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What You Need To Know About The Home Inspection Process

Congratulations on finding a house!

You now have only a few days from when you signed the purchase and sales agreement to have a home inspection.

Chances are your real estate agent made the offer contingent upon a satisfactorily home inspection and obtaining mortgage financing.

What Is A Home Inspection?

According to Wikipedia, a home inspection “is a limited, non-invasive examination of the condition of a home, often in connection with the sale of that home. This is usually conducted by a home inspector who has the training and certifications to perform such inspections.

The inspector prepares a written report, often using home inspection software, and delivers it to a client, typically the home buyer.

The buyer uses the knowledge gained from the home inspection to make informed decisions about their pending real estate purchase.

The home inspector describes the condition of the home at the time of inspection but does not guarantee future condition, efficiency, or life expectancy of systems or components”.

It is not the job of the home inspector to estimate market value or to let you know you got a good deal on the price of the home. This is done typically through an appraiser.

Why Have A Home Inspection?

Buying a home is the single most expensive investment many of us will ever make.

A home inspection is designed to provide the home buyer with the information they need to make a more informed decision about the property.

The home inspection report should clearly identify any potential significant defects, and give the home buyer a realistic estimate of the costs of repairs so that they can be negotiated in an updated purchase contract.   An inspection should also highlight any areas or features that need to be addressed in the near future which may be reaching the end of their useful life span.

What Do Home Inspections Cost?

The home buyer generally has to pay for the inspection up front, but there may be an agreement in the purchase contract for the seller to reimburse those fees at the time of closing.

Home inspection fees vary from state to state. An estimated cost of a home inspection is around $250-$400, depending on what services have been selected, as well as where the house is located.

In addition to the general home inspection, there are many common services that home buyers also choose to have preformed when having a home inspection. These additional services are not typically included in the general home inspection fee.

Optional Home Inspection Services:

  • Wood destroying pests
  • Radon gas
  • Lead base paint (homes built before 1978)
  • Asbestos
  • Carbon monoxide
  • Pools, spas, barns, or other external structures
  • Docks and sea walls
  • Underground sprinkler systems
  • Septic

Once the inspection is completed, the buyer generally has seven days to put in writing the “request for repairs” required by the seller to make prior to taking possession of the home.

The sellers may not be obligated to make every repair, so make sure you read the purchase and sales contract carefully to make sure the agreement does not state that the home may be sold in “as is” condition.

The Home Inspection Process:

A home inspection should include examination of all major systems, including the plumbing, heating, air conditioning, electrical, and appliance systems.

The home inspector will also look at the structural components, such as the roof, foundation, basement, exterior and interior walls, chimney, doors, and windows.

It is recommended that the home buyer and/or representing buyer’s agent be present at the time of the home inspection.

A typical home inspection can take between 1 ½ hours to 3 hours, depending on the size and condition of the home.

Remember you are paying for the home inspection. Follow the home inspector around and ask questions about the condition of your home and how to maintain it.

The attached link will help give you a better idea of what happens during a home inspection provided by the American Society of Home Inspector’s visual home inspection demonstration video. CLICK HERE FOR VIDEO

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June 7, 2017 by · Leave a Comment

What Do Phoenix Appraisers Look For When Determining A Property’s Value In AZ?

Most Phoenix area residents are surprised to learn what Arizona appraisers actually look at when determining the value of a real estate property, especially when it the property they are interested in.

The first misconception homeowners generally have is that the value of their home is determined after the appraiser has measured and photograhed their physical property inspection.

However, the appraiser actually already has a good idea of the property’s value by the time they have scheduled an appointment to stop by the property.

The good news is that you don’t have to worry so much about having to just to “clean things up” in order to help influence the value of your property.

While a clean house will certainly make it easier for the appraiser to notice improvements, the only time you should be concerned about “clutter” is if it is damaging to the dwelling.

The Key Components Addressed In An Appraisal

The Site:

Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…

Design:

Quality of construction, finish work, fixed appliances and any defining features

Condition:

Age, deterioration, renovations, upgrades, added features

Health & Safety:

Does your home have structural integrity, is it code compliant?

Size:

Above grade and below grade improvements

Neighborhood:

Is the property conforming to the neighborhood?

Functional Utility:

Is the property functional as built – style and use?

Parking:

Garages, Carports, Shops, etc..

Other:

Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.  Is the area clean and appealing?  Does the appraiser have easy access to all areas of the property?

When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.  A clean house can make for a more pleasing visit by your appraiser.

Check the batteries in your carbon monoxide and smoke detectors to insure they are in good working condition.

The appraisal can affect up to half  in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.

If you’re interested in what specifically appraisers are looking for, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.

Related Update on HVCC:

Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.

This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.

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June 7, 2017 by · Leave a Comment

Buying a Home in Phx! Where Do I Begin?

Getting Started

The decision has been made, I am BUYING a new HOUSE!! and I don’t know what to do next.

First things first: Get organized and do your homework.

CAN I AFFORD THE HOUSE?

You will need to determine what’s affordable.  Remember, when you purchase a home, you will also incur some additional costs, “upfront costs”, such as the down payment and closing costs associated with the loan.  You will need to be prepared to pay these costs.  You can refer to  Mortgae 101: and our  Mortgage Calculator:  (see above) to help estimate what you can afford.

WHERE IN THE PHOENIX METRO AREA DO I WANT TO LIVE?

Know the area in the Valley that you want to live so that you can focus on on your specific needs such as schools, proximity to work, etc.

WHAT DO I WANT VS WHAT I NEED?

Make sure you have a definite ideas of what you are looking for in a new home and base your decisions on these.  there are many choices-from townhouses,and condominiums to single family or multiple-family homes.  You need to know exactly what each has to offer.  You probably will not be able to check off everything on your list, but knowing what your requirements are before you get started will make your life much easier down the road.

WHERE DO I START?

Before you do any serious home searching, you will need a Mortgage Broker that you can trust and a Real Estate Agent qualified to get the most affordable home available.  You will also want to get your finances in order such as pay stbs, W2s, bank statements, etc.  Call me and I will get the information you need to get started.

WHAT ABOUT A DOWN PAYMENT?

In today’s economy, the preferred down payment of 20% is just not feasible.  We offer FHA loans which require as little as a 3.5%  down payment.  But please note that this loan will be require to pay Mortgage Insurance each month until you reach 20% equity in the home.

WHAT ABOUT MY CREDIT?

You will definitely need to know what your credit report says.  This will determine how credit worthy you are and what you will need to do to qualify for the loan.  Often, you will find inaccuracies or mistakes.  These will need to be corrected.  You will need to meet the qualification set by the lender which is typical a minimum credit score of 620.

For more information, please do not hesitate to call me at 602.248.4200.

June 7, 2017 by · Leave a Comment

Assembling Your Home Buying Team In Phoenix- Knowing The Players


Buying a new home is literally a team sport since there are so many tasks, important timelines, documents and responsibilities that all need special care and attention.

Besides working with a professional team that you trust, it’s important that the individual players have the ability to effectively communicate and execute on important decisions together as well.

Real Estate Agent –

A Realtor® is a licensed agent that belongs to the National Association of Realtors®, which means they are pledged to a strict Code of Ethics and Standards of Practice.

A few of the important roles your agent performs:

  • Determine your home buying needs
  • Define your property search criteria – neighborhoods, school districts, local amenities…
  • Provide insight on market trends and property values
  • Negotiate purchase contracts
  • Pay attention to due-diligence periods and other important timelines
  • Articulate inspection and appraisal reports
  • Professionally estimate fair market value on listings

A common misconception of many First-Time Home Buyers is that hiring a real estate agent will end up costing more money.

However, the typical arrangement in a purchase transaction is for the seller to cover the buyer’s agent commission.  In some cases where a new home developer or For Sale By Owner is listing a property and offering a lower price to deal direct, it is still a good idea to have an agent in your corner to protect your financial and investment interests.

Considering that some buyers may see 5-7 real estate transactions in a lifetime, compared to an agent that closes the same amount in a month, it is obvious to see that there is a big advantage to having the ability to rely on that experience when your home and security is on the line.

Mortgage Professional -

A mortgage professional (loan officer, mortgage planner, loan consultant, etc.) is the glue that holds the entire transaction together (biased comment).

In addition to establishing the purchase price and monthly payment a borrower can qualify for, the mortgage team will also need to communicate with all of the other players on the home buying team throughout the entire process.

To highlight a few details your mortgage team is paying attention to:

  • Initial pre-qualification to determine purchase price / loan amount
  • Explain all loan program options that may fit your investment goals
  • Collecting / organizing loan approval documents
  • Watching economic indicators that influence daily rate changes
  • Locking rates
  • Communicating with title / escrow officers
  • Submitting loan package to underwriting departments
  • Updating disclosure / GFE paperwork within proper time frames
  • Following funding through the final recording
  • Tracking inspections, insurance and other lending requirements
  • Post closing rate / program monitoring (although that might just be us)

Insurance Agent -

The lender in any mortgage transaction will require a homeowner’s insurance policy (hazard insurance).

This policy protects the property in the case of fire, theft or other damage (except flood or earthquake, those are separate policies and may be optional).

If it is determined that the property that you want to purchase is in a flood zone, flood insurance is not optional, it is mandatory.

The flood zone determination will be done with a “flood certification” from a third-party provider.

Title and Escrow -

It is possible to have a title company and an escrow officer work for different companies.

Also, some states use closing attorneys and there are still a few states where they use abstract of title instead of title insurance.

In most purchase transactions, the seller has the option of choosing the title company.

The title and escrow officers are often thought of as the same role, but in reality are quite different positions.

The title officer takes care of all issues that have to do with the title (also referred to as the deed) of the property.

The lender may require a title insurance policy guaranteeing that the title is free and clear of all liens except those being filed by the lender.

Escrow takes care of receiving, signing, and notarizing the final loan documentation, as well as collecting the other paperwork associated with the home sale.

The escrow officer is a neutral third party that makes sure no money is transferred until all conditions for each side are met.

The money management of an escrow company include:

Finally, the escrow officer will see that you are properly recorded as the new owner with the county.

Home Inspector -

When you have found the home that you like, it is a wise idea to have a professional take a look at the home to see if there are any issues with the property that could be a problem in the future.

Even though some buyers have an “Uncle Joe” who has owed several homes and knows what to look for, a certified Home Inspector can be money well spent.

They will look at the functionality of the home to make sure the electrical, plumbing and physical aspects of the home are strong, which will help the buyer make an educated decision about following through with the purchase, or renegotiating certain aspects of the contract.

Keep in mind, the home inspector and appraiser have different jobs. An appraiser determines value, while the inspector looks for structural problems, defects or maintenance issues.

The inspector is doing this strictly for the buyer’s sake. The lender is not concerned if a faucet has a minor leak as long as the property is worth the sales price. Therefore, the lender generally does not require an inspection unless the purchase contract requires one.

So, an inspection is not required, but it is recommended. As a matter of fact, one of the forms in an FHA application package is one that says “For Your Protection: Get a Home Inspection.”

Appraiser -

While the appraiser is typically never seen by the home buyer, an appraisal is obviously an important component of a home purchase transaction.

The appraiser will conduct an analysis of the property to determine the current market value. The bank will always require an appraisal, and in some cases need a second opinion of value if the program guidelines or loan amount require it.

Appraisers compare the sales prices of similar properties sold in the neighborhood and surrounding areas with the subject property.

This can be a very tricky process, especially if there are few properties to choose from, or if there is an overwhelming amount of foreclosures and short sale listings.

Now, since two homes are rarely identical, the appraiser has the difficult job of trying to compare apples to apples; sometimes red delicious to yellow delicious, or sometimes Fuji to Winesap.

When done, the estimate of value is given. If that value is below the purchase price, then negotiation may take place. If it is at or above the purchase price, we are ready to go forward.

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June 7, 2017 by · Leave a Comment

Top Five Market Factors That Influence Mortgage Rates

Timing the market for the best possible opportunity to lock a mortgage rate on a new loan is certainly a challenge, even for the professionals.

While there are several generic interest rate trend indicators online, the difference between what’s advertised and actually attainable can be influenced at any given moment by at least 50 different variables in the market, and with each individual loan approval scenario.

Outside of the borrower’s control, the mortgage rate marketplace is a dynamic, volatile, living and breathing animal.

Lenders set their rates every day based on the market activities of Mortgage Bonds, also known as Mortgage Backed Securities (MBS).

On volatile days, a lender might adjust their pricing anywhere from one to five times, depending on what’s taking place in the market.

Factors That Influence Mortgage Backed Securities:

1.  Inflation –

According to Wikipedia:

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services; consequently, annual inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.

A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.

As inflation increases, or as the expectation of future inflation increases, rates will push higher.

The contrary is also true; when inflation declines, rates decrease.

Famous economist Milton Friedman said “inflation is always and everywhere a monetary phenomenon.”

Public enemy #1 of all fixed income investments, inflation and the expectation of future inflation is a key indicator of how much investors will pay for mortgage bonds, and therefore how high or low current mortgage rates will be in the open market.

When an investor buys a bond, they receive a fixed percentage of the value of that bond as ‘coupon’ payments.

With MBS, an investor might buy a bond that pays 5%, which means for every $100 invested, they receive $5 in interest per year, usually divided up over 12 payments. For the buyer of a mortgage bond, that $5 coupon payment is worth more in the first year, because it can buy more today than it can in the future, due to inflation. When the markets read signals of increasing inflation, it tells bond investors that their future coupon payments will be less valuable by the time they receive them. So basically, this causes investors to demand higher rates for any new bonds they invest in.

2. The Federal Reserve

As part of its 2008-2010 stimulus effort, the NY Fed spent almost all of its $1.25 trillion budget buying mortgage bonds. Many believe this strategy kept mortgage rates lower over a 15 month period.

The lending environment significantly changed between 2008, when the Fed began its mortgage bond purchasing program, and early 2010 when the market was left to survive on its own.

When the MBS purchase program was announced in November 2008, mortgage bonds reacted immediately and dramatically.

But at that time, there weren’t any investors willing to take a risk in buying mortgage bonds. The meltdown in the mortgage market and world economies lead many investors to shy away from the risks associated with MBS, which is why the Fed had to step in and basically assume the role as the sole investor of mortgage bonds.

However, loan underwriting guidelines drastically tightened up by 2010, which may create a little more confidence in the mortgage bond market.

3. Unemployment –

Decreasing unemployment will suggest that mortgage rates will rise.

Typically, higher unemployment levels tend to result in lower inflation, which makes bonds safer and permits higher bond prices. For example, the unemployment rate in March 2010 was at 9.7%, just slightly below its highest mark in the current economic cycle.

Every month, the BLS releases the Nonfarm Payrolls (aka The Jobs Report) which tallies the number of jobs created or lost in the preceding month.

The previous report indicated a loss of 36,000 jobs. Not necessarily a number that will move the needle on the unemployment gauge, but some economists suggest we need about 125,000 new jobs each month just to keep pace with population growth. So that negative 36,000 is more like negative 161,000 jobs short of an improving unemployment picture.

One flaw to pay attention to with unemployment rates is that the method of surveying fails to capture part-time workers who desire full-time employment, discouraged job seekers who have taken time off from searching and other would-be workers who are not considered to be part of the labor force.

4. GDP –

GDP, or Gross Domestic Product, is a measure of the economic output of the country.

High levels of GDP growth may signal increasing mortgage rates.

The Federal Reserve slashes short-term rates when GDP slows to encourage people and businesses to borrow money. When GDP gets too hot, there might be too much money floating around, and inflation usually picks up. So high GDP ratings warn the market that interest rates will rise to keep inflation concerns in balance.

Spiking GDP with flat/increasing unemployment begs some questions.

There are two major indicators that help provide more context:

1. Increases to worker productivity – employers are getting more work out of their current employees to avoid hiring new ones

2. Surges in inventory cycles – when the economy first started contracting, manufacturing slowed down to cut costs, and sales were made by liquidating inventory.

This is like a roller coaster cresting a hill, where one part of the train is going up, the other down. Eventually, the other side catches up, inventories are rebuilt by manufacturing more than is being sold. Both surges can throw off periodic reports of GDP.

5. Geopolitics –

Unforeseen events related to global conflict, political events, and natural disasters will tend to lower mortgage rates.

Anything that the markets didn’t see coming causes uncertainty and panic. And when markets panic, money generally moves to stable investments (bonds), which brings rates lower. Mortgage bonds pick up some of that momentum.

Acts of terrorism, tsunamis, earthquakes, and recent sovereign debt crises (Dubai, Greece) are all examples.

…..

Putting It All Together:

Economic data is reported daily, and some items have a greater tendency to be of concern to the market for mortgage rates. If you are involved in a real estate financing transaction, it’s helpful to be aware of these influences, or to rely upon the advice of a mortgage professional who is already dialed in.

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June 7, 2017 by · Leave a Comment

What’s My Debt-to-Income (DTI) Ratio?

Debt-to-Income (DTI) is one of the many new mortgage related terms many First-Time Home Buyers will get used to hearing.

DTI is a component of the mortgage approval process that measures a borrower’s Gross Monthly Income compared to their credit payments and other monthly liabilities.

Debt-to-Income Ratios are designed to give guidance on acceptable levels of debt allowed by particular lenders or programs.

There are actually two different Debt-to-Income Ratios that underwriters will review in order to determine if a borrower’s monthly income is sufficient to cover the responsibility of a mortgage according to the particular lender / mortgage program guidelines.

Most loan programs allow for a Total DTI of 43% and a Housing DTI of 31%.

Two Types of DTI Ratios:

a) Front End or Housing Ratio:

  • Should be 28-31% of your gross income
  • Divide the estimated monthly mortgage payment by the gross monthly income

b)  Back End or Total Debt Ratio:

  • Should be less than 43% of your gross monthly income
  • Divide the estimated house payment plus all consumer debt by the gross monthly income

Remember, the DTI Ratios are based on gross income before taxes.  Lenders also prefer to use W2’s or tax returns to verify income and employment.

However, the adjusted gross income is used to calculate DTI for self-employed borrowers on most loan programs.  Since there is room for interpretation on these guidelines, it’s important to review your personal income / employment scenario in detail with your trusted mortgage professional to make sure everything fits within the guidelines.

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June 7, 2017 by · Leave a Comment

Manufactured Homes: Foundation Certification & Up

Manufactured Homes: The Foundation Certificate

 

There are a number of factors to consider when purchasing or re-financing your Manufactured Home.  As usual, the best place to start is the beginning which is:

What is a Manufactured Home?

To be considered a manufactured home it must have been built completely off-site in a controlled environment under U.S. Department of Housing and Urban development (HUD) regulations.  The home is then delivered to a permanent home site where it is installed on a foundation and this foundation must be Certified  and meet the strict HUD requirements.

To determine if your foundation complies with HUD Guidelines, you must obtain a foundation certification.

What is a Foundation Certification?

A foundation certification is performed by an engineer that will specify that the foundation complies with the HUD Permanent Foundation Code for Manufactured Homes (HUD 7584).

Why Do I Have to get a Foundation Certification?

The short answer is because the lending companies require it.  They have to be satisfied that the foundation can support the home in extreme weather conditions and that it meets today’s higher standards.

Why a Professional Engineer?

According to HUD, “All foundation systems, new and existing, must meet the guidelines published in the Permanent Foundations Guide for Manufactured Housing, (HUD-7584), dated September 1996. A certification attesting to compliance with this handbook must be obtained from a licensed professional engineer and included in the insuring file.”

Is our foundation built on sand or on stone?  This is determined by a professional licensed engineer who ensures the foundation meets the requirements to provide for the safety, health of the owners but also protects the general public.

 

 

 

November 19, 2014 by · Leave a Comment

Manufactured Homes: Four Critical Documents

Purchasing or refinancing a Manufacture Home can be difficult and extremely confusing.  First and foremost, they are hard to find and very time consuming.

Here are four items that are highly suggested to have or have access to before you start the loan process.

1.  HUD Certification Label (HUD Tag) which is attached to the exterior of each section of the home.  Here is an example:

 

2.  HUD Data Plate/Compliance Certificate which is located in a kitchen cabinet. Here is an example:

3.  Affidavit of Affixture:  This is a document used to change the assessment (tax) of a Manufactured Home from personal property to real property and it is recorded with the County where the Home is located.  This is a legal process, not a physical one.

4.  Engineer’s Certificate is a letter issued by a structural engineer certifying the acceptability of a foundation system, generally to meet the HUD Publication, Permanent Foundation Guide For Manufactured Homes dated 1996. Most lenders require that this is wet-stamped, indicating his license number and the date he places the stamp.

Having these 4 items will make your search for  a mortgage much easier.

If you have questions, please call and I can assist you in locating these items.

 

RELATED ARTICLES:

 Common Questions Regarding Manufactured Homes

 

June 17, 2014 by · Leave a Comment

Conventional or FHA Loans In Phoenix

How does one decide between a FHA loan or Conventional loan?  In a nutshell, if you can qualify for a Conventional loan, go for it.  Conventional loans are harder to qualify for but well worth it.

The main reason for this rational is the Mortgage Insurance associated with a FHA loan.

Mortgage insurance  is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer.

For example, suppose Ms Smith decides to purchase a house which costs $150,000. She pays 10% ($15,000) down payment and takes out a $135,000 ($150,000-$15,000) mortgage on the remaining 90%. Lenders will often require mortgage insurance for mortgage loans which exceed 80% (the typical cut-off) of the property’s sale price. Because of her limited equity, the lender requires that Ms Smith pay for mortgage insurance that protects the lender against her default. The lender then requires the mortgage insurer to provide insurance coverage at, for example, 25% of the $135,000 ($33,750), leaving the lender with an exposure of $101,250. The mortgage insurer will charge a premium for this coverage, which may be paid by either the borrower or the lender. If the borrower defaults and the property is sold at a loss, the insurer will cover the first $33,750 of losses. Coverages offered by mortgage insurers can vary from 20% to 50% and higher.

To obtain public mortgage insurance from the Federal Housing Administration, Ms. Smith must pay an upfront mortgage insurance premium (UFMIP) equal to 1.75 percent of the loan amount at closing.[1] This premium is normally financed by the lender and paid to FHA on the borrower’s behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well, of 1.35%. The United States Veterans Administration also offers insurance on mortgages.[2]

On conventional loans, the borrower does not have an up front mortgage insurance  (UFMIP) and borrowers pay mortgage insurance only if the the ratio of loan amount to propery value )LTV) exceeds 80% and the premiums are lower than than those on FHA’s.

To sum up, it is almost always better to go with a Conventional loan over FHA loan if you qualify.

 

 

October 31, 2013 by · Leave a Comment

Important Factors To Consider When Getting Financing On A Foreclosure, Short Sale or New Construction

Short sales, foreclosures and new construction homes all have caveats that need to be considered when pursuing financing.

If the guidelines and potential pitfalls are not properly understood, you could face delays in closing or potentially even a denied loan.

Short Sales & Foreclosures -

Short sales and foreclosures are everywhere. They often represent great value when looking to by a new home.

However, they also present a unique set of problems that homebuyers need to be aware of and plan for.

1.) Property Condition

Typically, when homeowners are facing foreclosure or looking to short sell their house, it means they lack the financial means to pay the mortgage or maintain the property.

A property in poor health can cause many financing issues for traditional financing.  FHA loans have specific rules requiring that the property is move-in-ready, unless you’re using a 203(k) Rehab Loan.

2.) Timing Challenges

Short sales typically come with awkward timeframes for purchase contract approval and loan closing.

Each bank is different, but approval can take anywhere between a week to 120 days.  As a general rule, the larger the bank the longer it takes to get short sale approval.

The lack of a set timeframe for short sale approval makes the timing of loan submission, rate locks and closing very challenging. You have your approval conditions cleared to close on time, just to find out that new appraisals, income, employment and asset verifications need to be updated by an underwriter to cover the most recent 30 days. Worst case, purchase contracts and legal documents may have to be re-submitted to a bank for an updated approval.

Either way, be prepared for a lot of redundant paperwork when purchasing a short sale property.

New Construction -

Home buyers looking to purchase new construction using FHA financing will have more hoops to jump through than those purchasing through conventional (Fannie Mae / Freddie Mac) financing.

If you want to use FHA financing to purchase new construction then you need to be aware of a number of issues that can trip you up.

First, you MUST have a certificate of occupancy (C.O.) certifying that the property is complete and move-in-ready. If you do not have this then you typically CANNOT go FHA. You’ll need a renovation loan, but a FHA 203K WILL NOT work.

You’ll need to employ the Fannie Mae HomeStyle for a property without a C.O.

In addition to the C.O. you’ll need some combination of the following documents as dictated by your lender and your unique situation:

  • Builder’s Certification
  • One Year Builder Warranty (10 YR Warranty may be required)
  • Termite Inspection (when applicable)
  • Septic Inspection (when applicable)
  • Well Test (when applicable)
  • Construction Permits

There are a number of factors which go into exactly what combination of documentation will be required to satisfy your lender and FHA, so it is best to work with an experienced loan officer when purchasing new construction with FHA financing.

If you plan on using conventional Fannie Mae / Freddie Mac financing you’ll still have hoops to jump through, just not as many as FHA. You’ll also have a higher down payment requirement and the credit qualification guidelines tend to be stricter.

Whether it be FHA financing, conventional financing or renovation financing, it’s important to have a qualified home buying team in place that can lead you through the maze of paperwork and negotiations.

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April 19, 2013 by · Leave a Comment

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