5 Things You Should Never Say When Getting a Mortgage

Being an open book is a great quality to exhibit to your BFF or significant other (well, usually), but it can get you into hot water with your lender when you’re trying to buy a home. Now, let’s be clear: We are not advocating in any way, shape, or form that you lie to your lender or withhold pertinent information when you’re getting a mortgage.

But there are some topics that you just don’t need to bring up, because they wave unnecessary red flags that can lead to lots of extra paperwork and raise questions about whether you can really afford that mortgage. Just ask Cheryll LeBlanc, a loan officer at Fairway Independent Mortgage Corp. in Holden, MA, who weighed in on some doozies she’s heard over the years.

Here are some crazy things would-be home buyers have said to lenders, and why they’re cause for concern.

1. ‘I need to get an extra insurance quote due to … (fill in the blank)’:

  • Crime rates in the area
  • Potential flooding
  • Earthquake zone

Asking questions about insurance could indicate the house is in a high-risk zone, and we "now have to underwrite the borrower and the property with a different and more intense default lens," says Bill Dallas, CEO and co-founder of Cloudvirga. If your home is in a designated flood hazard area, flood insurance is mandated by the Federal Emergency Management Agency. Otherwise, it might well be a good idea, but you don’t have to mention it.

2. ‘I can’t believe how much work the house needs before we move in’

Have you ever seen a home inspection report? It’s a stack of 20 to 50 pages containing every little nuance that needs to be fixed in a home. It’s crucial information for you, but you’ll want to hold off on mentioning the contents of it to your lender.

“When lenders see a home inspection report, they freak out and begin to ask for a lot of conditions to make sure these issues won’t grow into bigger problems and halt borrower payments,” Dallas says.

Best-case scenario: The lender will ask for a lot of information. The worst case is it will ask for a lot of money to be escrowed to make the repairs.

“Avoid any mention of what your inspector found," Dallas says. "The appraisal comments create enough challenges.”

3. ‘Please don’t tell my spouse what’s on my credit report’

First off, this makes lenders cringe because they’re wondering just how much debt you have, LeBlanc notes. Or what else you’re trying to hide.

But, the bottom line, she says, is that it’s all going to be revealed on an application.

“I’ve been in face-to-face appointments with clients and when I pulled their credit—one of the parties is crying as the extent of debt is coming out,” she says.

She advises couples make sure both parties are clear on each other’s debts and that they get the animosity out before sitting down for a pre-qualification or pre-approval.

4. ‘I’m still working out the details on my down payment’

"Lenders like to see that borrowers have ‘skin in the game,’ so the down payment source is critical,” Dallas says.

Any borrowed funds, gift funds, and increases in CLTV, or combined loan to value ratio, mean there’s an increase in the chances of default, he says.

“Fraud is the biggest risk in lending, and down payment fraud is the second-highest kind, after income fraud,” he notes.

Down payment fraud could comprise a number of things: Perhaps the borrower says it’s a gift but it actually has to be repaid, or the borrower got a loan to pay for it (which is a no-no). Or perhaps the buyer borrows the down payment from the seller and does a silent second mortgage to pay it back.

That’s why lenders will request a paper trail for any gifted funds.

If you do plan to use a gift for your down payment, the donor must be an immediate family member, must provide copies of bank statements confirming the donor has the capacity to gift the funds, and must sign a letter that states the money is a gift, not a loan.

5. ‘I can’t wait to use the hot tub I’m buying on the side from the seller’

If the hot tub comes with the house and it’s written into the contract, then you’re in the clear. But if you’ve negotiated for something on the side with the seller, you’ll be in hot water—and we’re not talking about the kind with bubbles.

“Buyers have to sign a document at the closing, which states that no money has exchanged hands between the buyer and seller outside the closing,” says Lauren LoMonaco, managing partner of Chicago law firm LoMonaco & LoMonaco.

If you mention a side deal to your lender, it’s going to raise major red flags. But don’t withhold the info, either—if you do and you’re found out, you could be charged with mortgage fraud, and that’s a felony. So whether it’s a lawn mower, flat-screen TV, or that sweet hot tub out back, make sure you disclose it in the contract.

Cathie Ericson is a journalist who writes about real estate, finance, and health.

realtor.com

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Home Prices Have Been Up Every Month, But Where’s The Inventory?

https://www.podbean.com/media/share/pb-i6k8c-783344

Steve and Terry start Real Estate Round-Up by talking about home prices, which were up 5.6% over August 2016 to a median of $253,000 across the U.S., for the 66th straight month of year-over-year gains.

To emphasize how much this is a seller’s market, Terry shares a story where she listed a house for $350,000 right after Hurricane Irma and thought she wouldn’t get any calls.  Instead, she got five offers, including one that was $10,000 over the asking price, all within one day of her listing the property! 10-11-2017

Yes, Florida Home Sales Are Rising After Hurricane Irma

https://www.podbean.com/media/share/pb-x6gcr-78333f

Steve starts this week’s Real Estate Round-Up by asking Terry Story for an update on existing home sales in her market of Boca Raton, FL.  Terry says her phone started ringing almost immediately after Hurricane Irma, with previously registered sellers moving up their timetable to sell and others inquiring what their homes were worth, but Terry does not attribute that to Irma.

In the aftermath of other hurricanes—and Hurricane Andrew in particular—a lot of people moved from South Florida to northern parts of the state, and that exodus created a lot of new construction and new homes for sale, notes Steve. 10-04-2017

Purge Your Home Before You Prepare to Sell It – 09-28-2017

https://www.podbean.com/media/share/pb-asnve-76214b

Switching topics, Steve wants to talk about a list, from Terry, of the nine things you should purge your home of before you move.  Terry starts with getting rid of all the junk you’ve accumulated over the years such as bathroom towels that aren’t all that nice and that you really don’t use, old sheets and extra pillowcases, and appliances and kitchen gadgets that you really don’t need, such as rarely used juicers.  Then go through the closets and take out all your unworn or incorrectly-sized clothes so someone else can use them, and throw out kitschy souvenirs, extra coffee mugs and old trophies that clutter-up your home. 09-28-2017

How Much Is Mortgage Insurance and How Long Do I Have to Pay It?

​If you bought a home with a down payment that is less than 20% of the purchase price, or if you refinanced with less than 20% equity, your lender will require you to purchase mortgage insurance.

It’s important to note that not all loan programs will offer the same terms. That’s why it’s smart to contact your agent when looking to find the right loan for you. A savvy agent can help you navigate the often confusing world of finance as they work with a wide range of professionals who can help.

Is There Only One Kind of Mortgage Insurance?

All mortgage insurance serves the same purpose-to protect your lender should you default on your mortgage. However, different loan types use different terminology for mortgage insurance.

– FHA – MIP (mortgage insurance premium)
– VA – no mortgage insurance required
– Conventional – PMI (private mortgage insurance)
– USDA – MI (mortgage insurance)

How Much Is It?

Your premium is determined by the lender and will depend on two things: your loan to value ratio and your credit score. So for example, someone with a credit score below 700 who puts down only 5%, will pay a higher premium than someone with a credit score of 760 who puts down 15%.

Conventional loans: 0.20% to 1.50%

FHA loans : Upfront premium often added to loan amount has two payments. 1.75% of loan amount + annual premium (paid monthly) 0.7% to 1.3%

USDA loans : Upfront premium of 2.75%, based on loan size, added to loan balance + .50% annual fee based on remaining principal balance

How Do I Pay It?

There are several options you have to pay mortgage insurance.

Monthly. This is the most common type of mortgage insurance payment. The premium will be calculated into your monthly payment. The lender will then pay the premium annually on your behalf. So for example, let’s say you’re purchasing a $200,000 home and have put down 10%. The PMI at a 1% rate would be $1,800 per year, $150 monthly.

One-time payment. If you prefer to keep your monthly payments as low as you can a single payment might be the way to go. Typically, this kind of premium will range from 1% to 2% of the loan amount, so taking the same example above, you would be paying anywhere from $1,800 to $3,600 at the time of closing to cover your mortgage insurance premiums. The lender might also let you roll the premium into your loan so that it will be financed over the life of the loan rather than annually.

Lender paid premium. Some lenders will pay the mortgage insurance if you agree to pay a higher interest rate. This keeps your monthly payments lower than if you had to pay a monthly PMI premium, however keep in mind that you will be paying this higher interest rate until you either refinance or pay off the loan.

How Do I Get Rid of PMI?

For conventional loans you must have at least 20% equity in the home. When you have paid the mortgage balance down to 80% of the home’s original appraised value, you can ask your lender to drop the mortgage insurance.

When your loan balance drops to 78% the mortgage servicer is required to eliminate the mortgage insurance.

FHA loans, however are dealt with differently.

For FHA loans with MIP (mortgage insurance premium) that originated before June, 2013, mortgage insurance cancels when the loan to value gets to 78% and 5 years have passed since the loan was created. FHA loans taken out after this date will pay mortgage insurance for as long as the loan is in place.

So as you can see, in some cases the best way to get out of paying mortgage insurance on an FHA loan is to simply refinance. USDA loans also have mortgage insurance for the life of the loan, so to get rid of mortgage insurance you would need to refinance.

Can I Get Out of PMI Early?

Get a new appraisal. Some lenders will consider a new appraisal instead of the one acquired at the time of purchase. If they agree with the appraisal – which typically costs from $300 to $500 – they might agree that you meet the 20% equity threshold and drop the PMI.

Make loan prepayments. Paying something as small as an extra $50 per month can drop your loan balance dramatically. There are a number of repayment calculators available online to help you find the best way to pay your loan down faster.

Remodel. Increase your home’s value by making improvements to your home. Not every change to your home will increase its value. Consult an agent about those changes you can make to your home before you get started.

How Do I Calculate My Equity?

Simply divide your current loan balance (how much you still owe) by the original appraised value (typically the same as the purchase price).

For example, let’s say you purchased a home for $250,000 dollars and have paid the mortgage down until it has a balance of $190,000. Your PMI should have been canceled by now, because you’re at less than 78% of original value.

Are There Any Other Requirements to Cancel?

Yes. You should request PMI cancellation in writing. You must be current on your payments and have a good payment history. You may be required to prove there are no other liens against the property. You might be required to get an appraisal to prove that the loan isn’t more than 80% of the home’s current value.

What if my Lender Doesn’t Agree to Drop It?

If your home has increased enough in value, you can refinance without paying mortgage insurance. Calculate the costs of refinancing to be sure it doesn’t cost more than if you were to simply keep paying the mortgage insurance.

Get more information on the home buying process by visiting coldwellbanker.com.

5 Reasons Why FSBO Sales Fail

​For-Sale-by-Owner, or FSBO, transactions are commonly seen in seller’s markets or whenever homeowners want to maximize their profits by not having to pay commission.

However, statistics show that selling your home with the assistance of a professional real estate agent will garner you a higher profit, enough to cover the commission as well as put more money in your pocket. According to the National Association of Realtor®’s 2016 Profile of Home Buyers and Sellers, the average FSBO sales price was $185,000, while the average price for a home represented by an agent was $245,000. That’s a difference of $60,000!

If you choose to sell your home on your own, you’ll be negotiating and relying on your own skill to finalize a contract, leaving yourself open to potential legal problems and a smaller profit when all is said and done.

Here are some of the top reasons why FSBO home sales can go very wrong.

1. Marketing your home online isn’t as easy as you think

Buyers always start online, and FSBO sellers are unlikely to get the exposure they need on a number of listings websites to reach their audience, says Realtor® Wendy Hooper with Coast Realty Services in Newport Beach, CA. Sticking a sign in your yard or trying to pull off some DIY social media marketing hardly has the same effect.

How an agent can help: Using an agent automatically offers widespread exposure for your listing through the multiple listing service. Your real estate agent will also have the means to promote your house to fellow agents to share with their clients. FSBO sellers would have to shell out big bucks for advertising and still might not reach the most important audience.

2. You could price your home wrong

Those who put their homes on the market as FSBO tend to set a price based on an online assessment tool or the lofty sum that the neighbor down the street claims they were offered—two methods that are liable to put the listing price way off.

"Using a free online valuation tool is like bringing your doctor a printout of your Google search about symptoms and possible cures,” says Jon Sterling, a real estate consultant with Keller Williams Realty in San Francisco. “There’s no substitute for actual market knowledge.”

The danger in overpricing a home is that it will languish on the market, and buyers will wonder why, even if you lower the price later, says Mark Ferguson, a real estate agent with Pro Realty in Greeley, CO.

"The home becomes stigmatized, and buyers are likely to pay a lower price when the home has been on the market an extended period of time,” Ferguson says.

How an agent can help: A real estate agent will provide an accurate home value based on a comprehensive market analysis to help you arrive at the right listing price. The goal is to make sure you’re pricing your home in the sweet spot—not too high so that you are turning off potential buyers, and not too low so you are leaving money on the table.

3. You could underestimate (or overestimate) how much money to spend on curb appeal

“A novice home seller is unlikely to view their home objectively or know how to stage it to appeal to the broadest audience,” says Hooper. That means you might be turning off potential buyers with an amateur paint job, an overgrown yard, or even a broken doorbell.

On the flip side, you might end up investing far more money than is needed. Hooper had sellers who were convinced they had to totally overhaul their 35-year-old kitchen and floors to the tune of about $50,000. Instead, she advised a $10,000 investment for paint, staging, and minor repairs, which still netted $45,000 above their target price.

How an agent can help: Even if you’re not up for a full home makeover, your agent has an eye for detail and can recommend simple, budget-conscious swaps that can translate into real dollars when it comes negotiation time.

“We know how to spend the least amount of money to get the best outcome and home presentation possible,” Hooper says.

4. Showings are a drag

FSBO sellers don’t realize how draining it can be to set up showings. And on top of scheduling actual potential buyers, you also have to deal with both looky-loos (gawkers with no intention of buying the house) and “sharks,” (investors looking to flip your house for a profit).

"Sellers who advertise their FSBO will quickly be inundated with calls from real estate investors who are looking to save the same commission the seller hopes to save,” Sterling says. Unfortunately, typically these offers are very low and could likely lead to no sale.

How an agent can help: Your agent will handle all the scheduling and staff the tours for you, so all you have to do is quickly tidy up and vacate.

In fact, that is another key reason to have an agent: Buyers can get uncomfortable with a seller hanging around during the showing, says Ferguson. Agents also will weed out unsuitable offers and collect feedback that potential buyers might be unwilling to share directly with the seller, which can make subsequent showings even stronger.

5. Preparing your own paperwork can be tricky

Unless you have a background in contracts or law, you might want to leave the paperwork to the pros. The closing process can entail more than 20 pages of complicated paperwork, including the contract and addendums designed to cover all of the situations that could go wrong, says Ferguson.

For example, houses built before 1978 require an addendum regarding lead-based paint and some states need a release confirming the presence of carbon monoxide detectors.

How an agent can help: Your agent will take care of all property disclosures and corresponding documentation to avoid future liability.

“If the seller does not use an agent and doesn’t know every law and required paperwork specific to their community, they open themselves up to lawsuits,” warns Ferguson.

By Cathie Ericson, realtor.com

Want a Smart Home? 5 Reasons to Get Started Now—and How

You’ve probably heard the term "smart home" a lot lately. After all, almost half of Americans now own some type of smart home technology, according to a recent survey by Coldwell Banker. Nonetheless, most of us have barely scratched the surface of all the options out there for boosting our homes’ IQ. Frankly, some of us might find all that tech a tad intimidating, or maybe just don’t think it’s that useful. And for those on the fence, it’s hard to know where to get started. Well, we’re here to help!

Welcome to The Connected Home—a series of articles where we help you navigate this brave new world, from smart security systems to thermostats to kitchens and beyond. We’ll help you cut through the white noise and tell you in simple terms which gadgets are worth getting, why, and what it’ll cost to set them up in your home.

In this first installment, let’s take a step back and highlight all the ways smart products can make your home a better place—by saving money, time, headaches, and other hassles.

Reason No. 1: Smart homes are safer

Homes should be our safe space, and an array of smart home devices can help ensure that. In fact, one survey by August Home found that 63% of consumers cite home security as the biggest motivation to buy a smart home device.

The most obvious smart home security devices to use are cameras that detect break-ins; they can also be serviced by companies that can further assess the danger and send the police rushing to your door. But burglars aside, smart home devices can detect an array of other threats: smoke, fire, carbon monoxide, moisture levels (important if you’re concerned about leaks or flooding), radon, and so much more. Smart locks can also be locked or unlocked from afar, removing the hassles of lost keys and pricey locksmiths.

Even better, most smart home security products won’t drain your wallet as much as you might think. According to Houzz’s 2016 Smart Home Trends Survey, the majority of smart home security upgraders (76%) spend just $1,500 or less on these features.

Reason No. 2: Smart homes save money

Want to slash your home’s energy bills? That can easily be done with smart thermostats like those from Nest, Honeywell, and Ecobee, which can perceive how many people are in a room and adjust the temperature accordingly, and also allow you to make adjustments remotely, with your phone.

According to a Nest study, the company’s smart thermostat saved consumers on average 10% to 12% on heating and 15% on cooling. Based on typical energy costs, that translates to an average savings of $131 to $145 a year, which would mean this smart device (which costs $249) can pay for itself in less than two years.

Because smart thermostats are fairly cheap (Honeywell’s costs $159) and boast a clear payoff, they’re a great way to start smartening up your home. If you’re ready to broaden your home’s budget-friendly amenities, consider smart lighting, smart dishwashers or laundry machine. Sure, these items are more expensive—Kenmore’s Smart 5.2 cubic foot front-load washer costs $1,290 (on Amazon), more than double the same-sized model without smart features—but they’ll save you money down the road by conserving heat and water.

According to Consumer Reports, water-efficient laundry machines use about 13 gallons or less for an 8-pound load—half the 26 gallons sucked down by a regular washer.

Reason No. 3: Smart homes save you time and stress

It’s time for the fun part: Smart homes make life easier!

“A lot of people don’t want to have to lift a finger around the house,” says Tom Flanagan, founder of Real Estate Things, a blog about real estate technology. And many aspects of this Jetsons-style fantasy are actually within reach.

For instance, rather than needing to schlep across the room to turn on your stereo, you can just tell a smart speaker (like Amazon Echo or Google Home) to play your favorite tunes. And since these speakers also work as virtual assistants, you can ask them for the weather forecast, or how many teaspoons are in a cup in the midst of cooking, or to add toilet paper to your shopping list.

Granted, all these little tasks might not seem like much hassle individually, but they add up, and they’re just the beginning. These Wi-Fi-enabled smart speakers can also act as smart home hubs, enabling various smart gadgets to speak to one another (i.e., your smart alarm clock can wake you up and turn on your smart coffee maker, while your smart fridge can sense you’re out of eggs and add that to your grocery list). It’s no wonder, then, that according to the 2017 U.S. Houzz & Home Survey, one-third of Americans who’d recently purchased a home plan to add some form of automation.

Reason No. 4: Smart home gadgets aren’t as hard to install as you might think

You don’t have to be tech-savvy to install most smart home products.

“They’re made to be user-friendly,” says Austin-based home technology expert Stacey Higginbotham. Many offer online instruction videos, and you might not even have to pick up a drill, since many operate wirelessly (like Arlo Pro’s Security System with Siren below, $201.45 at Amazon).

Reason No. 5: Smart homes are easier to sell

When you eventually sell your home, smart devices can pay off in a number of ways. According to Consumer Reports, smart home features can boost your home’s resale value by up to 5%—that’s $15,000 on a $300,000 home. Research also shows that home appraisers are beginning to factor in the value of tech features.

Daniel Bortz is a Realtor in Maryland, Virginia, and Washington, DC, who has written for Money magazine, Entrepreneur magazine, CNNMoney, and more.

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