The first step for all buyers starting the home buying process is to be pre-qualified or pre-approved for a loan. It is CRITICAL to be Pre-Qualified or Pre-Approved BEFORE you start the process of looking for a home. There are several reasons for this and all of them benefit YOU the homebuyer!  It is critical for buyers to apply for a loan and obtain approval before they find the home they want to buy.

Pre-qualification Vs. pre-approval

Loan pre-qualification is a simple process. It takes into account basic information about your finances and gives you an amount for which you may qualify. This can be done verbally or over the Internet. The pre-qualified amount is based solely on the information you provide. You should only work with a lender that pulls your credit report for pre-qualification.  Sellers too often require this.

Pre-approval is a more involved process. The lender will take all pertinent information regarding your finances and perform an analysis of your financial status. This will ultimately give you the exact amount that you will be eligible for depending on what type of loan you decide to go with. Being pre-approved lets the seller know that you have gone through an extensive financial background check and there should be no unexpected obstacles to buying the home.  Pre-approvals hold much more weight with sellers than pre-qualifications.

The benefits of pre-qualification or pre-approval

Pre-qualifying will help you in the following ways:

1.  If there are any errors or issues that need to be corrected in your credit you will need as much time as possible to fix them – even if they are not your fault!

2.  Applying for a mortgage early gives you time to shop around for the best deal. There is not enough time to do this when it is time to make an offer. By shopping early you could save yourself thousands of dollars in the long run!

3.  More sellers are requiring it. This proves to them it is a serious offer before they take their property off the market.

4.  It makes the process of purchasing a home less stressful.  Instead of wasting time on homes that you can not afford or settling for homes that are less than what you want, being pre-qualified lets you know exactly what price ranges you should be looking at.

In addition, Pre-approval will help you in the following ways:

1.  It gives you more leverage when you go into negotiations with a seller.  Plus, if you are bidding against another buyer that has only been pre-qualified, you have the advantage!

2.  A seller may choose to make concessions if they know that your financing is secured.  You are like a cash buyer, and this may make your offer more competitive.

3.  You can select the best loan package without being under pressure.

Rick Abdella

Keller Williams Realty

www.RickAbdella.com

When people talk about saving money on real estate commissions, they should instead focus on how to net the most money after the sale of their home.

MYTH: The best person to sell my house is the one that charges the least commission.
FACT: The best person to sell your house is the one that can net you the most money when the sale closes and all costs, including commissions, are paid.

MYTH: Just putting my house in MLS and putting a sign in the yard will sell my home for as much money as through a marketing campaign.
FACT: Maximum exposure to the market combined with correct pricing yields the highest possible price for your property.

MYTH: I can pick the best person to sell my house by the commission that they charge.
FACT: Hiring an agent with the best negotiation, marketing, list-to-sell ratios, and customer service skills will net you the most money.

MYTH: If I can get an agent to lower their commission they will still negotiate strongly on my behalf during the sale of my house.
FACT: If an agent does not have the negotiation skills to defend their commission that pays their bills and puts food on their table, chances are that they do not have the negotiation skills to defend your position with a buyer and get you the most money on the sale of your home.  Remember, you want an agent that can stand their ground in a strong, polite, and persuasive way.

MYTH: Saving money on the sale of my house is all about how much commission I pay.
FACT: Saving money on the sale of your home is about how much money you net when the sale closes and all costs, including commissions, are paid.  The agent’s selling percentage rate, which is a reflection of their negotiating ability, has just as much impact.  Here is an example of how you can pay less commission but end up with much less money at the end of the sale.

The advantages of having an agent help you purchase a new home are the same as those for purchasing a resale home…

* Knowledge of the market
* Help in finding the perfect home quickly
* Expertise in contract writing/negotiation
* Closing assistance

The builder has a professional representative watching out for his/her needs, and you need the same expert representation.

Buying a new home is a little more difficult and time-consuming than buying a resale.

It is very important that your interests be professionally represented when you are entering into a contract for a semi-custom or build-to-suit home. These transactions are complex and the contract details must be exact in order to protect you and to ensure you get exactly the home you want!

In the Triangle, it’s not just banks and lenders that rely on credit scores to help make important credit decisions. Landlords, employers, insurance companies, and even cell phone and other utility companies all reportedly utilize credit scores to help determine their business and credit relationships with consumers. In my opinion — credit is the most important component of your entire financial portfolio. Because of this, monitoring and managing your credit is vital, especially if you’re looking to buy or refinance a home anytime in the near future.

The FICO scoring system was created in the 1950s by Fair Isaac Corporation and has been the standard for lenders since the 1980s. FICO credit scores typically range between a low score of 350 and a high score of 850 ( the average American is @ 680). Under the FICO system, securing credit becomes less expensive for borrowers with higher scores (those who represent the least risk) and more expensive for borrowers with lower scores (those who represent the most risk). In fact, when it comes to a mortgage, a lower credit score could easily cost a consumer hundreds or even thousands of dollars more in interest every month and throughout the life of the loan, compared to the same loan with a higher score.

Source: Myfico.com (30 year fixed-rate mortgage on $300,000) as of March 11, 2009
(1) People with these scores aren’t usually accepted for this type of loan.

The above chart from MyFico.com clearly reveals the relationship between higher FICO scores and lower interest rates and monthly mortgage payments. Of course, interest rates are determined by many factors but the bottom line is that individuals with low credit scores will pay nearly three times more in interest than those with strong credit scores.

Now You Will Also Be Subject To Loan Level Price Adjustment Fees (LLPA’s) when applying for a conventional mortgage.

In addition to higher interest rates, having less than a 720 in today’s credit environment can also cost you up to 3% in points or an increase in your interest rate! Here’s the chart based on an 80% LTV:

LLPAs are mandatory surcharges based strictly on credit scores. They are additional fees paid to Fannie Mae or Freddie Mac, not your mortgage professional. Analysts suggest that imposing these “penalties” is a blatant effort to recoup - and to help lessen further losses - on foreclosures. The surcharge could mean thousands of dollars for borrowers who do not monitor and maintain a good credit rating.

For people experiencing the worst-case scenario, carrying a middle credit score of less than 620 could cost you an extra $9,000 upfront on a $300,000 loan amount.

If you’re thinking about buying, selling, or refinancing a home, you have to be credit ready!  Invite you to reach out so we can provide a  free credit consultation. Remember, effective credit repair, if necessary, could take months, so act now and be credit ready in no time — perhaps in time to take advantage of teh First-Time Home Buyer Tax Credit & Move- Up Home Buyer Tax Credit.

Stay tuned to Rick Addella’s Blog for more great credit tips!

Kevin

The Kevin Martini Group - SunTrust Mortgage - 919.274.3700 - Kevin@KevinMartini.com - www.KevinMartini.com

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

It is important to note that in order to be eligible for the lower cost up-front mortgage insurance, a lender has to order a case number from the FHA before April 5th. A case number can only be generated for loan applications where a property is involved and a fully executed purchase contract exists. Home buyers who have been pre-approved but are not under contract will not be eligible for the reduced premium effective April 5th.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

If I can answer any questions you may have about how these changes could impact you, call me. I appreciate your business.

Sincerely,

Kevin Martini
SunTrust Mortgage
919.274.3700
kevin@kevinmartini.com

There is a lot of information out there about the First Time Home Buyer’s Tax Credit’s of 2008 and 2009, and the current Expanded Tax Credit - except for how to claim it. It’s not the easiest thing in the world, but if you follow the instructions you will hopefully be receiving your check before you know it.

There is only one expert on this and it is the IRS, so here is the link to the instructions on how to file for it. Home Buyer Tax Credit

There are some unique items to receiving this credit so be careful.

• You can’t file electronically and receive it
• You have to submit a Settlement Statement (HUD-1) - ask your Realtor or closing attorney about this
• The 2008 Credit is like a no interest loan that has to be paid back, where as the 2009 and current credits do not have to be paid back - HOWEVER for homes purchased in 2009, the credit DOES have to be paid back if the home ceases to be the taxpayer’s main residence within a three-year period following the purchase
• It is only for purchases of primary residences

The Gadberry Group is reporting that Wake Forest is the fastest growing city in North Carolina. This is surprising because many areas of Wake County are growing like crazy. Cary, Apex, Holly Springs can’t be too far behind. Although, in my opinion Wake Forest is becoming an extension of North Raleigh which has grown at a rapid clip and is one of the best places to live in Wake County.

Any statistics junkies out there? Well this isn’t going to satisfy all your desires, but I think it illustrates how the housing market in Wake County is a reflection of the economy as a whole. But I also think it illustrates the housing market in Wake County is not as bad as it could be, or as bad as other parts of the country. While the number of closings is way down from the peak in 2006, 2009 was about the level as 2002 in terms of number of closings. That isn’t the worst thing in the world. Homes are still selling and there are buyers out there. My belief is that while the housing market in Wake County could be better, it certainly could be much, much worse than it is.

According to data pulled from the Triangle MLS, here is a snapshot of the number of residential closings in Wake County over the past several years.

‘I Can Do It Myself’

Many people believe that they can sell their house themselves and save on commissions. This statement can be true for a lot of situations. If you are ready and capable of doing all of the following, you may be a good candidate to sell your own home.

· You have the time and skill to field inquiries and schedule appointments

· You know how you will secure your personal safety and the safety of your family and belongings during showings

· You are aware of the federal, state, and local disclosures you are required to make to the buyer

· You know how to determine if buyers are qualified to purchase your home

· You know how to market your home to the largest pool of potential buyers to get the highest price for your home

· You have a strategy for avoiding litigation when providing buyers with information about your home

· You are prepared to negotiate with bargain hunters and with the buyer’s demands for repairs

· You have a plan on what to do if the buyer wants to back out of the transaction, tries to renegotiate, or fails to qualify for a mortgage.

· Since greater than 90% of buyers in the Triangle used a real estate agent in their home buying process, you have a strategy for marketing to the real estate brokerage community and are prepared to pay a commission to the buyers agent

· Since 80% of buyers search for homes on the Internet, you know how and have time to advertise on the Internet, track traffic to your site, and follow up with leads you receive

If you feel comfortable with all of these issues, you may be an excellent candidate to sell your own home.  However, based on recent NAR statistics, here are some points to consider before making this decision:

· 84% of all unrepresented sellers ultimately ended up listing their property with an agent

· The median home price for sellers who use an agent is 31.9% higher than a home sold directly by an owner

· Buyers are very sophisticated in their knowledge compared to years ago.  They know for example that if a seller is unrepresented they are not paying a commission, so they expect a reduced price that takes this into account

· 83% of sellers used full-service brokerage, 9% limited services and 8% used minimal service, such as simply listing a property on a MLS

· In 2006, 71% of sellers were very satisfied with their full-service experience and another 24% somewhat satisfied.  Limited services also received high marks with 76% being generally satisfied; however, 50% of sellers using minimal service were dissatisfied with their experience

· When you factor out the properties that were not placed on the open market, the actual number of FSBOs is only 7 percent - the rest are simply unrepresented sellers in private transactions (between parties who knew each other in advance)

· After paying a buyer’s agent, reducing the price to account for the lack of commission, paying all the marketing, and handling all the safety, legal, and time consuming aspects of selling a home, how much are you really saving?

Last week the FHA announced some policy changes in order to continue.  The FHA is the profuct of choice for many of my First-time home buyers and even repeat home buyers form people here in the Raleigh & Cary area.  I do not think these changes that the FHA has put into play wil change reduce the demand for ththis trurly wonderful program which will continue to allow a VERY low down payment @ 3.5%.

The highlight to the policy change are:

• increase the Up Front Mortgage Insurance (UFMIP) from 1.75% to 2.25%
• reduce seller credits to 3% from 6%

The increasing of the UFMIP will not hurt the bottom line to the borrower…this will not increase the “out of pocket” expenses at the closing table for the home buyer.

Reducing the seller credit from 6% to 3% — this effect will be minor…the last time I worked a 6% credit was because the Buyer overbid  for the home to use the addtional credit to pay for closing, therefor inflating the value of the home artificially.  In the Cary and Raleigh Area…if your prefer Wake County or even the Triangle, you will find that normally 3% seller credit is maximum seen on the aggregate.