Tuesday, June 30, 2009

Does it matter what day I close?

Because you will pay interest, taxes and insurance from the day you close, you would probably prefer a closing that dovetails with your present lease or mortgage so that you won't pay expenses on two different places for part or all of a month. On the other hand, you may want a few days with the new house vacant, for painting or other projects.

If you're placing a new mortgage, you'll be asked to prepay interest for the rest of the present month, to bring you up to the lender's usual "first of the month" bookkeeping. That means if you close early in the month, you'll need that much more cash. It isn't really an extra cost, of course, because you'll own the property from that day on. Still, between that and the rent you're paying, you might prefer to buy toward the end of the month.

You won't, by the way, need to make any mortgage payment on the first of the next month because mortgage interest is normally paid in arrears (the opposite of in advance). Close in June, prepay interest up to June 30th, and you won't owe any July payment because that would have been for use of the money during the month of June, and you paid that at closing. Your first payment will be due in August and will cover July's interest.

Sunday, June 28, 2009

This Month In Real Estate

This Month In Real Estate (US): June 2009
CLICK HERE to watch the youtube clip!

Each month, This Month in Real Estate provides expert opinion and analysis on real estate trends across the nation. The aim of the consumer-oriented segments is to provide real information on real estate.

Thursday, June 25, 2009

What Is A Point?

What is a point?
A point is equal to 1% of the amount of the loan.

Why do lenders charge points?
Whenever governmental regulation, state usury laws and/or competitive practices prohibit the lender from charging a rate of interest which would make the real estate loan competitive with other fields of investments, the lender must seek some method of increasing the yield for the investors. By charging “points” the lender can bring the real estate loan up to those other investments.

Are points called anything else?
Yes, they are sometimes called the Loan Origination Fee, Commitment Fee, Discount Fee, Warehousing Fee, and Funding Fee.

Who pays the points?
FHA: The buyer is usually charged with the Loan Origination Fee. The Discount Fee can be paid by the buyer or the seller or can be split between both.

VA: The same as for FHA.

Conventional: Points can be paid by the buyer, seller, or split between the two. State it specifically in the contract!

Do the number of points charged fluctuate?
Yes. If rates on mortgage loans are lower than other investments then funds will be drawn away from the mortgage market. Also, when there is a heavy demand upon the money market because of business needs, military requirements or other government borrowing, the result is that money for home mortgages becomes scarce and therefore, more expensive. When this occurs, more points can be charged. Points balance the market. Points are not set by government regulation but are set by each lender individually.

Are points tax deductible?
Points on a home mortgage (for the purchase of, and secured by, the taxpayer’s principal residence) are deductible currently if points are generally charged in the geographical area where the loan is made and to the extent of the number of points generally charged in that area for a home loan. If you are in doubt about points being deductible you should contact your tax accountant

Tuesday, June 23, 2009

Predicting Your Monthly Payment (The PITI)

Your monthly payment (PITI) is the sum of four items - the principal on the loan (P), the interest on the loan (I), property taxes (T), and homeowner’s insurance (I). To predict your monthly payment for a 30-year fixed rate loan, use the following table to determine the principal and interest part of the payment. Simply divide the loan amount by 1,000 and then multiply that figure by the appropriate interest rate factor from the table below. To that sum, add 1/12th of the amount of your yearly taxes and 1/12th the amount of your yearly insurance premium; this will give you your PITI payment.

For example: If your mortgage loan amount was $150,000 your monthly PITI would be:

$150,000 divided by 1,000 equals 150. If your interest rate is 12% you would multiply 150 by 10.29, resulting in a value of $1,542.50. Add your monthly insurance premium (approximately $25-$75 per month) and your property tax to your principal and interest and this is your monthly payment.

All property owners must pay general real estate taxes. These taxes are also called “ad valorem” taxes because the amount of the tax varies, according to the value of your property. General real estate is levied for the operation of various governmental agencies and municipalities. Other taxing bodies may include school districts, drainage, water, sanitary and recreation districts.

Each agency or municipality determines how much money is needed for the budget. They receive these funds through mills levied against properties in their counties. The state limits how much the mill levy can increase each year without voter approval. Each mill is equal to one-thousandth of one dollar ($.001) of assessed value or $1 for every $1,000 of assessed value.

The actual tax is calculated by multiplying the assessed value by the current mill levy. General taxes are a lien against your home as of January 1st, the year of the tax, even though in Indiana they are not due until the following year.

Properties are valued or assessed by the county assessor. The land and buildings are usually assessed separately. The assessed value is approximately 12-15% of the true value (percentage value is determined by state law.) If an owner feels the assessed value of their property is incorrect, they can present their objection through the local taxing authority on an annual basis.

Wednesday, June 17, 2009

Step-By-Step Loan Process

The first step — find a lender you can trust

In the home buying process you need to find an experienced lender at the same time as you begin to work with your REALTOR®. You begin the mortgage process at the same time as you begin looking so you know the value of the home you can qualify to purchase. Roger can recommend a trusted, qualified lender.

The next step — processing your loan application

The lender begins processing your loan application, ordering credit reports, and performing verifications. This is the pre-qualification phase. Therefore, when you go looking for your dream home, you know how much you can spend for it!

Final lender pre-qualification — the search is on!

When you have final lender pre-qualification you can seriously concentrate on finding a home that you know you qualify to purchase immediately.

Under contract — title work begins

Now that you have a home under contract the lender processes the necessary paperwork. In the meantime, the title company begins the searches and processing the title work.

Underwriting — final approval

When your application is completed and verified, the file goes to the Underwriting Department for final approval!

Getting the keys to your kingdom — Now it is yours!!

With the loan process completed, you are ready to go to your closing and secure the keys to your new home. Your next steps will be over the threshold of your new home!

Monday, June 15, 2009

Understanding What Debts Count Against Me

Lenders give consideration to present debts, or liabilities. Depending on the type of loan for which you apply, a lender will count any debt on which you must pay for more than 6 months. Car loans are among the most common liabilities in this category.

Before you arrive for mortgage application, list your liabilities, including loan numbers, monthly payments, balances and time left to run. Student loans are considered obligations if payments are presently due. Child support or alimony is considered an obligation.

Watch out for credit cards. Some lenders, for certain mortgage plans, may consider that you are liable for the potential full borrowing power on each of them. That can be true even if you carry no balances.

Your assets, debts and income allow the lender to judge whether you can make the proposed mortgage payments. The final question is : are you not only able but willing to meet your obligations? That's where your credit history comes in.

It is essential to divulge information about past credit problems frankly during your interview. You should have already discussed judgments or bankruptcies with the real estate agent during your first meeting. Such problems won't necessarily prevent you from obtaining a mortgage, but if the lender's checking turns up any lies, you're in trouble.

If you've never borrowed money, don't worry. An old wives' tale says you must take out a loan and repay it to establish credit. Lenders know, though, that you've been around long enough to get into trouble if you were going to. No credit history is considered good credit.

Saturday, June 13, 2009

Loan Application Checklist

□ Picture ID with social security number of borrower and co-borrowers
□ Payment to cover the application fee
□ Name and complete address of all landlords for the past two years

□ Employment history for the past two years including names, addresses, phone numbers, and length of time with the company
□ Copies of your most recent pay stubs and W-2 forms (past two years)
□ Verification of other income (social security, child support, retirement)
□ If self-employed you need copies of the past two years signed tax returns including all schedules, and a signed profit and loss statement of the current year. Retirees need tax returns for the past two years
□ If you have rental property income bring a copy of all lease agreements

□ Copies of all bank and credit union statements for the past three months
□ Copies of all stock/bond certificates and/or the past three statements from all investment and retirement accounts
□ Prepare a list of household items and their values
□ Copies of title documents for all automobiles, boats, motorcycles, etc
□ Face amount, monthly premiums and cash values of all life insurance policies. (Cash value may be used for closing costs or down payments. You need documentation from the carrier indicating cash value.)

□ Credit cards (account numbers, current balances, monthly payments)
□ Installment loans (car, student, etc.) Same details as for credit cards
□ Mortgage loans (property address, lender with address, account numbers, monthly payment and balance owed on all properties presently owned or sold within the last two years.) Bring proof of sale of property sold
□ Child care expense/support (name, address, phone number.)

□ Bankruptcy - Bring discharge and schedule of creditors
□ Adverse credit - Bring letters of explanation
□ Divorce - Bring Divorce Decrees, property settlements, quit claim deeds, modifications, etc., for all divorces by yourself or your spouse
□ VA only - Bring Form DD214 and Certificate of Eligibility
□ Retirees - Bring retirement and/or Social Security Award Letter

Friday, June 12, 2009

How Much Home Can You Afford?

When you are ready to begin looking at various houses to find your dream home you need to prepare all of the necessary materials to present to the lender. Your lender will tell you exactly what you can afford so that you do not spend time looking at “too much” home. There are three key factors that you will need to consider when determining how much home you can afford. These are the down payment, your ability to qualify for a mortgage, and the closing costs associated with your transaction.

Down Payment Requirements:

Most loans today require a down payment of between 3.5% and 5% depending on the type and terms of the loan. If you are able to come up with a 20% down payment you may be eligible to take advantage of special fast-track programs and possibly eliminate mortgage insurance.

It is often thought that bigger is better when it comes to down payments. In many cases this may be true. However, the arithmetic will differ from case to case. A bigger down payment means smaller monthly payments, and lower interest expense for as long as you remain with a mortgage. This can be an important factor for many people.

But if you can put your available funds to work for you, so that they can earn more than the interest rate on your loan, you could be dollars ahead with a smaller down payment. Also, a smaller down payment may allow you to keep your extra cash liquid and available for an emergency.

Closing Costs:

Don’t forget to think ahead carefully. In addition to the down payment on your dream home, you will be required to pay fees for loan processing and other closing costs. These fees must be paid in cash at the time of the final settlement, unless you are able to include these in your financing. Typically, total closing costs will range between 1-2% of your mortgage loan. A more detailed schedule will be available from your lender.

Qualifying for the Mortgage:

Most lenders require that your monthly payment ranges between 25-28% of your gross monthly income. Your mortgage payment to the lender includes four items -- the PITI. These items are discussed in detail on a following page entitled “Predicting your monthly payment -- the PITI.” Remember, when you buy a home all interest is tax deductible so you will qualify for a major tax advantage that will effectively increase your take-home pay. Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% of your gross monthly income. This is a general rule of thumb, but other key factors specifically determine your ability to qualify for a home loan. These factors are:

History of employment, stability of income, potential for future earnings, education, vocational training and background, and any secondary income such as bonuses, commissions, child support, etc.

Credit Report:
History of debt repayment, total outstanding debt and total available credit. If you have concerns about your credit record consider contacting one of the major credit bureaus for a copy of your file: Equifax (800) 685-1111; TRW (800) 392-1122; and Trans Union (312) 408-1050.

Cash on hand, other liquid assets such as savings, checking, CDs, stocks, etc.

The home you are buying must be appraised to determine that it has adequate value and is marketable to ensure it will secure the loan.

Thursday, June 11, 2009

Glossary of Real Estate Brokerage Relationships

In Indiana, real estate brokers and their salespersons are required to disclose the type of working relationship they have with the buyers and sellers in a real estate transaction. There are several types of relationships that are available to you. You should understand these at the time a broker provides specific assistance to you in buying real estate. Buyer’s Agent and Seller’s Agent relationships are commonly referred to as “agency” relationships and carry with them legal duties and responsibilities for the broker as well as for the buyer and seller. A buyer is advised to consult legal counsel before entering into any agency relationship.

Buyer’s Agent

A Buyer’s Agent acts solely on behalf of the buyer and owes duties to the buyer which include the utmost good faith, loyalty, and fidelity. The agent will negotiate on behalf of and act as an advocate for the buyer. The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to sellers all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property. A separate written buyer’s agreement is required which sets forth the duties and obligations of the parties.

Seller’s Agent

A Seller’s Agent acts solely on behalf of the seller and owes duties to the seller which include the utmost good faith, loyalty, and fidelity. The agent will negotiate on behalf of and act as an advocate for the seller. The seller is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to buyers or tenants all adverse material facts about the property known by the agent. A separate written listing agreement is required which sets forth the duties and obligations of the parties.

Limited Agent

A Limited Agent assists the buyer and seller throughout a real estate transaction with communication, contracting and closing without disclosing any of the following to either of the parties:

· Any material or confidential information, except adverse material facts or risks actually known by the agent concerning the physical condition of the property and facts required by statute, rule, or regulation to be disclosed and that could not be discovered by a reasonable and timely inspection of the property.
· That a Buyer will pay more than the offered purchase price for the property.
· That a Seller will accept less than the listed price for the property.
· Other terms that would create a contractual advantage for one party over another.
· What motivates a party to buy or sell the property.

Wednesday, June 10, 2009

The story of “Roger’s my REALTOR®!!”

It all started with Legos®, a piece of cardboard, and my wild creativity! I have wonderful memories of building Lego® houses and real estate offices...developing ‘lots’ on my cardboard neighborhood...and driving clients around in Matchbox® cars to look at houses. Since childhood, all I have ever wanted to do is sell real estate. In 1990, I was hired by Graves REALTORS® because of that story! I was the first person the management team had ever heard say: “Selling real estate is all I have ever wanted to do.”

In preparation for my career, I left home in Central Florida to attend Anderson University in Anderson, IN. While working towards my Management/Marketing degree, I participated in Study Abroad programs throughout Europe, Central America, and the Carribean. My favorite courses were Publicity and Public Relations which gave me a strong foundation for marketing homes. While at AU, I was introduced to Indianapolis and chose not to return to Florida, but create my home in Indianapolis, “the biggest small town in America.”

I have been blessed with a thriving business which has continued to grow. My interest in Internet Marketing and using technology to help make the moving process easier for my clients has brought national recognition for our efforts. Most importantly, it has earned us the respect and trust of our clients and their continued referrals.

This growth has led to the development of a Team that I am very proud of and enjoy working with every day. As a Team, we are better prepared to handle all of the details of your move as they occur...one agent working alone just can’t keep up with all of the things that make your move a success.

I invite you to read on and learn more and to find out why so many of your neighbors are saying,

“Roger’s my REALTOR®!!”