I want to buy a “fixer upper”.

assorted_toolsEveryone is looking for a deal these days. When you work as hard as most people do, you want your money to go as far as it can. One of the ways people try to do this is by purchasing a property that needs a little work. Maybe it needs paint or carpet or wallpaper removal, but the thought is that if you can get the house at a good price you can put a little “sweat equity” into it to improve the value without having to pay as much for the house. Sounds like a good plan. Here are some thoughts to consider if you are thinking about doing this.

First of all, unless you’re looking at new construction you probably won’t find a house that doesn’t need at least a little something done to it after you buy it. Maybe it’s the hot pink walls in the bedroom or the lime green kitchen appliances. Every house has something. Most likely this isn’t really going to change the overall value of the home on the open market. Personal preferences are just that: personal. After you get through “improving” the look of your new house you have something you love but maybe others aren’t impressed by. You’ll find that out when you try to sell it yourself. Because of this, don’t expect small things like this to affect the overall price that much. You’re buying the house because it fits your family and your lifestyle. The little things are secondary. Once you walk into the house that just shouts at you that it’s “the one”, you won’t really care that the faucets in the master bath are gold.

Then there’s the second group of houses: those that are not move in ready. These properties have bigger issues. The carpet may be filthy or there may be holes in the walls. Possibly the HVAC system is questionable or appliances may not work or are gone completely. In these cases the properties are priced accordingly and seem like a good deal. I’ve been with many a client who has walked through a house such as this and made statements like, “oh, I can deal with that if the sale price is right.” And maybe they can. But if you’re one of these types of clients you’ll need to take into consideration two things.

If you need a loan to buy a house remember the bank will be your partner in the purchase. If the house is in too bad a condition the lender will not approve the loan. When they send their appraiser out to the address he will make notations about the poor condition of the dwelling. Since the bank is holding the property as collateral against your promise to pay the note, if they don’t feel the house is a good risk you will be denied.

Assuming the house is in good enough shape for the lender the next thing to consider will be the expense of the repairs for you. You may be saving several thousand dollars on the purchase of the house but then you’ll need to spend the money you saved to make the repairs so you can move in. Recarpeting a whole house, replacing an HVAC system, buying new appliances, and wall repair can cost a lot of money. You’ll need to either pull that out of savings or use credit to purchase them. In the latter case you still have payments but now they’re at a much higher interest rate than your mortgage. In the former case, you could have taken that same amount of money from savings and lowered the initial amount you were borrowing from the lender to buy a house that is move in ready without the repair headaches.

Home loan interest rates have been inching slowly upward but they are still at historic lows we may never see again in our lifetimes. If you buy a home and get one of these low interest rates you’ve already won big time. If you’re a do-it-yourselfer and you love the challenge by all means go for it. But if you’re someone who’s just trying to find a way to save a few extra bucks, simply buying right now is a win for you. You’ll probably never be able to buy as much house for your mortgage dollar than right now.

If you’re thinking about buying a home, I can help you. Call me today at 918-809-5199 and we’ll get started!

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What Do I Do Now? part 5 – Contract to Close

 o4smHn9DNow that you have a contract, everything shifts into overdrive to get the deal done. There are several things you will need to do before close. You’ll need a closing company to help you with the transfer of the Title from the seller to you. That company will inspect the Title on your behalf to make sure the seller is able to transfer the house to you free and clear of any liens or encumbrances. If there are any liens or a mortgage against the property the closing company will make sure those are paid off on closing day from the money you are paying to buy the house. This research takes about two weeks and will most likely be done before your lender is finished with his part.

During the five days after the contract is signed you will take your contract to your lender and start the underwriting process. Since you’ve already been talking to him about your purchase and you’ve given him enough information to get your pre-approval letter you will be moving to the next step in the loan process. The lending company will tell you not to do any shopping for furniture just yet! In fact, don’t make any major changes in your financial situation. Don’t change jobs, don’t apply for credit, don’t buy anything with the credit you already have. Everything needs to stay the same for thirty days while they get the loan in place. Even if you looked good on paper when you got the pre-approval you could jeopardize your purchase by adding debt to your credit rating before you close. If any of these things do happen outside of your control, tell your lender immediately. In the meantime your lender will send an appraiser out to the property to verify that the house is worth the price you are paying.

During the first ten days after the contract is signed, you will do your inspections of the property. Don’t skip this part! It will cost roughly $550 but it is money well spent. You are making the purchase based on the way the property looks to you on the surface. But if there is a major fault in the property it might change your willingness to purchase, or at the very least affect the negotiated purchase price. You have the opportunity to inspect every aspect of the house. Remember you also negotiated a repair cap into the contract that was a dollar-amount the seller automatically agreed to spend to do needed repairs. Above that amount any other repair costs would then be negotiable. You should not consider this repair money as a way to “nickel and dime” the seller with a lot of trivial repairs. But if something needs attention you will make that request on the TRR (Treatments, Replacements, and Repairs) form.

Also during the first ten days you should call your hazard insurance company and apply for home owners’ insurance. In Oklahoma we have an issue with bad weather that can beat up a 25 year roof and reduce its usable life span to half that long. The insurance company will inspect the house to verify that it is insurable. That includes the roof.

You should know that as your agent I can help you with recommendations for any of these services including a reputable insurance company, Title company, and certified inspector. But you don’t have to take any of my suggestions. You can choose all of your own companies without my input. Do what you feel on this one.

All of these items will be finished by the time the lender gets your file out of underwriting. When that happens you are ready to close! Your contract included a scheduled date for closing but you can close early if everyone agrees. The contract also has a default five day grace period to close if you need just a bit more time to get everything done. Try not to use this grace period. The closer you get to the closing date the more stress everyone is feeling. Get it done on time to leave everyone smiling at the closing table.

Finally, most of the time everything goes smoothly but sometimes the best laid plans go bust. Since you put up earnest money in the beginning you’ll want to know under what circumstances your earnest might become jeopardized. There are three things that can kill a deal. If you find something wrong with the house during your inspections that changes your mind about your purchase you may cancel the contract without loss of your earnest money if you do it within the first ten days. Under most circumstances if your loan is denied or if the house doesn’t meet appraisal your earnest will be returned. But if either of these things happens deep into the closing process after the seller has spent money to ready the house for you, some or all of your earnest money could be forfeited. But even in this situation you will have to agree and sign off on the disbursement of the funds to the seller before any of your funds will be released.

You should also know that if the house is uninsurable this does not release you from your commitment to buy the property. That is why it is important to call your insurance company during your initial ten day inspection period. If this is discovered during that first ten days you may cancel the contract without loss of your funds.

The day before closing day you will receive a closing statement from your closing company that will spell out every penny you will spend to close. All charges, credits, taxes, fees, credit for your earnest money, and the cost of the property will be included. At closing you will pay in advance for your one-year hazard insurance policy. Additionally, you will pay the equivalent of 25% of the total cost of that policy into an escrow account that the bank will set up for you. You will pay 25% of the projected amount of yearly tax into the escrow account as well. Part of every monthly payment to the bank will also be collected and deposited here. In December the lender will pay your property taxes from this fund. On the anniversary of your purchase they will pay the insurance company to keep your hazard policy in force.

You’ll be at the closing table for up to two hours signing documents for the lender and the Title Company. But when you’re finished you will own a home! Be sure to get all of the keys. Then change out all of the locks. It is now your home after all.

If you’re thinking about buying a home, I can help you. Call me today at 918-809-5199 and we’ll get started!


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What Do I Do Now? part 4 – Making the offer

love You’ve found the house! Now it’s contract time. This part comes with a bit of stress. In order to keep that to a minimum, your Real Estate agent will be your go-between during the negotiations. You tell me what you’re thinking about the property and I relay the information to the seller’s agent. In this way you get to keep the seller at arm’s length and things will be much easier for everyone involved.

There are several parts to the contract and you should make sure your agent explains everything to you to your satisfaction. If you don’t understand any part of the process you should ask questions. The agent does this every day. You don’t. Make sure you are satisfied with the information you are given.

In the contract you are going to do more than just tell the seller what you want to pay for the property. You will tell him how you intend to pay for it. This is where your preapproval letter comes in. You will include this with the offer. It will show the seller you’ve talked to a lender who is willing to work with you to buy the house. You will tell him how much earnest money you are willing to pay up front with the contract. The amount of this earnest check can vary widely but I usually suggest that it equal 1% of the price of the house. This is another way you show the seller your offer is serious.

You will also tell the seller when you want to close the deal. Generally this is a date from four to six weeks out. The lender will need the time to get all of the paperwork for the loan done. There is also a place in the contract for you to ask for “extras” such as the refrigerator or the hot tub. Or maybe you want to be sure that the seller doesn’t leave the jungle gym in the back yard when he moves. There’s a place for that as well.

One of the important parts of the offer is the section on Treatments, Replacements, and Repairs (TRR for short). This is the section that gives you at least ten calendar days to inspect the property for any major defects. During this specified time you should schedule a reputable inspection company to check everything out from top to bottom. A basic inspection will cover the roof and attic; foundation and structural; electrical, mechanical, and plumbing (or EMP); and a termite inspection. Do not skip this part. You will pay around $500.00 but it is money well spent. If you’re getting a loan the lender will require the termite inspection anyway. In the TRR portion of the contract you will ask the seller to promise to repair any defects you find up to a specified dollar amount. After that, if there are still things that need to be repaired or replaced you can negotiate those items with the seller. Or if you find a major hidden defect you weren’t expecting you can cancel the contract and your earnest money will be returned to you.

Of course the biggest decision you’ll make is determining what you want to offer the seller for the property. This is where you’ll find the Real Estate agent to be very helpful. I can research the immediate area around the address and see what other comparable properties are selling for. This is a good starting point. I’ll also be able to see how long the property has been on the market and whether the seller has lowered the price since it was first listed. If the seller will allow his agent to tell me, I’ll check for current activity on the house to see if you have any buyer competition. And I’ll factor in any work that might need to be done on the house, such as new carpet or appliances that will be needed after you move in. Your offer will then be made based on all of these variables.

Finally, about the offer, everyone wants to feel like they got a good deal on their home purchase. Just remember that everyone is different, just as every house is different. What you value in a home may mean very little to someone else. If you love the house then be happy when you make a fair deal with the seller to purchase it. And be aware that at today’s market interest rates you’re saving a truckload of money on the loan. Just a few years from now after the rates have gone up you’ll be sitting in your castle smiling at your low payment.

As we discussed earlier, there is a four to six week period between the time the contract is accepted and the day you close on the property. We’ll talk about what happens during that time in the next installment of “What Do I Do Now?”

If you’re thinking about buying a home, I can help you. Call me today at 918-809-5199 and we’ll get started!

Next: What do I do now? part 5 – Closing the Deal


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What do I do now? part 3 – House Hunting

file000262492675 This is the fun part. You get to look at all the possibilities and imagine yourself living in all kinds of interesting settings. And since you’ve been to your local loan officer for advice, you also have a good idea of what you can afford. You even have a pre-approval letter from the loan company. This letter is a basic conditional commitment from the bank which says that based on the information they know about you so far they will conditionally back your home purchase up to a specific dollar amount. It’s not a 100% guaranty that you will be able to get a loan but it’s a good start. And when you make an offer on a property it tells the seller you’ve done your homework and you know the house you’re making an offer on is within your budget. In Oklahoma, sellers don’t even have to look at your offer if you don’t have one of these included with the contract.

It will take you a few weeks to find the house you will want to own so in the meantime there are a few important things you need to remember about your home loan preapproval. It was made based on a quick snapshot of your financial condition at the time. That condition can change from the day you get pre-approved until the day you actually apply for the loan on your new house. Your goal is to not do anything that could negatively affect your credit. Bret Close with Elite Financial has these valuable tips on what not to do while you’re looking for your new home.

  1. Don’t change jobs, quit your job or become self-employed.
  2. Don’t buy or trade a vehicle.
  3. Don’t increase debt balances or let current accounts fall behind.
  4. Don’t spend money you have set aside for closing.
  5. Don’t omit debts or liabilities from your loan application.
  6. Don’t buy furniture or appliances or make a new credit application.
  7. Don’t originate credit inquiries (no new loans, credit cards, or lines of credit).
  8. Don’t make large deposits or transfer funds.
  9. Don’t charge bank accounts.
  10. Don’t co-sign any loan.

If any of these things become unavoidable, contact your loan officer immediately so he can help you determine the best course of action that will have the least negative impact on your home loan.

A house is the largest purchase you will make. When you’re dealing with a loan for such a large amount of money, you need to be sure not to do anything that will delay the final approval for your purchase.

In the meantime, you look at houses. You should sit down with your spouse and talk about what you want. Is a certain school district important? How many bedrooms do you need? How many garage stalls do you want? Is the size of the house or the size of the lot important? How old can the house be? Or do you prefer new construction? You should have a basic answer for all of these questions. You should also rank them in order of importance, because as you look you may find that your budget will affect what you can or can’t find available in all of these categories. Also, every house is different, if only because one may be in a separate area from another. You may like the drive to work from one or the drive to school from another. The first one may have a three car garage and the second one only two, but it includes a large back yard for your dog.

I always suggest to my clients that they plan to see a dozen houses in their price range before they decide on one. It still may be the first one you saw but at least you’ll be able to make good comparisons with the others that will confirm your final choice. This is not a hard and fast rule. One of my clients holds the record for looking at houses, which stands somewhere near 60 properties. And he bought the very last one he saw. Another couple looked at three and they were done. Sometimes when you walk inside, you just know.

But whatever the final number is, always use a Real Estate agent. As we discussed in lesson 1, it doesn’t cost you anything to do this. And what you will save in time and aggravation will be of great value to your sanity.

If you’re thinking about buying a home, I can help you. Call me today at 918-809-5199 and we’ll get started!

Next: What do I do now? part 4 – Making an Offer


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10 Terms First-Time Homebuyers Should Know

2014-08-31 12.39.58We’ve been working through the step-by-step process of buying a house. Today I ran across an article on U.S News and World Report by Geoff Williams that is very informative on the subject so we’ll follow a little detour and visit Geoff’s glossary of Real Estate terms that you will run across as you search for your first home.

In about a month, it won’t just be spring. It’ll be home selling and buying season, and you’ll start seeing  “For Sale” signs posted in yards as well as online advertisements beckoning prospective homebuyers.

But before you allow yourself to be beckoned, it would behoove you to familiarize yourself with the following 10 terms, especially if this is your first time making one of the biggest purchases of your life.

  1. Fixed-rate mortgage. This means the interest rate you pay on your home loan won’t change. Over the years, your mortgage payment will likely change some. Property taxes will likely rise, your homeowners insurance might climb or fall, or you might shed your PMI (a term we’ll come back to). But generally, if you have a fixed-rate mortgage, your monthly mortgage payment won’t change much over the years.
  2. Adjustable-rate mortgage. Also known as an ARM, this is essentially the opposite of a fixed-rate mortgage. You’ll have a fixed rate for several years, maybe five or 10, and then the interest rate adjusts according to the fully indexed interest rate, often the prime rate, which is what banks charge their most credit worthy customers. So while your interest rate and payments will likely be lower in the beginning than those of the homeowner with the fixed-rate mortgage, hope that interest rates remain low throughout the life of your loan. As interest rates climb, so too will your own interest rate and monthly payments.
  3. Prequalified. This can be a confusing term, mostly because homebuyers tend to mix it up with preapproved, says Rick Hogle, chief strategic officer at Supreme Lending, a mortgage company in Dallas. If your lender tells you that you’re prequalified for a house, that’s a good start but you’re still a long way from being a homeowner. “Prequalification requires less documentation,” Hogle says. “It provides a general idea of the loan amount for which a homebuyer might qualify.” This way, you can start looking for a home and have a sense of what type of house you can afford.” Preapprovals are a much bigger deal, Hogle says. These require the submission of many more documents, such as pay stubs, bank statements and tax returns. Preapprovals are really for homeowners who are ready to commit to buying a house. If you’re preapproved, you’ve basically been told that the bank will lend you money for a house, provided you don’t blow things in the meantime while you’re house hunting, like missing a bunch of payments or racking up credit card debt before you’re actually approved.
  4. Conventional loans. These are the typical loans that many people, but not all, apply for when they want a mortgage. “Those with low credit scores usually won’t qualify for conventional loans,” says Passard Dean, associate professor of accounting at Saint Leo University in Saint Leo, Florida. “In the past, you were also required to put a down payment of at least 5 percent. However, with the new guidelines from Fannie Mae and Freddie Mac, you can now put a down payment as low as 3 percent. These loans generally require a credit score of above 650.
  5. Federal Housing Administration loan. Have poor credit? You’ll probably get one of these, also known as FHA loans. “These are excellent for first-time homebuyers with subprime credit scores,” Dean says. “In addition to more relaxed credit scores and lower upfront costs, the down payment can be as low as 3 percent.”
  6. Appraisal. This is an estimate that determines what a property is worth. Banks need homes to be appraised, in part, so they don’t lend you, say, $300,000 for a house that’s only worth $175,000. After all, if you can’t pay the loan, the bank will send you packing and will sell the home. But most people won’t buy a $175,000 home for $300,000, and knowing that, the bank doesn’t want to lend you more than your house is worth.
  7. Private mortgage insurance. This is a monthly insurance payment you’ll have to pay if the down payment on your house is less than 20 percent of the appraised value or sale price. If you don’t want to pay the PMI fee, which often ranges from .03 to 1.15 percent of the original loan, divided into 12 monthly payments, you’ll have to fork over a bigger down payment or buy a cheaper house. Usually, PMI insurance isn’t something you pay forever. It just seems like it, if you have a small down payment. Typically, after your payments reach 20 percent of the value of your home, you stop paying PMI. (My note: this isn’t true if you have an FHA insured loan. The PMI fee will stay on the loan until you pay it off or until you refinance the house. Only standard conventional loans allow for the removal of this fee after your equity hits 20%.)
  8. Closing costs. These are fees related to buying a house that your lender charges you, or you rack up from various third parties, such as a home inspector. Generally, expect your closing costs to be 2 to 5 percent of the purchase price of your home. That may sound like a lot, but there are many costs involved in closing the deal, from buying title insurance to paying for points and attorney and surveyor fees.
  9. Points. One point is a charge equal to 1 percent of the loan amount. So if you’re buying a $200,000 house, and a lender is charging you 2 points, that’s $4,000. Three points, $6,000. And why do you care? Because points are prepaid interest. The more points you pay, the lower your interest rate will be. If you’re planning to live in your house a few years, you could make a good argument for not paying points, but if you believe you’ll go the distance with a 30 year mortgage, it generally makes financial sense to pay as many points as you can afford to snag that lower interest rate, which, in the long run, should save you money. Ask your lender to do the math.
  10. Escrow. When you hear your real estate agent throw this word around, you’ll know you’re probably near the end of the home buying process. The word can be used in a few different ways, but when you think escrow, think of a third, neutral party. For instance, you may have looked at a house, loved it, made an offer and offered a deposit, which would then be put in escrow. That is, it’ll be put in a third-party account, probably set up by your real estate agent. This way you aren’t giving the homeowner your deposit, also sometimes called earnest money. Usually you can’t recoup these deposits if you back out of the contract, but if the seller decides to sell the home to somebody else, you most certainly would get your deposit back. The escrow account keeps your deposit safe so the homeowners don’t inadvertently spend your money and put you through the hassle of having to get them to repay you. You might also hear your lender talking about an escrow account where your property taxes and homeowners insurance go until they’re paid.

Of course, you can buy a house without truly understanding real estate and lender speak. Those professionals will walk you through everything, and you can likely nod your way through it all. But that doesn’t mean you should. After all, some would argue that’s how many homeowners got themselves in trouble before the 2007 recession, making decisions they shouldn’t have, and buying homes they didn’t realize they really couldn’t afford.

This is an excellent article with good information. Some minor edits were made in the original text. If you want to see the original story, go here.

Next: What do I do now? Part 3 – House hunting.

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What do I do now? part 2 – Choosing an Agent

P9210040There is more than one way to buy a home. But the best way is to use a licensed Real Estate agent to help you. After all, you don’t do this every day. A licensed Real Estate agent actually does do this every day. Maybe you’ve never done it before. An agent has done it many times. A good agent will help you focus on your needs, refine the areas of your search to only what might fit you and oversee the offer, negotiation, and closing on your new castle. Your home search and purchase will take around eight weeks, give or take, maybe longer. A good agent will keep the process on track for you.

When you choose an agent, it’s best to choose a full time agent. They’ve made the commitment and it’s their livelihood. They will be available when you are to answer questions and give guidance. Chances are very good that they’ve kept up with the changing marketplace as well. You can and should ask questions about their activity in Real Estate. How long have they been in Real Estate? How many properties did they broker last year? What areas of town are they familiar with? Do they know about school districts in the area where you want to live? Can they provide references from other clients? You might also know a friend who is in Real Estate. If you decide to consider them, these questions are still fair to ask them, too. If they can’t answer them to your satisfaction, move on.

An important thing to remember is that even though your agent is working for you during the search and purchase of your new home, you will not be paying him or her for this service. Your agent will be compensated by the seller’s agent at close. The seller’s agent is getting paid an average of 6% of the closing sale price to help sell the property you are buying. The selling agent agrees with the buying agent (your agent) to split that 6% commission 50/50. So take every advantage you can of your agent’s experience and knowledge knowing the person whose house you will ultimately buy will be paying for all of it!

If you are starting the search for a new home and you need help, please call me at 918-809-5199. I am an experienced full time agent who has been brokering residential properties in the greater Tulsa area since 2005 and I love my job. I will enjoy helping you find your next home.

Next: What do I do now? Part 3 – House hunting.

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What do I do now? part 1 – Getting Started

DSCN8976You’ve made the decision. Apartment living just isn’t going to work anymore. Too many rate increases, too much noise, and one too many dings in your car doors have convinced you it’s time to think about putting a few feet of open space between you and your neighbors. A house will solve all of those problems but where do you start? You’ve spent your spare time browsing through Real Estate websites looking at pictures. You’ve even taken the last few weekends and driven through neighborhoods looking at houses. But you aren’t getting anywhere.

You need a plan.

Buying a house is a big step. It’s the biggest investment you’ll make for your family’s comfort, safety, and future. It’s important to make the right decision. And there are things you can do to insure that you make the right purchase.

It’s important to remember that even though the process of buying a house might seem intimidating you are always in control. Use professionals to give you as much advice as you can get. Ask a lot of questions. Pros will understand where you’re coming from and will answer each question thoroughly; even the questions you might think are dumb. But if you’ve never bought a house before, how are you to know if you don’t ask? Knowledge is power. The more you know the better choice you will make.

The first step in your quest for knowledge is to talk to a mortgage loan officer. He or she should be local so if anything comes up you can get in your car and go to their office for answers. Dealing with money people only on the phone or through emails can be a slow and frustrating process. If your loan officer lives here you know they have a vested interest in the community just like you do.

You’re probably wondering why you would need to talk to a mortgage company if you haven’t even found a house yet. A loan officer will help you in several ways, not the least of which is to look at your current financial situation to find out how much house you can afford. There’s no need to look at properties that are out of your price range. That is just frustrating. A good loan officer will also tell you if you need to clean some things up to increase your credit rating so you can get a better interest rate. Sometimes it can be amazing to see how just paying off a balance on a credit card can mean the difference between getting a loan or not. Sometimes it can even mean getting a lower interest rate, which will lower the monthly payment.

The loan officer will talk to you about down payments and closing costs, too. This will help you know how much money you need to plan to bring to the closing table. All of these things will affect your home search. Being this open with a stranger about your finances might make you feel uncomfortable but it shouldn’t. When you’re done with this part you’ll feel empowered because you’ll have knowledge about what you can do and in which direction you need to move forward.

If you’re interested in knowing more about the process of buying a home, call me at 918-809-5199. I can answer many of your questions and I know people who can answer the questions I can’t. I also know several loan officers who take pride in providing you with information that will help you win.

Next: What do I do now? Part 2 – Choosing an Agent.

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My house is worth how much??


Believe it or not, when it comes to determining the value of a property it’s as much art as it is science.

Here’s the scenario: you have your house for sale. Someone likes it and has made an offer you have accepted. Sometime during the next 30 days someone is going to come by to look at your castle to see if it’s really worth the price you and the buyer have agreed on. That nosey person doesn’t work for the buyer- not directly, anyway. He works for the mortgage company. And that company wants to know more about the property they are about to finance for your buyer. While the nosey person (hereafter referred to as “appraiser”) is there he or she will take a lot of pictures, make a lot of notes, catalog anything that looks out of the ordinary, such as that hole you made in the wall after the Broncos lost the Superbowl, and then bid you a cheery “good day”. Now you wait.

Generally it can take from three to ten days for the appraiser to get back to the bank with the results. During that time he’s looking at several things. One of those things is the area where you live. He’ll check out the other houses for sale to see if your price falls in line with those. And she’ll look at the properties that have sold in that area over the last six to twelve months and see what the average prices were for those sales, too. Some time will also be spent checking to see if anyone else sold their house with a hole in the wall- or comparable damage.

You’ll probably be surprised by the findings. To some extent it may surprise the buyer as well, because even though the person who came by your house was called an “appraiser” she’s not really there to give you or the buyer a hard and fast assessment of what the house is really worth in dollars and cents. Remember, she works for the bank. What the bank wants to know is whether or not the house is a good piece of collateral for the money that is being loaned. That is a pass/fail question which the appraiser will answer not with “yes” or “no”, but with a number. If the number is higher than the sale price of the house the answer is yes. If it’s lower the answer is no.

Most often in residential Real Estate deals, if I’ve done my job correctly when I listed the house for sale the answer is yes. But the number given is very rarely much higher than the sale price. Sometimes it’s exactly the same as the sale price. Even if the buyers have been able to negotiate a sweet deal for themselves the result will still be very close to the actual sale price on the contract. If you’re wondering how that happens, it’s because the appraiser goes into the research knowing what the sale price of the house is before he ever shows up on your porch. Remember, she’s not being paid to tell you how much your house is worth. She’s only there to affirm the sale price for the bank. If you want an appraiser’s opinion about the value of your house you’ll have to hire your own appraiser.  But if you do that be aware the bank still won’t care what your appraisal says. They will still send their own appraiser to your house before it closes.

So what happens if the appraisal comes in below the sale price?  In Oklahoma that immediately voids the sales contract. To rectify that problem you may have to lower your asking price to match the appraisal. Another less plausible option would be for the buyer to pay the difference between the sale price and the appraisal value to cover what the bank won’t finance. The buyer will really have to be in love with your house to do that. Or you can put your house back on the market and wait for another buyer. Another buyer will bring another lender. Another lender will send another appraiser who may come up with a different number altogether.

Keep in mind, the goal is to sell your house. If you keep that in front of you wading through these little mazes between contract and close will be easier to manage. And it will be easier still if you’ll give me a call at 918-809-5199 when you’re ready to move!

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One-third would do it. Would you?


DSC03046A recent survey by BMO Harris Bank revealed that most people who go into the home buying process (61 percent) have a budget in place for their purchase. They know how much house they want and what it will cost them. But within that group, one-third of them would go over that budget if they found a house they truly wanted. First time home buyers are less likely to start with a budget they will stick to and are more likely to go over budget when they do find a house they want.

This isn’t necessarily a bad thing. First time home buyers are more often than not at the beginning of their earnings arc, meaning that over time they can expect to see their yearly incomes increase as they progress through their chosen careers. What seems like a high payment today may become much easier to manage over a few years’ time.

As a Real Estate agent I can’t really advise you about what might be right for your individual financial situation. But what I can do is make sure you have all the information you need to make it for yourself. And I will relate one story that tends to help bring some common sense to the subject.

Several years ago I had a landlord client I called on regularly. One day when I visited her there was a brand new Lexus sitting in her parking spot. I went inside and congratulated her on her beautiful new car. Her response was surprising.

“Yes, it is pretty. And it costs me over $600 a month in payments.”

Which meant every time she got into her new luxury car she wasn’t enjoying the ride. She was thinking about the expense.

Houses can be the same way. You might be able to reach a bit higher than you planned but if you’re going to be constantly worrying about the monthly payment, maybe you’re overreaching. A home should be a castle, not a prison.

To start the process you should talk to a lender and get an idea of what your current income and debt load will allow you to afford. A good lender agent will also show you how you can rearrange your finances to help you comfortably accommodate home ownership. I have access to those kinds of people.

If you’re ready to start the process give me a call at 918-809-5199 and we’ll get started today!

What would you do? Would you go over budget if you found the right house? Leave a comment below.


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What is a MIP? Will it hurt me?

calculatorI have good news and bad news. The good news is, you’re getting the house loan. The bad news is, there’s a MIP included in the payment.

MIP is an abbreviation for Mortgage Insurance Premium. When you pay it each month as a part of your mortgage payment you are paying for insurance. But the insurance doesn’t benefit you, it benefits the lender.

Under many circumstances where you don’t pay at least 20% down on your house purchase the lender is going to require mortgage insurance in order to make the loan. Let’s face it. The mortgage represents a risk on the part of the lender who is giving you money merely on your promise to repay. In return for loaning you the funds, they get a little of the funds paid back each month plus some extra money, called interest, for their trouble. It’s that extra amount of money they receive each month that motivates them to take the risk and offer you the loan in the first place.

When you pay less than 20% down the risk for the lender is greater. So, they add on an “insurance policy” that will cover their loss in case you can’t repay the loan and lose the house. But what loss do they have, you ask? Don’t they get the house? Can’t they just resell it and get their money back? Yes, and they will. But at the very least the cost to do that is roughly 8% of their final sale price of the house. And if there are other issues with the property such as deferred maintenance or a need for repairs the expense will be much higher. When you pay at least 20% down at purchase, the lender sees that you’re accepting more risk in the ownership of the house because now if you lose the house you lose your 20% equity as well. And that twenty percent will also help them cover the expenses of turning the house over in the Real Estate market.

Remember, lenders aren’t Real Estate investors. They don’t want to own houses. They just want to lend money. When a house loan goes bad they don’t see that as a good thing. As a result we have MIPs.

Here’s some more good news. If your loan is a conventional loan, after you’ve reached 20% equity ownership in your house in many cases the lender will drop the MIP requirement from your monthly payment. Won’t it be a great day down the road when you get your monthly mortgage statement and see your payment has dropped significantly? To be sure this will happen for you make it a point to discuss with your lender about the MIP, how it works, and when it will disappear. But if you’re getting a Federally insured FHA loan, forget it. The MIP payment will be on that loan until you pay it off or refinance your house.

If you’re in the market for a new home and you have questions about financing, call me at 918-809-5199. I have some excellent contacts who will make sure you know everything you need to know before you commit to anything.

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