Real Estate

Why do we do appraisals?

An appraisal is required when getting a loan, because the lender wants to know that the collateral (property) is worth what they are loaning on it. Since the underwriter is not going to drive out to every property they lend on, they require the borrower to pay for a third party person to review the property and compare it to other properties in the area. The appraiser is also required to verify that the property is in a condition suitable for lending and meets certain lending guidelines.
The appraiser does receive a copy of the contract. They then measure the property for square footage, note improvements, or deficiencies, and try to justify why an educated buyer would pay the amount they are willing to pay via contract using area comps.
A lot of my buyers will ask when the house comes back on appraisal for value, why it didn’t come back for more. I always respond that something is only worth what someone is willing to pay for it. The appraiser’s job is to justify to the lender why you believe the property is worth what you are willing to pay for it. If the appraiser cannot find past properties that have sold for values that justify why a buyer is paying what the contract states, the appraisal will come in low. Rarely does the appraisal come in for more than contract, because if the property was worth more than the sales price a buyer would have paid that in a free market.
In an increasing market, appraisals may come in low because appraisers are looking at historical data, while in a decreasing market, appraisals may come in high. The appraiser is always looking in the rear view mirror to see what is happening in the market. They tend to use comparable properties that have sold within a six month period

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Real Estate

Why are rates going up?

The interest rates for home loans have drastically risen in the past couple weeks. Loan rates have been extremely low for several years and rates with rates tumbling over the last year, it is a shock to many of my buyers how fast rates have risen. Many buyers have asked my opinion on whether rates will go back down to the level they were at last month. And while I think there may be some volatility in the rate I also know that the market has been distorted by the government intervention. The following was a recent email I received from a lender that explains in layman terms why the interest rate has risen.

The magnitude of the rapid rise in mortgage rates has been shocking, but the reason is clear. To help stabilize financial markets and boost the economy during the financial crisis, the Fed initiated an unprecedented program to purchase enormous quantities of Treasuries and MBS. The added demand from the Fed distorted MBS markets and pushed mortgage rates down to historically low levels. In recent years, analysts have attempted to estimate the impact of the Fed’s bond buying on MBS prices, and some have said that mortgage rates would have been as much as 1.50% higher without the Fed purchases.
Now, the economy is no longer in recession. With steady economic growth, the Fed has indicated that it’s almost time to scale back (taper) its bond purchases. Investors are now trying to determine the “proper” level of mortgage rates in a growing economy in the absence of unnatural demand from the Fed. Unfortunately, most investors would rather be safe than sorry, meaning that they would rather continue to sell MBS instead of guessing if mortgage rates have moved “high enough”. From one point of view, mortgage rates are still just back at levels last seen about two years ago when the economic outlook was much weaker.
If you have further questions regarding real estate matters, please feel free to contact me at 405-213-2992 or visit my website http://www.sandiwalker.net

Real Estate

What should I do if I am denied for a home loan?

It is not the end of the world if you are not able to buy a home today due to your credit score. But not learning how to raise your score can have harmful effects. Not only on your ability to buy a home but also the interest rate you pay for other items as well as the cost of insurance. In addition, some employers use credit scores in making hiring decisions.
Several lenders that I work with have programs to help buyers increase their credit scores in a reasonable time. In addition I also work with a non profit that can help you make a budget and give you ideas on improving your credit score.
Some of the ways that may help you to increase your credit score are:

1. Paying off or lowering the balances on your credit cards. Do not close accounts though, just pay them off.

2. Sign up for a secure credit card at a local bank. Make a small purchase each month and pay it off.

3. Sign up for auto pay on your reoccurring bill pay on your accounts that allow this option. Making sure the money is available in your account.

4. Make a budget and stick to it. This seems to be a difficult thing in our society but you need to see where your money is going in order to manage it.

5. Review your credit report. If there are any discrepancies, write to the credit reporting agencies to correct them.

6. If you have judgments or collections, contact the people you owe and see if you can make payment arrangements. Sometimes creditors will take less than is owed if you will negotiate with them. But you have to call and ask. There is no guarantee they will take less but if you don’t ask, you will never know.

Your credit score affects so many parts of your life. People who have low credit scores tend to pay more in interest for all sorts of things. So decide today to improve your credit score. If you need help improving your credit score, feel free to ask for a referral to a person who can help you. Just because your score is low today doesn’t mean it has to stay that way.
If you have real estate questions, please feel free to call me at 405-213-2992 or visit my website http://www.sandiwalker.net