There are so many things to keep in mind when looking at making the largest purchase of your life. In the past few years, as we saw buying frenzies and bidding wars, many home buyers opted to buy homes without having home inspections because owners (arrogantly) would not take offers (contracts) with any contingencies including home inspections and appraisals.
Here are some key areas to look at; including two that many people leave out:
1. The Value – Is this house a good value? Of course, most banks will require an appraisal to protect their interest in the home (their interest is usually larger than yours). If the value of the home comes in at lower than the contract price, you may be able to renegotiate the sale price with the seller by proving that it is not worth what they are asking. If the value comes in higher, then you most likely got a good buy based on the value. When homes are sold without a appraisal clause, the buyer is accepting responsibility for the difference in appraised value and sales price. As an example, if you were getting 100% financing on a home with a contract purchase price of $220,000 and the appraisal came in at $215,000 and you waived the appraisal clause, you would have to pay an additional $5,000 to close the loan or forfeit your earnest money deposit. If you didn’t have the money, the underwriter may even turn you down for the loan.
2. The condition – Is this house in good condition? Perhaps you have heard the phrase “caveat emptor”? It is often quoted in the real estate industry and is Latin for “let he buyer beware”. My recommendation is to always have a home inspection to make sure the home is sound and that there are no deficiencies. Another good recommendation is purchasing a Home Warranty, which will cover most appliances and major systems for the first year or your ownership.
3. Parking (one of the two often missed areas). When trying to choose a neighborhood, make sure you notice how many parking spaces you are allotted, how many visitor spaces exist, do they not allow commercial vehicles, and how far will you or your visitors have to walk to your home from visitor parking or overflow parking areas.
4. Safety (the second of two often missed areas). So many people focus on value and property condition that they forget to inquire about the neighborhood. If you already know the area, then it isn’t a problem, but more often than not prospective buyers end up looking in areas other than they originally desired, and this is often due to price factors. Here are a few ideas for checking out an area:
- Don’t ask your agent about the condition of the neighborhood. First, they may not want to do anything to jeopardize the sale. Secondly, in many areas, the agent is prohibited by law to answer these questions because they are not criminology experts, but most of all, because of anti-discrimination laws. I know this is true in Maryland for a fact as I am a licensed real estate agent in Maryland.
- Check with the local police department. Ask about crime statistics on the specific street you are looking to buy on, as well as the surrounding areas.
- Ask neighbors. This is particularly effective if you know them because they will be real with you as opposed to someone who is biased and is denying that crime takes place in their neighborhood.
- Drive the neighborhood at night. One of my pet peeves is lighting. I like to see a well-lit community. Also, check and see if lots of people are hanging out and about or if it seems to be a quiet area. Not every one is the same; some will prefer communities where people hang out til all hours of the night, and others prefer that it is quiet outside by 8PM. Just make sure you do your own homework.
I hope this helps you as you look for the home of your dreams.
Until next time,
Anthony
Wednesday, August 23, 2006
Tuesday, August 22, 2006
Are Sub Prime Loans in trouble?
Read this article from AZcentral.com for more info:
Some lenders cut riskier mortgages due to Wall Street pressure
Dow Jones/Associated Press
Aug. 21, 2006 12:39 PM
NEW YORK - Some mortgage lenders are feeling the heat from Wall Street to tighten their lending standards and cut their exposure to riskier loans.
The force at work is the increasing demand from investment banks for lenders to buy back the loans due to borrowers' failure to make their first few payments on those loans. Such "early payment defaults" so far have largely been limited to nonprime mortgages made to borrowers who pay higher rates than those qualifying for standard loans due to their weak credit or inadequate documentation.
Buybacks of defaulted loans demanded by whole-loan acquirers, particularly Wall Street firms, have in recent quarters led some lenders to incur losses and set aside more money in their reserve funds for potential loan repurchases in the future. An increase in those reserves then cut into their profits. To shield themselves from future buybacks, some lenders including NetBank Inc. and Fremont General Corp. have backed away from offering loans that have seen greater delinquencies, such as those featuring higher loan amount relative to the property value and lower credit scores.
Some subprime lenders have also raised the bar for qualifying borrowers for loans requiring only limited paperwork and implemented more stringent procedures to fend off fraud, a common cause for early delinquencies. Though some of the tight{tspc}wgg measures might make it harder for some borrowers to swing a loan, they coul d )revent lenders from issuing loans they shouldn't make in the first place.
"You'll continue to see us change policies, products and processes to ensure that we achieve the correct returns for our shareholders and minimize repurchase activities," says Jerry McCoy, chief capital markets executive at NetBank. Due to a spike in the buybacks of loans previously sold to investors, the Atlanta bank added $13.2 million to its provision expense in the second quarter, which in turn ate into its mortgage gain-on-sale income.
At subprime lender Fremont General, the amount of home loans repurchased and re-priced reached $238.4 million in the second quarter, up from $67.7 million in the year-ago quarter and $107.7 million in the first quarter of this year. The Santa Monica, Calif., company said it had cut back on "certain higher loan-to-value products and lower FICO" loans during the second quarter to reduce early payment defaults and thereby loan repurchases from investors.
In its fiscal year ended April 30, H&R Block Inc. increased its loss reserves $11.6 million above its normal loss accrual, also blaming loan buybacks triggered by early payment defaults. "The mortgage industry has seen an increase in early payment defaults over the past few months, and we have taken steps in reaction to our loss exposure," the Kansas City company said in its annual report.
A spokesman at the tax-preparation firm, which has been expanding into mortgage banking and other financial services, declined to comment on the specific steps it has taken to cut its loss exposure, citing the quiet period ahead of its earning release.
As a way to manage risk as well as to have more funds available for making mortgages, more lenders are opting to sell the new loans they create in the secondary market rather than keep them on their books. Buyers of those mortgages, such as Wall Street investment banks, pool and package the loans into mortgage-backed securities and then sell them to investors. When inking those loan purchase deals, industry experts say, Wall Street buyers increasingly ask to retain the right to request the seller to take back the loans in event of an early default, which typically occurs within the first three months.
____
So whats the point? Contact me today to discuss getting your credit in order so you dont have to worry about not qualifying for a non sub-prime mortgage.
Have a great week!
Anthony
Some lenders cut riskier mortgages due to Wall Street pressure
Dow Jones/Associated Press
Aug. 21, 2006 12:39 PM
NEW YORK - Some mortgage lenders are feeling the heat from Wall Street to tighten their lending standards and cut their exposure to riskier loans.
The force at work is the increasing demand from investment banks for lenders to buy back the loans due to borrowers' failure to make their first few payments on those loans. Such "early payment defaults" so far have largely been limited to nonprime mortgages made to borrowers who pay higher rates than those qualifying for standard loans due to their weak credit or inadequate documentation.
Buybacks of defaulted loans demanded by whole-loan acquirers, particularly Wall Street firms, have in recent quarters led some lenders to incur losses and set aside more money in their reserve funds for potential loan repurchases in the future. An increase in those reserves then cut into their profits. To shield themselves from future buybacks, some lenders including NetBank Inc. and Fremont General Corp. have backed away from offering loans that have seen greater delinquencies, such as those featuring higher loan amount relative to the property value and lower credit scores.
Some subprime lenders have also raised the bar for qualifying borrowers for loans requiring only limited paperwork and implemented more stringent procedures to fend off fraud, a common cause for early delinquencies. Though some of the tight{tspc}wgg measures might make it harder for some borrowers to swing a loan, they coul d )revent lenders from issuing loans they shouldn't make in the first place.
"You'll continue to see us change policies, products and processes to ensure that we achieve the correct returns for our shareholders and minimize repurchase activities," says Jerry McCoy, chief capital markets executive at NetBank. Due to a spike in the buybacks of loans previously sold to investors, the Atlanta bank added $13.2 million to its provision expense in the second quarter, which in turn ate into its mortgage gain-on-sale income.
At subprime lender Fremont General, the amount of home loans repurchased and re-priced reached $238.4 million in the second quarter, up from $67.7 million in the year-ago quarter and $107.7 million in the first quarter of this year. The Santa Monica, Calif., company said it had cut back on "certain higher loan-to-value products and lower FICO" loans during the second quarter to reduce early payment defaults and thereby loan repurchases from investors.
In its fiscal year ended April 30, H&R Block Inc. increased its loss reserves $11.6 million above its normal loss accrual, also blaming loan buybacks triggered by early payment defaults. "The mortgage industry has seen an increase in early payment defaults over the past few months, and we have taken steps in reaction to our loss exposure," the Kansas City company said in its annual report.
A spokesman at the tax-preparation firm, which has been expanding into mortgage banking and other financial services, declined to comment on the specific steps it has taken to cut its loss exposure, citing the quiet period ahead of its earning release.
As a way to manage risk as well as to have more funds available for making mortgages, more lenders are opting to sell the new loans they create in the secondary market rather than keep them on their books. Buyers of those mortgages, such as Wall Street investment banks, pool and package the loans into mortgage-backed securities and then sell them to investors. When inking those loan purchase deals, industry experts say, Wall Street buyers increasingly ask to retain the right to request the seller to take back the loans in event of an early default, which typically occurs within the first three months.
____
So whats the point? Contact me today to discuss getting your credit in order so you dont have to worry about not qualifying for a non sub-prime mortgage.
Have a great week!
Anthony
Thursday, August 03, 2006
My New Book is coming out this Fall
I am pleased to announce that I am releasing my first book this fall (currently scheduled for October). I have written a book based on my experiences helping those who have had a bankruptcy or other financial challenge, overcome significant hurdles and become homeowners.
Right now, you can pre-order this book at a discounted rate of $25.00.
Visit the book sales site for more information:
http://www.bankruptcymortgagebook.com
When you pre-order, you will receive a 60 Day Action Plan to help you get on the right track to getting a mortgage approval after having a bankruptcy. You will also get a FREE no-obligation consultation with me to give you the personal attention that we all desire to make this transition as smooth as possible.
If you know anyone who has had a financial challenge such as a bankruptcy, please direct them to the site as well.
Thanks in advance,
Anthony
Right now, you can pre-order this book at a discounted rate of $25.00.
Visit the book sales site for more information:
http://www.bankruptcymortgagebook.com
When you pre-order, you will receive a 60 Day Action Plan to help you get on the right track to getting a mortgage approval after having a bankruptcy. You will also get a FREE no-obligation consultation with me to give you the personal attention that we all desire to make this transition as smooth as possible.
If you know anyone who has had a financial challenge such as a bankruptcy, please direct them to the site as well.
Thanks in advance,
Anthony
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