Changing gears, Steve wants to talk about an article in the New York Times about the explosion of rental units across the country. Terry mentions an uptick in the housing market and increasing home-ownership rates as millennials reach the age where they’re forming families and settling down. Even so, home-ownership is still below its historic norm of 65% and future growth could be slowed by rising interest rates and an overhaul of the tax code, which could take away the mortgage interest deduction on Federal taxes. Nov 15, 2017
Switching gears, Steve poses a listener’s question for the Real Estate Survival Guide segment, which asks if it’s wise to add a child’s name to older adults’ deeds. While this may seem like a good idea on the face of it, Terry believes it may not be all that wise. When you add an adult child to the deed, you’re also giving them permission to say “no” to selling your house, so if you need the money or decide you want to sell the house and travel, your child could refuse and that could be a problem. Nov 8, 2017
Steve wants to know what condominium owners can do if they’re living in a community that has a bad condo board. Terry facetiously (or perhaps not) recommends getting on the board yourself, which Steve likens to a fate worse than death!
Steve kicks off Real Estate Roundup by asking Terry Story if she’s heard of anybody buying a house using Bitcoin. Terry hasn’t, and Steve goes on to explain that Bitcoin is a new digital currency that’s basically created from a computer, so it’s bits and bytes, and doesn’t really have the backing of a government, gold reserves, or something else of surety or value. What makes it valuable is that there’s a limited quantity of bitcoins in circulation at any point in time, unlike traditional currencies where central banks can print as much as they want, devalue the currency, and trigger inflation. Bitcoins also come with inherent anonymity so their owners are shielded from the government’s prying eyes.
Terry kicks off Real Estate Round-Up by quoting a recent Freddie Mac September 2017 Outlook Report on trends for the mortgage market in 2018. The report projects that new homes should be the primary driver of sales next year, with a two percent bump-up in total home sales from 2017 to 2018. Freddie Mac expects a moderate increase in mortgage interest rates in 2018 which, with a slight increase in housing supply, should reduce U.S. house price growth to about 4.9 percent in 2018, down from about 6.3 percent in 2017.
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.
“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.
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