Home Loan Archives - Page 15 of 24

Cash is King, But Appraisers Aren’t Court Jesters

Written by Elise Loan Tucson on July 23, 2018. Posted in Home Loan. Leave a Comment

What is someone’s home worth? Short answer, of course, is whatever someone is willing to pay for it. And if they’re buying with cash, that’s all the answer one needs, right? So, for those of us who don’t have bags of money at our disposal, the real-life answer to that question is the amount at which it appraises. As real estate brokers and agents, you already know this, so why am I even talking about it? Well, let’s just think of this as a quick refresher course–one that should help you in our current market.

One of the big factorsused in determining the value by an appraiser – who quite often seems to take his or her job REALLY seriously – is the overall condition. Please, hold your “well, duh” comments for the moment. The “condition ratings”, according to the Uniform Appraisal Dataset Definitions, are broken down into six categories: C1-C6. The category of C1 is almost always a new house; C6 is beyond the definition of “fixer upper” – the idea of financing such a purchase evokes either maniacal laughter or the need to evacuate the contents of one’s stomach. Again, I’m confident you already knew this, but stay with me –you’ll like how all this ends.

GOODagents know how to prep their clients to get their homes ready for the appraiser. GREATagents know how to read the comps and can tell from the condition rating (C1-C6) why asimilar nearby houseappraisedfor a certain amount. Then, armed with that information and knowledge, they can give their clients very specific advice and instructions to assure the appraisal comes back as close to what is anticipated. In many instances, this is what separates the “GOOD”from the “GREAT”agents – it’s all in the details.

If the house across the street (practically the same floor plan, similar square footage) sold for $268,000, a great agent is going to dig into the comps and find, for example, that the “comp” kitchen was given a C3 – regular wear and tear, well maintained. This great agent is going to look at her client’s kitchen through the eyes of an appraiser and notice that there’s a chip in the sink and the tile has some cracks in very noticeable places, all signs that the appraiser could look less favorably on the kitchen’s condition and issue a rating of C4. That difference in rating could mean thousands of dollars in decreased appraised value while the repair of these items might only cost $150-200.

If you already knew all of this, I’m flattered you actually made it this far. However, if there was even a slight “hmmm, that’s interesting” pop into your mind, give us a call. We would love to sit down with you and review an appraisal to show you what you should be looking for and how to get an appraiser possibly to change his mind – we’re not making any promises, but you’ll be pleasantly surprised to learn that it’s actually more common than a flying pig.

Don’t Wait for the Rate

Written by Elise Loan Tucson on July 15, 2018. Posted in Home Loan. Leave a Comment

Buckle up and get ready to have your mind blown! Okay, it’s not THAT mind blowing – some of you might even say, “well, duh” – but it’s still interesting. The New York Federal Reserve’s economists recently published the results of a study: changes in down payment requirements have MORE influence over home buyers’ willingness to buy than changes in rates.

Surveying both buyers and renters, the Fed found that the effect of interest rates may be overrated when compared to even small changes in down payment requirements. The study found:

1.Droppingthe down payment from 20% to 5% increases the willingness to purchase, on average, by 15% among buyers and 40% among renters

2.Decreasingthe interest rate on a 30-year fixed-rate loan only raised the willingness to purchase by 5%, on average

As buyers straddle the fence between BUY RIGHT NOW with a higher interest rate and WAIT AN UNKNOWN PERIOD OF TIME to save 20% of the purchase price, here’s an example to give them a push. Take a look at the numbers for a house with the purchase price of $200,000 with a 30-year fixed mortgage:

WAIT: requires a $40,000 down payment for a total loan amount of $160,000. At an interest rate of 5%, the monthly mortgage payment (principal & interest) would be $855.35.

BUY NOW: requires a $10,000 down payment for a total loan amount of $190,000. At an interest rate of 5.375%, the monthly mortgage payment (principal & interest) would be $1059.20.

No doubt $855.35 is better than $1059.20 for a monthly payment – that’s not what’s at stake here. The difference between those two payments is $203.85. In order for a person to save the additional $30,000 to go from a 5% down payment to a 20% down payment at the rate of $203.85/month, it would take over 147 months (12.25years!) to get to that point, which is almost half the life of a 30-year mortgage–and who knows what home prices will be like 12 years from now!

For many perspective buyers, that additional $204/monthis significant. We have a number of strategies to help make up that difference and get you into a home as soon as possible!

This is a reprint (with a few changes) from a few years back, but the message is still relevant today.

Don’t Trust Whispers

Written by Elise Loan Tucson on July 8, 2018. Posted in Home Loan. Leave a Comment

When I was a young whippersnapper, I played a game with my fellow whippersnappers –both boys and girls –called Telephone Line. I’m sure most of you have played this game in one form or another, whether it was called “Telephone Line” or something else. You would sit in a circle –the more people the better –and one person would start the game by whispering a phrase like “my dog has fleas” into the ear of the person to her/his right (or left, depending on your political leanings). The person in whose ear the phrase is initially whispered turns to the next person in the circle and repeats that phrase in a whisper, and the game follows in that manner until the phrase has been passed to the last person in the circle. At that point, the final person in the circle repeats out loud the phrase as she/he understood it.

Ninety-nine times out of one hundred, the original phrase changes rather dramatically through repeated retellings usually due to poor hearing, muffed whispers, possible regional accents, and the kid who’s chewing a wad of bubble gum while passing the phrase along to her/his circle mate. And when it gets to the end, “my dog has fleas” has become “the designated hitter rule has ruined the game of baseball” (or something along those lines). Sure, it’s possible that you have one smart aleck kid in the middle of the line who purposefully changes the phrase (I don’t know anyone who would do that), but this usually happens because humans are involved –and humans, the well-intentioned beasts that we are, just don’t have a corner on the market of perfection. That’s how myths and misconceptions come into existence –and the mortgage world is certainly not immune to them. Let me address just two myths concerning credit scores.

Myth #1: having your credit report pulled by a lender will hurt your credit score. That’s a bold-faced lie! Honestly, it’s PARTIALLY true, but it’s not NEARLY as adverse in its effects as so many rampantly believe. The true part is simple: when you have a lender pull your credit report, this signals that you’re considering as assumption of debt, so the credit scoring trolls who live under a bridge (in a van down by the river) note that you’re displaying “risky” behavior. However, the REAL TRUTH is that such a pull doesn’t knock your score down into basement –and along those same lines, if you have your credit pulled by multiple lenders in a short period of time because you’re shopping for the best mortgage provider, those pulls will only be viewed as one action.

Myth #2: closing out credit cards will improve your score. Paying them off, yes, will improve your score, but closing them can actually HURT your credit score. In general, credit scoring models don’t measure risk by how much credit you have availablebutrather by how much of that credit you’re using – a ratio known as “credit utilization”. When you close an unused account, you reduce your total available credit, so your credit utilization goes up. The trolls don’t like things that go up.

The moral here, of course, is don’t believe everything you hear/read (except this column because this is the absolute truth, of course). Ask questions and investigate so you can be better informed –but be careful who you ask because it might be that kid with the giant wad of gum in his mouth all grown up, and you won’t understand a word he says.

The Naked Truth About Real Estate & Lending

Written by Elise Loan Tucson on June 18, 2018. Posted in Home Loan, Real Estate Statistics. Leave a Comment

For those of you who are paying attention, you might remember that I wrote about an experience I had at my local gym with a gentleman who was heavily “inked” – that’s the cool way of saying he had tattoos, in case any of you are wondering. As we sat in the sauna, he told me that all the work done on his upper torso amounted to approximately 100 hours of work, and it cost $85/hr to have an artist repeatedly jab you with a needle (I’ve done that for free at the local blood bank when the technician couldn’t find my vein). Fun! I used that experience to write about how this guy was a walking “down payment” for a house because he had spent $8,500 – more than enough to purchase a home in the range of $200,000. If it’s all coming back to you, I apologize for boring you. For those of you who don’t recall, you have just read the Reader’s Digest version (truth be told, though, the original is MUCH funnier). Since that experience, I’ve kept a small notebook and written down some of the more wacky experiences I’ve had with my fellow sauna enthusiasts (and in case you’re wondering: no, I don’t take the notebook in the sauna – I wait until I get home and write in my notebook at that time). Here’s just a sampling of those experiences:

 The gentleman who stood up and proceeded to inhale deeply through his nose and exhale through his mouth. On the surface, nothing weird about that. However, he either ate a 55-gallon drum full of rotten fish or something had died inside him. Within seconds, the odor FILLED the sauna. With my eyes watering up at an alarming rate, I barely made it to the door before being blinded by my own tears.

 The gentleman who insisted that we turn out the light in the sauna room because IT GAVE OFF TOO MUCH HEAT. Really? You’ve VOLUNTARILY walked into a room that’s kept north of 200 degrees, and you’re worried about a 60-watt bulb pumping out enough ADDITIONAL heat to make you feel uncomfortable?

 The NUMEROUS gentlemen who walk into the sauna without nary a towel (and they sit wherever they want). I’ve found there’s an interesting matrix involving age and body mass to predict how much clothing someone will be wearing in the sauna: the older and bigger a man is, the more shamelessly naked he will enjoy his sauna session.

These three types of sauna goers are perfect examples of people we mortgage and real estate folks deal with on a daily basis. The bad-breath guy is like the client who needs help with his credit score – the equivalent to giving him a Tic Tac – so his offer will get accepted. Then there’s the light-bulb guy. This, of course, is the client who lucks into finding a home in his price range with a beautifully remodeled chef’s kitchen but complains about the color of the grout in the backsplash. And last but certainly not least is naked man who is the pathological oversharer. You ask him for his birthdate, and you suddenly find that you’ve lost thirty minutes of your life and know everything about his gallbladder surgery and where he has travelled so far around the world to collect spoons. Obviously, we have to be licensed to perform our jobs, and it’s this very licensing coupled with our knowledge that adds invaluable worth to the transaction. But where we really EARN our living is dealing with so many different personalities and making it look easy, right?

Humble Pie Tastes Awful

Written by Elise Loan Tucson on June 4, 2018. Posted in Home Loan. Leave a Comment

Recently, a friend of mine sent me a link to a story with a note that read, “This will make you laugh.” My friend hasn’t been wrong before, so I clicked on the link and gave it a read. I’ll recreate it here and let you decide if my friend chose well.

The author of the story had been working hard and felt a small headache coming on, so he decided to take a break and get some lunch at a local Burger King. The line to place an order was fairly long (who knew Burger King as that popular?), and it was moving rather slowly. While he was waiting for the line to move at its glacial pace, a woman and her son had taken up a place behind him to wait. The woman was jabbering away on her cell phone at a decibel level probably akin to that of a 747 firing up its engines to ready for takeoff, and she wasn’t paying attention to her son.

The author’s slight headache was growing as the woman yammered on about something that was more appropriate for a discussion to be held in the privacy of a doctor’s office, and the child at her side was making it very clear that he was tired of waiting in line and that he wanted a pie. Spying the front of the line, the author noticed that the restaurant’s manager had chosen the lunch hour to train a new cashier who wasn’t exactly catching on that quickly. The headache grew.

As the woman behind him continued to speak on her cell phone, completely oblivious both to the unwritten rule of society that there are things you don’t talk about in public and her son’s growing volume in letting his mom (and everyone within earshot) know that he wanted a pie, the author turned around and asked the woman if she would please speak a little more quietly and rein in her son. She exploded and told the author how rude he was; she then looked down at her son and assured him that he would get his pie to make up for the rude man in front of them. The headache has now reached migraine levels.

At last, the author made it to the front of the line and instead of placing his order for the burger-and-fries combo he had originally intended on buying when he had decided to hop over to Burger King for a break from work, he asked the cashier how many pies they had on hand and ordered them all: 23 pies in all, to be precise. As he was handed his bags teeming with his order, he heard the woman behind him step up and place her order and her son’s request for a pie. Upon being told that they were completely sold out, the woman asked who had ordered all the pies because she had seen them behind the counter when she and her son first walked into the restaurant. The hapless cashier pointed to the author and told the woman he had purchased all the pies – and the author, while taking a bite into one of the pies and heading out the door, looked the woman in the eye and just smiled.

The sale and purchase of a home, no matter what anyone says, is an emotional transaction. Sure, you can run the numbers and make sure it’s a good decision financially, but the ultimate trigger is emotional – sort of like falling in love. While the author of the link I read began his quest for lunch simply as a need to get some food to tamp down a headache, emotion caused him to pay more than he had intended and walk away with something he really didn’t want. The woman didn’t fare any better either as she was stuck with a deal that didn’t get her any closer to her goal. Remember this the next time you’re buying/selling a home: if you don’t keep your emotions in check, you could end up eating humble pie – and that’s not tasty!

Category: Home Loan

Cash is King, But Appraisers Aren’t Court Jesters

Don’t Wait for the Rate

Don’t Trust Whispers

The Naked Truth About Real Estate & Lending

Humble Pie Tastes Awful