are purchasing real estate as an individual, there are a few different forms of ownership.
When purchasing a home with multiple owners; your spouse, business partners or family members there are also ways to hold title that may determine percentage of ownership and how property will be disbursed upon death of one of the title holders.
Title may also be held in the name of a trust, corporation, partnership or LLC. Check with your lender prior to making a determination on one of these ways to ensure they will allow you to hold title in any of these manners.
How you determine you are going to hold title may be based on many factors. You will want to examine all tax consequences, survivor benefits and family circumstances prior to determining how you will hold title. Depending upon the state you are purchasing property in you will want to be sure how the laws apply.
You should not allow anyone other than your attorney of financial planner to advise you on how to hold title to real property. If you are unsure, please discuss the implications with an attorney. you would not want to make a decision that may affect you negatively tax wise or your heirs upon death.
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
One of the first things you will be doing in your new home search is getting pre-approved for a mortgage loan. While going through this process, you will come across financing terms that you may not be familiar with. Your understanding of these financing terms will help you make an educated decision on what the best loan for you will be. In addition, while speaking with your loan officer, it is important you understand
the process. Understanding some of the financing terms will help make sense of all that is going on.
• Adjustable Rate Mortgage (ARM)~ This type of loan has an interest rate that will adjust after a pre-determined period of time. The time periods can range from 6 months to 10 years.
• Amortization ~ the way a loan is paid off, with regular payments over a specific period of time. Payments must be sufficient to cover both principal and interest.
• Annual Percentage Rate (APR)~ the actual interest you are paying which factors in fees, points and other costs paid for obtaining the loan
• Appraisal/Appraised Value ~ A report completed by a qualified professional that makes a complete market analysis of a properties surrounding area to determine a reasonable value for a home. Based on comparable properties that have recently sold.
• AUS/DU/LP~ Automated Underwriting System/Desktop Underwriter (FNMA)/Loan Prospector(FHLMC) Using completed loan application information, an automated underwriting systems retrieves relevant data, such as a borrower’s credit history, income information, asset information and arrives at a logic-based loan decision.
• Buy Down ~ Money paid to “buy down” an interest rate. Interest rates may be permanently bought down by paying points or temporarily bought down 1 year, 2 years or 3 years. Example: interest may start at 3% for the first year, 4% for the second year 5% for the remaining life of the loan.
• Caps ~ Both payment and interest rate safeguards set in place for an ARM loan that will not allow a payment or interest rate to increase over a certain amount in a given time period.
• Certificate of Eligibility~ Document given to qualified Veterans that show their eligibility to use the benefit of a VA Home Loan.
• Closing ~ The date written into your offer as when the escrow will be completed. Money will be transferred to the seller. Close of Escrow date.
• Closing Costs ~ Expenses over and above the purchase price of the property for lenders fees, appraisals, property taxes, escrow and title fees.
• Conventional Loan ~A mortgage loan that is not insured or guaranteed by a government entity. A loan that will meet guidelines set forth by FNMA (Fannie Mae) and FHLMC (Freddie Mac) (also known as a conforming loan)
• Credit Report ~A detailed report of all loans, credit cards, car payments and the payment history for each. Will include all current and closed accounts. Will also include any liens or judgements in public record.
• Credit Score~also known as FICO score. Based on the information in your credit report, it is a statistical summary of the payment history. It is a mathematical summary calculation that gives numerical values to information in the credit report. YOUR CREDIT SCORE IS AN IMPORTANT FACTOR IN OBTAINING A MORTGAGE LOAN
• Debt to Income Ratio (DTI)~ This figure is calculated by taking any long term monthly debt and dividing it into your gross monthly income to determine affordability.
• Deed of Trust ~ Document executed by the borrower evidencing the debt owed to a lender. This document is recorded with the County Recorder’s Office and will be public record of the debt.
• Discount Points ~ Prepaid interest based on 1% of the loan amount for each point. Paying discount points will help lower the interest rate being negotiated.
• Earnest Money Deposit~ Money given by a buyer to a seller to bind the contract. This money is held by the Escrow Company and will be applied to down payment at the close of escrow.
• Escrow~ A third party intermediary who will hold and disburse funds in the transaction. The Escrow Company will assist in getting paperwork signed and arrange the recording of documents.
• FHA Loan ~ A mortgage loan insured by the Federal Housing Administration. FHA loans have their own underwriting guidelines that must be met, but may also be underwritten by an automated underwriting system.
• Fixed Rate Mortgage ~ A mortgage loan where the interest rate will remain consistent throughout the life of the loan.
• Impound Account ~ An account set up for the buyer by the lender to collect monthly payments that will cover property taxes and insurance. The lender will pay these installments when they come due.
• Jumbo Loan~ A mortgage loan that is higher than the conforming loan limits that are set by Fannie Mae and Freddie Mac
• Loan Origination Fee ~a percentage of the loan amount charged by the lender to originate the mortgage loan.
• Loan to Value (LTV) ~ Based on the appraised value of the home, the amount of money borrowed. Example: A loan with 20% down payment would equal an 80% Loan to Value ratio.
• Lock or Rate Lock ~ An opportunity to lock in a certain interest rate for a period of time. Usually between 12 and 45 days.
• Mortgage Insurance, PMI or MIP~ insurance to protect the lender in the event of default required on any loan with less than 20% down. Please see a more detailed explanation in my post on What is PMI
• Note~ A written promise to pay back money borrowed from the lender. This will include the terms of the loan, interest rate, payment dates, lender and borrower.
• PITI~ abbreviation for describing a total monthly mortgage payment that includes Principal, Interest, Taxes and Insurance.
• Prepayment Penalty~ A penalty charged by the lender for paying off or paying down a loan prior to a specified date. Not as common today as in the past. It is important to ask if your loan has a prepayment penalty.
• RESPA (Real Estate Settlement Procedures Act)~ The requirement for lenders to provide detailed information to the borrower in advance of what closing costs are to consist of.
• Title Insurance~ An insurance policy issued by a Title Company that may cover the lender and the buyer in the event of unfound claims against the property.
• Truth In Lending (Reg Z) ~ Federal law requiring the lender disclose the annual percentage rate (APR) to the buyer.
• Underwriting~ A decision made to lend or not to lend money based on information provided by the borrower regarding income, employment, assets and liability. The property will also be considered in the underwriting decision. Condition and loan to value will be evaluated.
• VA Loan~ A loan guaranteed by the Veterans Administration available to qualified veterans. May require no money down.
This is a short list of financing terms that will at least help you more fully understand the basics of the loan process and some of the forms that will accompany your process. Be sure to ask questions on anything you do not understand, continue to ask until you do. We are so used to talking to people in our industry on a daily basis that often times the terms and phrases that are used are just assumed to be known to the lay person. You should feel comfortable throughout the process you know what is going on.
For information on choosing a lender, please see my post on the Importance of a Good Lender. Happy House Hunting!
Making the Home of Your Dreams A Reality. As your Agent of Possibibility it is my intent to make your home buying or selling process a smooth one!
Please feel free to subscribe to my blog or contact me at 619-838-4408.
Stephanie Reynolds 
Colleen Mitchell 
