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How Much Shopping for a Mortgage Should You Do?

Does getting a mortgage feel like rolling the dice?

How much shopping around for a mortgage should you do?  The short answer is enough to feel comfortable, but that doesn’t really address the question.

The reason for shopping for anything is to satisfy yourself that you got a good deal.  When it comes to buying your home, especially true for first time buyers, there is a lot of integrated complexity and the mortgage process is often overlooked.  Because I’m not a lender, I’m not going to tell you about all the intricacies from  that perspective but  instead from the purchase and real estate consultant perspective.

As your real estate consultant, I focus on helping you get clarity around what’s really important to you when it comes to buying your new home.  And yes, part of that is getting the best possible deal both on the purchase price and terms and for the mortgage but if what’s truly important to you about having your new home is being in a place where you feel comfortable, that feels like “home” to you, then sometimes a compromise in the financial aspect is what’s needed.

Shopping for a mortgage, especially going the online route for a home purchase, may offer what seems like the best deal.   You may save money by shopping around but does that help if you ultimately don’t get the house of your dreams?  Online mortgage companies are more concerned about high volume than they are about personal service.   Often times,  your mortgage may take  longer than it should to process causing you to fail to meet your contractual deadline for mortgage approval.

Another common obstacle in the mortgage process is the Appraisal.  Although the lender orders the appraisal, they do it through an Appraisal Management Company who then puts it out to bid for Appraisers.  It is quite possible to end up with an out of area Appraiser that does not have full access to local comparable properties that are required to accurately appraise the property you are purchasing.  This means that your Appraisal could come in below the purchase price you have contractually agreed to and require you to bring in additional cash to close the gap between the appraised value and purchase price or potentially to lose the home of your dreams if you are unable to do that.

It’s also important to be aware that there are two contractual requirements regarding the Appraisal, one is value but the other is time.  If you fail to meet your contractual obligation for either of these requirements, you are also at risk of losing your dream home.

By this time in the process, you have already spent about $1,000 on inspections and Appraisal of your own hard-earned money that you will simply lose if you are unable to complete the transaction.

Generally your best bet when it comes to getting financing for your new home is to talk to your qualified professional Real Estate Consultant first, and get their recommendations for best choice of lenders.  Using a lender that your Consultant has confidence in based on experience also may help to secure your purchase offer over that of another when your Consultant is able to make a good case for your lender to the Seller’s agent.

It’s not just about getting the cheapest mortgage.  It’s really all about getting a complete package that is affordable financially and gets you moved into your new home.

If this raises more questions than answers for you or if you are thinking about moving and want to talk more about that, feel comfortable calling 661.375.7325 to get all your questions answered.

Your friend in real estate,

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Energy Upgrades Can Improve Property Value, But Are There Financing Pitfalls?

There are loads of good reasons to make energy efficient improvements to your home but choose wisely to get the most bang for your buck.  Not only does it matter what you upgrade but even more important is how you pay for those improvements.  That tankless hot water heater could land you in financial hot water if you’re not careful!

New windows, doors, roof, insulation, et cetera will all make your home more comfortable and potentially more attractive as well as increasing the value.  Few people have the cash available to do the upgrades they intend and so will resort to financing the improvements.  That can be a great way to get the improvements you want with a relatively low pain point in your monthly budget.  Here’s where you need to be careful.

  • There’s a relatively new (since 2010) loan program available that allows local governments, state governments, or other inter-jurisdictional authorities, when authorized by state law, to fund the up-front cost of energy improvements on commercial and residential properties, which are paid back over time by the property owners.  The program is called PACE (Property Assessed Clean Energy).  What this means is that certain lenders are funding the improvements for you and attaching a lien to your property that is repaid through your property taxes.

On the surface it sounds like a great idea and for some it may be but there are some pitfalls to be aware of.

  • Many times the contractor that is arranging to do the work is also the contractor providing the financing for the PACE program loan.
    • Be sure that both the cost of the improvements and the cost of the loan are within typical costs for the kinds of improvements you are considering.
  • Take your time in making your decision.  An offer that is good “today only” may not be your best choice.
  • Understand exactly the cost of the improvements with the financing cost and the terms under which you are repaying the loan.
    • Remember that the loan payments are added to your property tax bill as an additional assessment.  This means that if you become delinquent on your property taxes, you are also delinquent on your PACE program loan and your PACE program lender would be able to foreclose on their lien and you could lose your home.
    • A PACE program loan can also make it difficult or impossible to sell your home.  Most buyers will not be willing to accept your loan obligation as part of the sale.  That means that the PACE program loan has to be paid off before you can transfer ownership to the new buyer.  If you don’t have enough equity in your home to cover the cost of the lien, you may have to bring in additional funds.

Even if everything else looks good, you love the cost of the improvements and the PACE program financing terms, check with your lender before doing this kind of loan because the PACE program loan is recorded as a super lien.  This means that in most cases it is in order of priority above other liens on your property (including your primary mortgage)!  Your mortgage lender will probably not allow you to put them in this position.

In conclusion, as with most things, do your homework, make sure you know what you’re getting into and make your best decision based on the facts.  If you want to talk about your specific situation and how it relates to buying or selling your home, start the conversation with me at 661-375-7325.

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Why Might Short Sales Stabilize the Real Estate Market?

Find out why foreclosure may not be your best choiceI hear from lots of prospective buyers that want to get a list of Tehachapi foreclosed properties so they can look for the “best deal.”  The truth is a foreclosed property may not be the best deal whether you are the occupant of the foreclosed home, or the prospective purchaser.

As the occupant, if you are just waiting for the foreclosure to go through, you’re not really doing yourself, or your neighbors, any service at all.  I understand that the entire situation is distressing and stressful.  You probably already went through one or more attempts at a loan modification.  I’m sure you’ve had plenty of offers of “help” that didn’t seem very helpful.  Regardless of what your history has been, it’s pretty much never a good idea to stand by and let the lender foreclose.

As the seller, you can salvage the shreds of your credit rating by taking action.  In addition to stopping the free-fall on your credit rating, you’ll be able to hold your head up and move on with your life.  How do you do that?  Consider a short sale as an alternative to passively waiting for foreclosure.

Why is this good for your neighbors?  A foreclosed home typically sits vacant for extended periods of time while the lender is readying it for sale.  During that time, squatters may move in, but whether they do or not, the property continues to deteriorate while it sits there waiting.  This means that the value is going down while it sits too.  This spiral is contributing to the issues we face today with market values dropping because when these distressed properties finally do sell, they are the comps (comparable properties) that are being used to help value the properties for which buyers are getting loans.

Foreclosed properties typically will sell for a little bit less than non-foreclosures, but those savings come at a cost.  The costs can include both time and money.  A foreclosed property will, most often, need some work done in order to bring it up to the standard of a non-foreclosed property.  That means that it may not be the best deal when it comes to buying.

It also takes a special kind of person to look past the problems and see the beauty that can be revealed with some sweat equity.

It takes an even more special seller to take action and try to sell the house before the lender forecloses.  If you are that kind of seller, I’d be happy to talk to you about options.  Why not call today?

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Tehachapi Home Buyers See Mortgage Fees Increase

Fannie Mae and Freddie Mac are raising risk fees charged to lenders on loans they buy for resale to investors for the first time since 2009.  They are also adding risk fees to more loans offered to borrowers with exemplary credit.   Although lenders could absorb the cost, most are expected to add the fees to loan costs.

  • To avoid a fee or to receive a discount, most borrowers will need FICO scores of 740 or better and down payments of at least 25 percent.
  • The fee increases likely will affect most loans with terms longer than 15 years that are sent to Freddie beginning March 1, and to Fannie beginning April 1.
  • The most notable aspect of the fee increase is that the fees are being added to more loans to borrowers with higher credit scores.  With few exceptions, risk fees previously hadn’t applied to borrowers with FICO scores of 740 or higher.

I often say that now is the time to buy.  If you have excellent credit, closing on a Tehachapi or Kern County area home loan before March or April could save you money.  Everyone likes to save money don’t they?

Thanks for reading this!  If you enjoyed the article, please share with your friends too.

Sally Lawrence

Questions, comments post below.  For faster response, call or text Sally at 661-375-7325 (375-REAL), or email Sally@HomeSalesSally.com .

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