Category: Home Loan

As a parent, one of your ongoing goals is to impart day-to-day guidance and deep wisdom to your kids like “look both ways before you cross the street” and “don’t eat yellow snow”. While YOU know how insightful these little nuggets are, they don’t always listen to you, but when someone other than yourself shares the same advice, they’re viewed as geniuses who could kick Stephen Hawking’s tail on Jeopardy.

As a real estate agent, when you’re dealing with someone who is currently renting, you quite often feel the same way: why won’t they listen to me? I feel your pain, and I have something you can share with your “children” that comes from a “genius” other than yourself. This information comes from Lawrence Yun, chief economist for the National Association of Realtors, and The Fed. If you think it would work, tell them you got it from this really cool cat named Larry and his Uncle Sam. Regardless of how you spin it, here’s the low down:

• In 2016, the predicted net worth for a typical homeowner is $225,000; for a renter, it’s $5,000
• That means a home owner’s net worth is 45 times more than a renter’s

“Larry” sums it up by writing in Forbes.com, “The simplest math shouldn’t be overlooked. A vast majority of home buyers take out a 30-year fixed-rate loan to make a home purchase. After 30 years, there is no loan payment (nor rent payment). So the home price growth over that time period would be the equity that the home buyer would have accumulated.”

I know there’s nothing new (or even that “insightful”) in that piece of wisdom, but sometimes people need a gentle reminder – and having it come from someone other than yourself might elevate it to “genius” status. Sometimes it’s a thankless job. : )

Big Bank Brush-Off
As you may have already heard, the Big Banks like BB&T, Bank of America, Chase, and Wells Fargo have drastically decreased the number of FHA loans that they are originating. As an example, one of the Big Boys originated 19,111 FHA loans in the second quarter of 2013; in the second quarter of 2015, they did only 340. So why bring this up?

The Big Banks have the biggest voices and biggest megaphones: their message will be heard and broadcast through national media. Even the casual home buyer is bound to hear snippets – and what they’ll most likely hear is that FHA loans are no longer available. That piece of incomplete information could stop them cold in their tracks or completely derail them in their design to look for and buy a home.

There are many great things about Big Banks, but loan option variety is not one of them. Educate your clients and empower them with the knowledge that we have what they need – whether it’s an FHA loan or another product that will get them the home they want.

We figured if we threw a little French into the headline of this week’s edition, it would sort of class it up because, let’s face it, the French have given us some of the finer things in life: fine wines, high-end fashion, and hopelessly devoted Jerry Lewis fans. The world wouldn’t be the same without them.

Three weeks ago, we talked about the Condition Ratings that appraisers use to categorize and support their valuations of homes. Specifically, we detailed how important it is to read the comps for surrounding homes so you can help your clients realistically price their homes when listing. We’ve heard back from a lot of you that this has been extremely helpful, so we wanted to revisit the topic of appraisals and give you some more tips that will help you stand out from your peers and impress the daylights out of your clients – we’re talking about upgrades!

Not all upgrades are the same – nor are they worth the same in the eyes of an appraiser. For example, if your client spent $6K on a brand-new HVAC system two months ago, she’ll be able to get a dollar-for-dollar reflection in the appraisal. Come on, this is the desert – a new HVAC system is like handing someone a key to Shangri-La and/or Heaven (depending on their philosophical or religious views). For those clients who are getting ready to put their homes on the market and are considering an HVAC upgrade, if they already have a swamp cooler, give them this advice: definitely install the new HVAC system but keep the swamp cooler, also.

Another dollar-for-dollar upgrade is a garage. This applies either to the costs for enclosing a carport or building an entirely new garage onto the property itself. We’re a car culture, and the appraisers know it.

Here are some other upgrade items that generally fetch consideration from an appraiser in the ballpark of $.30 to $.50 on each dollar spent:

• Kitchens – no matter how much they love that Viking range or built-in Sub-Zero refrigerator, they need to know they’re only going to get a percentage of their costs in the appraisal
• Pools – your client may have imported tiles from an Italian monastery and had a pirate ship trucked in from the Bahamas, but they’ll only get so much for them
• Bathrooms – it’s nice that they can fit the entire family and their three cousins into the bathtub at the same time (kind of weird), but that feature won’t appeal to everyone so the appraisers will only give a percentage
• Windows – bulletproof, specially glazed, shaped like the silhouette of Jerry Lewis, etc., an appraiser is only concerned about cost of the materials and what percentage they’ll assign

Give us a call about these and other upgrades – we’ll help you look like a rock star!

Before we get into the meat of the subject, let’s review some numbers. In the Arizona market, here’s how your potential buyers break down by loan type:

• 28% qualify for Conventional loans
• 18% qualify for VA loans

Doing some simple math, that means that your pool of potential homebuyers who qualify for Conventional and VA loans is 46% of the population. That’s not necessarily a bad number – there’s an argument to be made for being selective – but if you add FHA buyers to the mix, that’s another 44% of the population. You’ve practically doubled your pool and can draw from 90% of the population here in Arizona.

Let’s look at an example of a $271,050 30-year fixed loan with a 680 credit score (average credit score in Arizona is 676):

Conventional (4.5% rate w/1.48% MI):
Monthly payment is $1,731.70

FHA (3.75% rate w/.85% MI):
Monthly payment is $1,469.24

That’s a difference of $262.46/month!

Why the difference in the rate? On Conventional loans, when the credit score drops below 700, pricing hits occur. Remember, the average credit score in Arizona is 676. Now for the arguments against FHA:

With a Conventional loan, MI eventually falls off; on FHA it doesn’t.
All true, but home buyers stay in one home for an average of just over six years – the MI won’t fall off in six years on a Conventional loan either. In those six years, with a savings of $262.46/month with the FHA option, that’s $18,897.12 in overall savings. That’s some major college fund money!

The loan limit on FHA is $271,050 – I sell houses that are much more expensive.
No argument here. That’s where being selective comes into play, of course. Food for thought, though: the average house price right now in Maricopa and Pima Counties is below that threshold. Those homes that are selling as fast as you can list them are below that threshold. You can sell four $250,000 houses in six months or you can try and sell a $1 million house in 12-18 months.

When your next client comes to you to buy a house, be the expert! Or just call us – we’ll make you look REALLY good!

That’s a line from a really old joke – still funny – that fits perfectly with the here and now. For those of us geeks who live and breathe mortgage “stuff”, we all know that October 3rd was a big day (maybe a “day that will live in infamy” – I’m kidding; couldn’t resist another government reference). For those of you who have been living under a rock for the past year, and this is new, it’s time to catch up!

As we all know, October 3, 2015 (after strict warnings from the CFPB that it would be August 1st) was the date on which the new TRID guidelines went into effect. We all know “TRID” stands for “TILA-RESPA Integrated Disclosure”, which in English means “Buckle up!” Okay, it’s not that bad, but it’s sort of like the mortgage industry’s equivalent to an appendix: it’s just sitting there taking up space and isn’t necessary. Nevertheless, it’s here to stay, and that’s okay. On the bright side (and there always is one), TRID will help separate the good real estate agents and mortgage folks from the bad and the great real estate agents and mortgage folks from the good. We’re here to help you hang with the great ones! Here are some pieces of advice to help you do that:

· Tell your clients to check their email every two or three hours (if not sooner). Tell them that any email they receive from us or any other party to the sale/purchase, open and respond to it immediately – and read through them VERY CAREFULLY. In some (and these are the REALLY important ones), they will need to click on a button to confirm receipt of that email. Simply hitting reply with “I got it” won’t suffice.
· Order warranties EARLY!!!!! Don’t wait!!!!
· If you’re the seller’s agent, send all invoices directly to us and NOT to the title company.
· Make sure the contract is filled out COMPLETELY. If it’s not, delays will inevitably result. If we have to run down information, it will delay the process because we can’t issue the LE, CD, and other documents without everything being complete.
· On the contract, TRIPLE CHECK that the buyer AND seller contact information is there.
· Don’t wait to negotiate price and seller credits that could change the loan amount.

And here’s another thing we have that practically no other lender offers: a program that will save FOUR DAYS at the front end of the loan and up to TWO FULL WEEKS over the course of the process. Come to us before your client starts looking for a house, and we’ll get you on the right track. While the rest of the industry is defaulting to 45- and 60-day closings because of TRID, we’re confident that we can still provide 30-day closings with our program.

You can say it: that IS pretty GREAT!!!!

What is someone’s home worth? Short answer, of course: whatever someone is willing to pay for it. And if they’re buying with cash, that’s all the answer one needs, right? So, we all know the real answer is, “for the amount at which it appraises.” As real estate brokers and agents, you already know this, so why am I even talking about it? Think of this as a quick refresher course.

One of the big “factors” used in determining the value by an appraiser – who quite often seems to take his or her job REALLY seriously – is the overall condition. Hold your “well, duh” comments for now. 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. But you already knew this, right?

Good agents know how to prep their clients to get their homes ready for the appraiser. Great agents know how to read the comps and know from the condition rating why a nearby house that’s similar appraised for a certain amount; armed with that information and knowledge, they can give their clients very specific advice and instructions to assure the appraisal comes back 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 slight chip in the sink and the tile grout has some holes, signs that this kitchen could get a rating of C4. That difference in rating could mean thousands of dollars in decreased appraised value – the repair of these items might only cost $150.

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 – that’s actually more common than a flying pig.