Michelle Millikin

Archive for the ‘Buying Process 101’ Category

Being in the real estate business since 1994, I have had the opportunity to witness the complexity of the mortgage environment increase. In the recent past the lending process rules are changing more rapidly than ever. This has many ramifications for a potential home buyer:

The training of such revisions is difficult to implement

The mortgage application process is much longer

The once-considered “able and willing” buyers are facing increasing difficulty obtaining their financing

What can be done to overcome the new delays and obstacles?

Get pre-qualified: Consult with a qualified mortgage specialist and secure a pre-approval letter. I suggest going to a local bank and a local credit union. There are some local banks which do not re-sell your loan package to the secondary market, eliminating some of the rules implied by the secondary market. If you don’t qualify now, the lender will offer valuable credit counseling services so you can get prepared to purchase in the future.

Stay local: Most market rates are similar but local service and loan execution is as important and better facilitated within your local community. Take your time to interview several lenders so when you get an accepted offer on the home you choose, you are prepared to move forward and maintain loyalty to that lender to closing.

Look into Options: Check into FHA loans, Wheda programs or Rural Housing programs. These programs boast minimal down payment requirements – some at 0% down and very attractive rates.

A Buyer’s interest should not dwindle with the expiration of the tax credit earlier this year. Current interest rates and available programs are positioning buyers in a far better place than when the credit was available, allowing far greater savings over the course of the loan.

Please feel free to call me to schedule an appointment to discuss beginning the home purchase process today!

In 2009, I represented several clients in short sales (see previously posted blog if you need a refresher on the definition). They were grueling, at best, many times lasting well-over 6 months, causing buyers to walk away from the deal and consisting of hundreds of pages of documentation. Clearly the option to negotiate with the bank needed improvement and, finally, we have some.

The US Treasury Department has created a program offering financial incentives to mortgage services, investors and borrowers who HAMP which purpose is to streamline and simplify the otherwise nightmarish process.

According to The Residential Specialist Magazine (March/April 2010) the program:

Uses a borrower’s financial and hardship information collected in conjunction with HAMP to determine eligibility

Allows borrowers to receive pre-approval short sale terms prior to a property listing. (This is huge! Usually the bank wouldn’t even start looking at the financials or eligibility until there was an offer, which took forever, and usually ended up sending the once willing buyer, to cancel the proposed transaction and find another home simply because they could no longer wait).

Prohibits the servicer from requiring a reduction of commission from the listing agent. (Another biggie! The banks used to have us do all of the work and just prior to closing, ask the agent(s) to reduce their commission – stating “if we are losing, so should you.” To facilitate these difficult and time-consuming transactions, Realtors deserve to be fully compensated. We are not a party to the financial dilemma – we are trying to help).

Requires that borrowers be fully released from any future liability for the debt (Incredible development #3! Outside of this program it was possible, although ridiculous in my opinion, for the bank to file a 1099 for the difference between what was actually owed and actually received against the borrower to pay income taxes on it. What??? The borrower clearly indicated, for months on end, their inability to come up with additional funds to pay the mortgage in full and then they slap income tax liability on them????)

Realtors need to be aware of this valuable and much needed HAMP as the guidelines have become effective as of April 5, 2010. A complete description of the program can be found on the HAMP website at bit.ly/6ubGGe.

On March 10, 2010, Governor Doyle signed Senate Bill 415 into law which will require all homes to have carbon monoxide detectors. The legislature will go into effect as of February 1, 2011. (As of April 1, 2010, all existing and new multi-family units must have the detectors)

Carbon monoxide claims more than 2000 lives each year and causes more than 40,000 to go to the emergency room in the United States.

This new law will:

Require detectors to all one-and two-family homes, new construction or existing homes.

Require installation of detectors in the basement and on each floor except attic or storage areas.

Require the detectors to be hard-wired in new construction but allow battery operated units and/or units in combination with a smoke detector in existing homes.

Exempt properties with no attached garages, no fireplaces and no fuel-burning appliances

There will be no fine or penalty for non-compliance, however, home inspectors will be required to check for the alarms and document their absence.

As a concerned Realtor, I have and will continue to encourage all of my customers and clients to install a detector, well in advance of its legal requirement.

A First Time Home Buyer or essentially any home buyer, is excited about the purchasing climate we are experiencing.  And with good reason:  inventory is good, interest rates are low and the $8000 tax credit has many families getting into a home with down payment  or price assistance.  If you are considering a home purchase, I have a few pieces of advice that I would like to share.  My goal has always been to help buyer through the process, resulting in it being a positive transition.  Here’s what I know:

Check your credit rating in advance.  This can usually be done for free on sites such as www.annualcreditreport.com.  This way you know where you stand and also can identify any errors and have time to correct them.

Get pre-approved.  There is really no sense in looking for properties, setting appointments that end up being very cumbersome to a seller and the agents involved, writing an offer, negotiating to acceptance and then having to send a Cancellation and Mutual Release because you cannot obtain financing.  And when you do receive a pre-approval amount, make sure the monthly mortgage is one you are comfortable with and the terms meet your financial goals.

Know your Neighborhoods.  Pinpoint the areas, neighborhoods or school district you wish to live in.  Minimize your scope even further until you have found 2-3 perfect neighborhoods that you know you will be happy in and ones that will protect your investment in home ownership.  Then, stick with the plan.  Don’t compromise by choosing a home in which you love but you know the neighborhood does not have a history of high desirability.  If you are unsure of a neighborhood, check it out during different days and times during a week. 

Work with an Accredited Buyers Representative.  A knowledgeable Buyers Agent will take your hand and walk you through the home buying process, with your best interest in mind.  They will be sure you are properly pre-approved, help you choose the best property and negotiate the best terms for you.  They will help you through the professional inspection, conduct all paperwork and insure your closing documents are correct.  A Buyers Agent is typically compensated by the Seller or the Seller’s Agent, so for no additional cost, you could be provided with the market advice and negotiating expertise that would be difficult to acquire on your own.

Please see the “What you need to know” tab on my website for more information regarding the difference in agency and when you are ready to buy, find someone in the real estate business full time, accredited in Buyers Agency and interview them.  If they impress you with knowledge and enthusiasm for the opportunity to work for you, (and they should!), and forge ahead towards home ownership!

Contact me for a no obligation session regarding the home buying process at 715-581-9013.