Looking to Buy?
Make Wise Decisions
The home buying process can seem overwhelming and complicated, but with Locators Ltd. by your side, you will soon be holding the keys to your new home.
We guide our clients through every step of the home buying process. But to get you started, here’s some good general advice:
- Hire a Real Estate Professional
- Help you find your dream home.
- Fine-tune your financial expectations.
- Is legally responsible for representing the buyer’s interest in a real estate transaction.
- Shop for Mortgage Rates and Terms
Many people don’t realize that half a percentage point can mean a considerable savings over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8 percent vs. 7.5 percent is about $35 per month. Over 30 years, that’s $12,600.
- Pre-qualify for a Loan
Getting pre-qualified for a mortgage loan, early in the home buying process, helps determine how much you can afford. It allows you to:
- Move swiftly through the buying process when you find the right home.
- Prevent losing your favorite real estate to other interested buyers.
- Appeal to sellers showing you’re serious about home buying and can afford to buy the property.
- Outline What You Want
Create a realistic idea of the property you’d like to buy. Make two lists.
- First – aspects of a house you can’t live without.
- Second – Features you would enjoy.
Refine the lists as you house-hunt. Searching online can help to see what is currently available on the market.
- Visit Real Estate on the Market
Locators Ltd. can arrange showings for the homes for sale that you’d like to see. Be sure to keep a list of all the properties you’ve seen.
Each time you visit more properties, revisit your notes to immediately eliminate any that clearly do not meet your standards.
- Rate the Homes You Tour
After touring each home, write down what you liked and didn’t like. Develop a rating system to help narrow the home-buying field.
Pick the house you like best first and compare all other houses to it. When you find a better one, use the new favorite as the standard.
Avoid trying to track more than 4 top choices at any given time since this can quickly become overwhelming.
- Make and Offer
Found your dream house? Get serious about the financial and contractual side of the purchase. Locators Ltd. guides you through this sensitive part of the home buying process.
Buyers and sellers have different goals, rely on your Locators Ltd. agent’s experience and expertise to bring order and calmness to the process; and help both parties reach a favorable outcome.
- Arrange for a Home Inspection
After your offer is accepted, set up a home inspection. It’s common to find problems, including:
- Leaky roofs
- Cracked walls
- Insect infestations
- Foundation problems
We can help find a reputable inspector and will negotiate for you getting the most for your money once the inspector’s report is final.
If you negotiate repairs as part of the purchase, ask for a “walk through” before finalizing the home buying paperwork. Ask your Realtor about home protection plans, which can save you money in the near future.
Ensure you’ve made all necessary deposits and completed the paperwork before your closing date, such as:
- Homeowner’s insurance
- Other paperwork required by local or state governments
Your Locators Ltd. agent helps you complete that closing checklist and avoid any last-minute snags, so you can enjoy every moment of the process.
- Prepare for Life in Your New Home
Before rolling out the welcome mat, consider these moving basics:
- Arrange for an alarm company
- Turn on electricity, water and gas
- Cleaning or replace the carpet
- Notify your local post office of your new address
- Complete renovations (the best time is before you move in)
We’ll help you find the answers to all your questions and give you peace of mind.
Common Buyer Questions
- What Price Can I Afford?
As a ‘rule of thumb’ you can afford to buy a home equal in price to twice your gross annual income. More precisely, the price you can afford to pay for a home will depend on six factors:
- Your income.
- The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.
- Your outstanding debts.
- Your credit history.
- The type of mortgage you select.
- Current interest rates.
Lenders will analyze your income in relation to your projected cost of the home and outstanding debts. This will determine the size loan you can borrow. Your housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your loan, property taxes and hazard insurance. The sum of these costs is referred to as ‘PITI.’
Monthly homeowner association dues, if you’re purchasing a condominium or townhouse, and private mortgage insurance are added to the PITI. Your housing income-to-expense ratio should fall in the 28 to 33 percent range. 28 percent of your gross monthly income is allotted toward PITI. 33 percent of you gross monthly income is allowed for PITI and all long term debt. Some lenders will go higher under certain circumstances. Your total income-to-debt ratio should not exceed 34 to 38 percent of your gross income.
- How do I find out about the condition of the home I’m considering?
First and foremost it is strongly recommended that you hire a professional person to inspect the home. Many inspectors belong to the American Society of Home Inspectors (ASHI). They attend seminars and stay abreast of the latest developments.
Secondly some states require sellers to complete a disclosure form revealing everything known about their property. Home sellers are required to indicate any significant defects or malfunctions existing in the home’s major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachment of easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for settling, sliding or soil problems, flooding or drainage problems.
People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions, if the homeowners association has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
- How low can I consider offering?
There are always some sellers who for some reason must sell quickly, however in general, a very low offer in a normal market might be rejected immediately. In a strong buyer’s market, the below-market offer will usually either be accepted or generate a counteroffer. If few offers are being made, an outright rejection of offers becomes unlikely. In a strong seller’s market, offers are often higher than full price. While it is true that offers at or above full price are more likely to be accepted by the seller, there are other considerations involved:
- Is the offer contingent upon anything, such as the sale of the buyer’s current house? If so, such an offer, even at full price, may not be as attractive as an offer without that condition.
- Is the offer made on the house ‘as is’, or does the buyer want the seller to make some repairs before the close of escrow or make a price concession instead?
- Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
- Are there any requests for seller concessions, such as asking the seller to contribute towards points and/or closing costs? If so, the offer is not really full price.
- How and what do I negotiate?
Different sellers price houses very differently. Some deliberately overprice, others ask for pretty close to what they hope to get and a few (maybe the cleverest) underprice their houses in the hope that potential buyers will compete and overbid. A seller’s advertised price should be treated only as a rough estimate of what they would like to receive.
If possible try to learn about the seller’s motivation. For example, a lower price with a speedy escrow may be more acceptable to someone who must move quickly due to a job transfer. People going through a divorce or are eager to move into another home are frequently more receptive to lower offers.
Some buyers believe in making deliberate low-ball offers. While any offer can be presented to the seller, a low-ball offer often sours a prospective sale and discourages the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway.
Before making an offer, also investigate how much comparable homes have sold for in the area so that you can determine whether the home is priced right.
- Down Payment: Should I put more or less down, if we can afford it?
Various types of loan programs exist. Some require a minimum of 3 percent down payment (FHA Loans) or 5 percent on conventional loans. Veterans can purchase with no money down (VA Loan).
Putting down as little as possible allows buyers to take full advantage of the tax benefits of home ownership. Mortgage interest and property taxes are fully deductible from state and federal income taxes. Buyers using a small down payment also have a reserve for making unexpected improvements. It may be more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed. Once a buyer puts twenty percent or more as a down payment on their desired home, they will waive the requirement for mortgage insurance.
Mortgage insurance is a requirement on all loans, with the exception of veterans guaranteed loans. That means a full years premium for the insurance is collected ‘up front’ at the closing of escrow, plus you will be paying monthly as part of your PITI, principle-interest-taxes-insurance.
- What steps should I take when looking for a home loan?
It is strongly recommended that home buyers are prequalified or pre-approved for a loan as their first step in the process. By being prequalified, a buyer knows exactly how much house they can afford. They can make more informed decisions in the market place. This does not mean they will definitely get the loan because their credit reports, wages and bank statements still need to be verified before you can receive a commitment from the lender for the loan.
Almost all mortgage lenders prequalify people at no charge. Many of them will even do it on the internet. In order to be pre-approved, an application will be taken. For a fee, your credit report will be pulled, your employment and income will be verified, your checking and savings accounts will also be verified. In other words, all the necessary documentation will be completed in order for you to obtain a loan. The only things remaining will be for you to find a home, obtain an appraisal on it to prove its value to the bank and perform whatever inspections you may want on the property. This process considerably shortens the time frame to closing.
- Is it possible to negotiate interest rates?
Compare the mortgage charts published in most newspapers.
Occasionally some lenders are willing to negotiate on both the loan rate and the number of points. This isn’t typical among many of the established lenders who set their rates. Nevertheless, it never hurts to shop around, know the market and try to get the best deal. Always look at the combination of interest rate and points and get the best deal possible. This is reflected in what is called the APR or Actual Percentage Rate.
The interest rate is much more open to negotiation on purchases that involve seller financing. Generally, these are based on market rates but some flexibility exists when negotiating such a deal.
- Is it better to buy a new home or a resale?
Sales price increases in either type of housing are strongly tied to location, growth in the local housing market and the state of the overall economy.
Some people feel that buying into a new-home community is a bit riskier than purchasing a house in an established neighborhood. Future appreciation in value in either case depends upon many of the same factors. Others believe that a new home is less risky because things won’t ‘wear out’ and need replacement.
“Existing homes have been appreciating a little more than new homes but every once in awhile they’re at the same level and sometimes the new home prices go up a little quicker” according to the National Association of Realtors (NAR).
NAR figures show the median price of existing homes went up 3 percent between 1994 and 1995; projections are that prices will increase 3.2 percent in 1996 and 1.2 percent in 1997.
New home median prices went up 0.8 percent in 1995 and are likely to increase another 0.5 percent in 1996. For 1997, the group predicts a 1.1 gain in median new home prices.
- Fixer-Uppers: Are they good or bad?
Distressed properties or fixer-uppers can be found everywhere. These properties are poorly maintained and have a lower market value than other houses in the neighborhood. It is often recommended that buyers find the least desirable house in the best neighborhood. You must consider if the expenses needed to bring the value of that property to its full potential market value are within your budget. Most buyers should avoid run-down houses that need major structural repairs. Remember the movie ‘The Money Pit’? Those properties should be left to the builder or tradesman normally engaged in the repair business.
- Can you borrow the money to repair?
HUD’s Rehabilitation loan program, Section 203(K) is a program designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.
A 203(K) loan is frequently done as a combination loan. You purchase a ‘fixer-upper’ property ‘as is’ and rehabilitate it. Or, you may refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.
Investors are required to put 15 percent down. Owner-occupants have a required down payment of 3 to 5 percent. A minimum of $5,000 must be spent on major improvements.
Major repairs can be: a new heating system, roof, replacement windows, etc. You may then also finance additional repairs and improvements i.e.: new carpeting, kitchen cabinets, appliances, etc. You must of course ‘qualify’ for the total amount you will be borrowing through this program.
Two appraisals are required. These appraisals will be on the property ‘as repaired’ not ‘as is’. Plans and specifications for the proposed word must be submitted for architectural review and cost estimation. Once approved mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.
- Is there a good ‘return’ for my efforts?
Remodeling a home improves its livability and enhances curb appeal, making it more salable to potential buyers. Some of the popular improvement projects are updated kitchens and baths, enlarged master bedroom suits, home-office additions and increased amenities in older homes.
The resale market is often difficult because you are competing with new construction. You need to give your home every competitive advantage you can if you are selling an older home.
Home offices are a relatively new remodeling trend. Adding one to a house often recoups 58 percent of the costs, according to a survey found in a report called ‘Cost vs. Value Report’ in Remodeling Magazine.
- Are foreclosures good or bad ideas?
The incidence of foreclosures is cyclical, based on national and regional economic trends.
People can get a rough estimate of the number of foreclosures in a target area by dividing its population by 2,500, according to John T. Reed of Reed Publishing, Danville, Calif.
Buying directly at a legal foreclosure sale can be risky and dangerous. The process has many disadvantages. There is no financing so purchases require cash. The title needs to be checked before the purchase or the buyer could buy a seriously deficient title. The property’s condition is not well known and generally, an interior inspection of the property is not possible before the sale.
Additionally Estate (probate) and foreclosure sales are exempt from some states’ disclosure laws. The law protects the seller (usually an heir or financial institution) who has recently acquired the property through adverse circumstances and may have little or no direct information about it.
- How much does my real estate Realtor need to know?Be sure to find out who your real estate Realtor is representing before you tell them too much. The degree of trust you have in an Realtor may depend upon their legal obligation of representation. An agency working with a buyer has three possible choices of representation. The Realtor can represent the buyer exclusively, called buyer agency, or represent the seller exclusively, called seller agency, or represent both the buyer and seller in a dual agency situation. Some states require Realtor to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types:
- In a traditional relationship, real estate Realtors and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub-broker, who brings the ready, willing and able buyer to the table.
- Dual agency exists if two Realtors working for the same broker represent the buyer and seller in the same transaction. A potential conflict of interest is created if the listing Realtor has advance knowledge of another buyer’s offer. Therefore, the law states that a dual Realtor shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, without express written permission.
- A buyer can hire an Realtor who will represent their interests exclusively. A buyer’s Realtor usually requires a retainer which is refunded once the buyer purchases a house. The amount of the retainer differs from Realtor to Realtor. A buyer’s Realtor can perform enhanced services for the buyer, such as preparing a market analysis on the home they are buying. All information provided to the buyer’s Realtor shall remain confidential and will not be relayed to the Seller’s Realtor.
Tips for First Time Home Buyers
Ditching the land lord and taking the leap into the realm of home ownership? While it can be frightening, consumers who have the resources to buy a home shouldn’t shy away from this type of financial decision. But you must be prepared and you much have the money to do so, or you may incur years of unavoidable debt.
With the help of your Realtor or real estate representative, and some research, buying a home for the first time will be less daunting and complicated. The best thing you should do is to not rush into a decision and to prepare well ahead of time.
Here are some tips, guidelines and advice for those who are thinking of buying a home:
- Knowing That You’re ready
Before you even look at homes online or in the newspaper, make sure that you have the ability to buy a home. Check your finances, your credit score and budget accordingly. Ask your real estate professional or your representative at your bank to check over you financial situation to determine whether or not you’re ready. If you aren’t or if you feel like you aren’t, start saving what you can. Even if you choose to buy a home, you’re going to have to cut your spending considerably.
- Know how much you’re going to spend before you look
After you have found out that you’re ready to buy a home, it’s time to budget yourself. Determine how much you’re willing to spend to purchase a new home, as well as for down-payments – something that usually gets left until the last minute.
- Finding the right real estate representative
If you haven’t already, you should acquire the assistance of a real estate professional. As a first-time buyer, you should never go solo when buying a home. A real estate professional can give you advice on what home is best for you, as well help you search for the most fitting home for your needs.
- Knowing what you need
Once you acquire the assistance of a Realtor or agent, start looking for a home that suits your needs. If you’re thinking for the future, take that into account when deciding which home is best for you. But don’t be over the top—be realistic when searching for that first home.
- Getting a home appraised and inspected
To receive a quality mortgage, homeowners will need to hire an appraiser. An appraiser values your home based on the surrounding market and the condition of the home. Finding a reputable appraiser is crucial because an overvaluation can be detrimental to your economic health. An inspector is someone who comes in to check out the physical condition of your home. Hiring an inspector will let you know if you have to spend extra money on renovations or construction. Do this before you close on the deal – you don’t want to spend considerable money after you’ve bought the home.
- Understanding your options for mortgages
Do a bunch of research before you choose a mortgage. Go to various lenders and understand their rates and policies. You could also ask your real estate agent for some help or hire a mortgage broker. There are different options, so find the one that suits you.
- Getting a Lawyer/Notary
Before you make a deal, have a lawyer or a notary read over the financial documents. This is to ensure that you’re not getting into a deal that looks shaky or fraudulent. The lawyer or notary has to be a real estate specialist.
- Don’t forget about those closing costs
After purchasing a home, you may be faced with “extra charges”. Understand the various fees that you’ll have to pay before the close of the sale so you could save accordingly. These fees can include legal costs, land transfer taxes, disbursements and many others.
Buying a home should be an exciting period for you, and while it seems complicated and difficult at first, prevailing through the challenges isn’t as hard as you think. With the help of a Locators Ltd. agent on your side, you’ll get a favourable deal. So if you decide that buying is the right decision for you, just do your research and you’ll be good to go.
Looking to Sell?
The decision to move can be based on many factors such as needing a bigger home for a growing family, a smaller space with the kids going off to school, relocating for a new job, or any number of other exciting changed in your life. Regardless of your decision on why to move, each comes with its own unique set of circumstanced and tasks that require your attention so why add extra stress by undertaking such a large job on your own?
That’s Locators Ltd. is here for! We will help you sell your home or property so you can take on a new chapter in your life stress free.
Common Seller Questions
- Is there a best time to sell my house?
Property sells year round. It is mostly a function of supply and demand, as well as other economic factors. The time of year you choose to sell can make a difference in the amount of time it takes and the final selling price. Weather conditions are often a consideration in some states than in other parts of the country. Generally the real estate market picks up in the early spring.
During the summer, the market usually slows. The end of July and August are often the slowest months for real estate sales. The strong spring market often places upward pressure on interest rates, many prospective home buyers and Realtors take vacations during mid-summer.
After the summer slowdown, sales activity tends to pick up for a second, although less vigorous, season which usually lasts into November. The market then slows again as buyers, sellers and Realtors turn their attention to the holidays.
The supply of homes on the market diminish because sellers often wonder whether or not they should take their homes off the market for the holidays. There are still buyers in the market place, but now those buyers have fewer homes to choose from. Those homes on the market at that time have considerably less competition. Generally speaking, you’ll have the best results if your house is available to show to prospective buyers continuously until it sells.
- Are there important factors to consider when selling a home?
The two most important factors are price and condition in selling a home. The first step is to price it properly. Then, go through the house to see if there are any cosmetic defects that can be repaired.
A third factor is exposure. It is also important that the home gets the exposure it deserves through open houses, broker open houses, advertising, good signage and listing on the local multiple listing service, as well as the internet.
Choose the real estate Realtor that you believe will get the job done, not the one that quotes you the highest price – sometimes just to buy your listing.
- How much is my home worth?
There are two methods many people use to determine their homes value, an appraisal and comparative market analysis.
Appraisals vary in cost and are defendable in court. They average about $300 for a single family home and more on multi-family dwellings. Appraisers review numerous factors and base information on recent sales of similar properties, their location, square footage, construction quality, excess land, views, water frontage and amenities such as garages, number of baths, etc.
A comparative market analysis on the other hand is an informal estimate of market value performed by a real estate Realtor or broker. It is based on sales and listings that will compete with your property that are similar in size, style and location. A range of values will be determined thus arriving at a probable market value. Many Realtor offer a free analysis anticipating they will have a new client.
The analysis or opinion should be in writing and should involve professionally accepted appraisal practices.
Some individuals do their own cost comparison. It may take several hours of research at the county recorders office, where there will be indexes to match street addresses and parcel numbers. Once matches have been chosen a tax card can be used to find the assessed value, size, style, number of rooms, baths, etc.
- What should I do to get my house ready?
The way you live in a home and the way you sell a house are two different things. First and foremost, “declutter” counter tops, walls and rooms. Too many “things” make it difficult for the buyer to see their possessions in your rooms or on your walls, however don’t strip everything completely or it will appear stark and inhospitable. Then clean and make attractive all rooms, furnishings, floors, walls and ceilings. It’s especially important that the bathroom and kitchen are spotless. Organize closets. Make sure the basic appliances and fixtures work and get rid of leaky faucets and frayed cords. Make sure the house smells good: from an apple pie, cookies baking or spaghetti sauce simmering on the stove. Hide the kitty litter, and possibly put vases of fresh flowers throughout the house. Pleasant background music is also a nice touch.
The second important thing to consider is “curb appeal.” People driving by a property will judge it from outside appearances and make a decision then as to whether or not they want to see the inside. Sweep the sidewalk, mow the lawn, prune the bushes, weed the garden and clean debris from the yard. Clean the windows (both inside and out) and make sure the paint is not chipped or flaking. Also make sure that the doorbell works.
- Should I make repairs?
Minor repairs before putting the house on the market may lead to a better sales price. Buyers often include a contingency “inspection clause” in the purchase contract which allows then to back out if numerous defects are found. Once the problems are noted, buyers can attempt to negotiate repairs or lowering the price with the seller. Any known problems that are not repaired must be revealed as a material defect. You do not have to repair the problem, only reveal it and the house should be appropriately priced for that defect.
- What are my obligations to disclose?
Items sellers often disclose include: homeowners association dues: whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as any restrictions on the use of property, including but not limited to zoning ordinances or association rules.
It is wise to review the seller’s written disclosure prior to a home purchase and ask questions if it does not satisfy you entirely.
- Must I disclose the terms of other offers?
No, according to experts, sellers do not have to disclose the terms of other offers. You may disclose the existence of other offers, so that all parties are aware that they should be submitting their best offer.
- Are there standard contingencies in an offer?
Yes, the two basic contingencies in a purchase contract are financing and inspections.
- Should I be flexible in granting contingencies?
That often depends on if you are in a buyer’s or a seller’s market, the condition of your home, the price you hope to get, how motivated you are to sell, as well as the quality and quantity of the offers you are getting.
Any contingencies that are negotiated are written into your contract. Both the buyer and seller can place requirements on the table during the negotiation phase.
A frequently seen contingency is regarding the sale and closing of the buyers home before they can purchase yours. Whether this requirement is reasonable, or even achievable, depends on the individuals involved. Financial capabilities usually play a major role in negotiations. Few people can afford to own two homes simultaneously, except for some all-cash buyers.
- What do I do if my house isn’t getting activity?
Even in a slow market, price and condition are the two most important factors in selling a home.
If a home is not getting the activity it needs in order to sell it is probably because it is overpriced for the market. The first step is to lower the price. Then go through the house and see if there are cosmetic defects that you missed that can be repaired.
The second step is to make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the multiple listing service and internet.
A third option is to remove the home from the market and wait for overall housing conditions to improve and catch up to the price your asking.
Finally, frustrated sellers who have no equity and are forced to sell because of a long term illness, divorce or financial considerations should discuss a short sale or a deed in lieu of a foreclosure with their mortgage lender and their Realtor.
A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender.
In a deed-in-lieu-of-foreclosure, the lender agrees to take the house back without instituting foreclosure proceedings. These are considered more radical options than lowering the price.
- Is it possible to sell for less than my mortgage?
A “short sale” is for home sellers who are upside down on their mortgage. The home’s value is less than the amount of the mortgage. A hardship must exist, then sometimes home owners can negotiate with lenders and split the difference between the sale price and loan amount, which still must be paid. A short sale is often complicated. If the loan has been sold into the secondary market, the lender will have to get permission from Fannie Mae or Freddie Mac to negotiate a short sale. Fannie Mae, the secondary market giant, has a policy of looking at each loan individually. If the loan was a low-down-payment mortgage with private mortgage insurance (or PMI), the lender needs to involve the mortgage insurance company that insured the low-down loan. Once all these issues are resolved or negotiated, the house may be sold.
- How will a foreclosure effect my credit?
Without a doubt a property foreclosure is one of the most damaging events in terms of the borrower’s credit history.
Talking to the lender who holds the mortgage note on the property might provide specific answers as the possible courses of action available to the borrower, as well as to the effects those actions might have on that person’s credit report.
In terms of the effect on credit history, a deed in lieu of foreclosure or a short sale are not as adverse an event as is the forced foreclosure.
However, even after a foreclosure or bankruptcy, there are lenders who are providing loans after 7-10 years have lapsed. The borrower will have many obstacles to overcome and will need to provide a good paper trail to the lender proving they are once again credit worthy.
- How long will a bankruptcy or foreclosure stay on my credit report?
Bankruptcies and foreclosures can remain on your credit report for 7 to 10 years. However, there are lenders who will consider an applicant who went through a bankruptcy as recently as two years ago, as long as good credit has been reestablished. Much will depend on when the bankruptcy was discharged and what kind of credit a borrower has reestablished since then. The longer ago the discharge occurred, the better off a loan applicant will be. Another factor considered will be the circumstances surrounding the bankruptcy. If a borrower went through a bankruptcy because his or her company had financial difficulties due to downsizing or merger resulting in job loss, that means one thing to a lender. If, however, a borrower went through bankruptcy because of overextended personal credit lines from living beyond their means, that means quite a different thing.
- Is it possible to refinance after bankruptcy?
Although a good idea, it is usually difficult to refinance after a bankruptcy. If you have been struggling but keeping current on your payments the lender may be accommodating. You first need to contact them and explain your situation. They may suggest or perhaps you can suggest a way to work out alternative payments until you recover.
Most mortgage lenders take the guess work out of applying for a loan by figuring out for you the amount you can afford to borrow. Then, they give you a printed document stating the maximum mortgage amount you qualify for based on your particular finances and income. Mortgage pre-approval establishes your price range and strengthens your buying position by letting the Seller know that you have already been approved for the loan. It can also ease time constraints once the purchase agreement in signed between Buyer and Seller.
Consider these Scenarios:
You’re out looking at homes. Your Real Estate Broker never mentions that you should get pre-approved and just ballparks what you can afford. Of course, the more house he shows you, the better he usually comes out. You find the perfect house and work out a deal with the Seller. Three weeks later, the lender informs you that the house is $10,000 over what you qualify for and does not approve your loan. The Seller has already bought another house. You’ve given notice where you’re renting and told all your friends about the great house you bought. And then, there’s the money you’ve already spent on inspections on a house you can’t own.
You and your Realtor have been working diligently finding that “perfect” home. A new listing comes on the market that’s priced right and has got everything you’ve been looking for. You write an offer. Your Realtor takes it to the listing Realtor and is informed that another offer is coming in and will have to present both offers simultaneously to the Seller. The other Buyer is pre-approved for his loan. Whose offer do you think the Seller will negotiate first?
Should You Get Pre-Approved for a Loan First? Most Definitely!
Getting That Perfect Mortgage
If you have any questions or would like more information about getting that perfect mortgage please Contact Us. If you are buying or selling a home or property please also visit our Buyers Page or Sellers Page for more helpful information.
For most first-time home buyers, shopping around for that “perfect” mortgage can be a daunting and complicated task. Just as if you were to take your time purchasing a car or new large screen television, purchasing a mortgage loan takes patience and research so that you receive the best possible deal for you and your family. There are various aspects of a mortgage loan that you have to be aware of so you fully understand the type of loan that you’re receiving. In addition, be certain that you know your credit records, income, debts and assets.
Maintaining a Good Credit Score
One of the most important things that you’ll have to maintain to receive a quality mortgage is your credit score. This includes credit card payments, bills, employment history, debts as well as assets. Your economic history is vital for your economic security, so if your history is unhealthy, then that may affect your chance of getting the loan that you wanted. If you have a poor credit score, then you may be inflicted with higher interest rates. If you do have a poor credit rating, you may have to wait and save some money before getting a loan. However, if you have a mediocre to poor credit score, but have legitimate reasons of why you have that (ex. Illness, tragedy, and temporary loss in income) then you may not receive as high interest rates. As well, if the information on your credit rating is accurate but still slightly poor, then you may slightly be able to avoid higher interest rates.
There are multiple ways of receiving a mortgage. You get a mortgage loan from a lender, which typically is a bank. Contacting and discussing with multiple lenders will only help your research and your chances a getting that loan you want. However, another method of finding a solid mortgage loan is through the assistance of a mortgage broker. As a separate entity, the broker will contact multiple lenders to try to find you the best deal through your application. However, if you have not signed a contract with the mortgage broker to be your agent then they are not required to give you the best possible deal. Just as you would have contacted multiple lenders, make sure you search around for the most suitable broker, as well as understanding the policies of each one you visit.
Understanding the Information
Thoroughly understanding all the information lenders and brokers tell you is vital to your success of receiving a worthy mortgage. Be sure you also receive all the required information in order to compare the information of one broker and lender to another. And don’t just settle with knowing only the monthly payment or the interest rates – get all the information there is.
Here is Some of the Information That You’ll Need to Know:
- Rates: When you visit each lender and broker, understand their current mortgage interest rates and ask if the rates being quoted are the lowest for that week or day. As well, understand the difference between fixed and adjustable rate mortgages.
- Points: These are separate fees that you pay to the lender or broker that will go towards the cost of the interest rates. Typically, if you pay more and obtain more points, it might lower the interest rate for your mortgage. Make sure you see the points in a dollar amount instead of just the number of points you’ll need to receive a lower interest rate.
- Down payments and PMI: Some lenders – and even more now if the Qualified Residential Mortgages gets implemented – require the borrower to give a down payment of 20 percent. But some lenders, for borrowers who cannot put down such a hefty down payment, offer conventional loans of as little as five percent. If they were to take such a route, then they may be required purchase private mortgage insurance (PMI) to ensure that nothing too detrimental happens to the lender if the borrower defaults on their payments. Make sure you understand the costs, policies and repercussions of these two options.
The best thing for any new home buyer to do while looking for a mortgage is to take their time and to have multiple options. Don’t rush this process, it can be very severe and detrimental to you if receive a high interest rate loan. Just as if you were to take your time looking for a home, use the same amount effort when looking for a mortgage loan and consult with your Real Estate Agent, they have experience working with lenders and can refer you to a trusted professional.
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