Real Estate

I got the lowest rate and it cost me lots of $$$$

What is the cost of a loan? Most people want to know what the interest rate is on a mortgage, but what about the fees. It costs money to get a loan. There are typically lender fees including underwriting, doc prep fees, discount points, and origination fees. A lender may charge some fees at one rate and other fees at a different rate.
In order to compare loans between lenders or to know whether it is advisable to buy the rate down, the buyer must do the math. Here is a simple example to illustrate the effects.

If the discount rate is 1% to lower the interest rate ¼% and the difference in the payment is approximately $15 on a $100,000 loan, the buyer would divide $15 into $1000. In order to save $15 a month the buyer will have to live in the house 67 months before actually realizing any savings. If the buyer moves or refinances prior to the 67th month, the upfront fee he paid to lower the monthly interest payment was more than he would have paid with a higher rate.

Sometimes builders will pay closing costs when a buyer uses a preferred lender. This lender is someone who is familiar to the builder and that they may have negotiated lower fees. The interest rate should be competitive with other lenders. Of course, sometimes another lender will quote a lower rate that the preferred builder’s lender. But if the builder will not pay the closing costs when a non preferred lender is used, the lower interest rate may cost the buyer more money overall.

Example: If the closing costs with the non preferred lender are $2500 and the interest rate is ½% more making the payment an extra $30 a month. If the buyer pays there own closing costs, it will take 83.3 months or almost 7 years to recoup the $30 a month. If the buyer lives there longer than this then it makes sense to pay the money up front and take the lower monthly interest rate. However statistically we know most people move prior to realizing the benefits of the lower interest rate.
Always make sure you get a good faith estimate and understand which fees are controlled by the lender and which fees are third party fees. This way you can compare the complete cost of a loan.
If you need help with real estate questions, are looking to buy or sell please call me Sandi at 405-213-2992 or visit my website at http://www.sandiwalker.net

Real Estate

You want to buy a house, but where do you start?

I believe that by following certain steps in order you will have a better experience purchasing you new home. These include having a minimum amount of money on hand, getting preapproved, and working with a full time realtor.

When writing an offer, you will need earnest money also know as deposit money. The standard in Oklahoma is $500-$1000, may be more or less. You will also be asked to pay for the appraisal, typically $450 in Oklahoma, and the home inspection fees are approximately $300 for home and termite. While the lender and inspectors may be willing to wait to closing to be paid, they will probably want a credit card or check to hold incase the file does not close. Even if the house does not close, if these services have been rendered you will be required to pay for them. The earnest money may or may not be refundable depending on contract terms and reasons for fall through.

Preapproval is essential. By getting preapproved you will learn the following:

Is your credit and income where it needs to be to qualify for a loan.

Do you need a down payment and how much?

Can you qualify for down payment assistance?

What type of loan can you obtain?

Are you eligible for an American Native loan, VA loan, or rural development loan?

What are the costs associated with the loan?

How much do you want to spend a month?

Without getting preapproved you are simply window shopping and you may not know the exact fees that are associated with the cost of purchasing. You could also possibly spend money attempting to get a house that you don’t qualify to purchase as well as wasting time and gas.

Working with a full time Realtor who knows the area that you want to purchase a home in is critical. If you are calling sign to sign, you have no representation. The realtor on the sign is being paid a commission by the seller. If you hire a realtor of your own, then that Realtor can represent you the buyer. The buyer does not pay the commission for this service. The seller contracts with the listing agent to sell their house. The listing agent offers a portion of the full commission to a buyer’s realtor to bring them a buyer. This way your best interest is represented during the transaction.

If you are looking for a full time Realtor in Moore, Midwest City, Del City, Mustang, Yukon, or Oklahoma City to represent you, please feel free to call me at 405-213-2992 or visit my website http://www.sandiwalker.com

Uncategorized

What is a Short Sale?

A short sale is when the lender accepts a payoff less than what is owed on the property. It avoids foreclosure and the worry that the lender will sue the borrower for a deficit judgement.

In our current market, not all homes are worth what is owed on them. We sometimes refer to these homes as being under water or with negative equity. While property typically appreciates in time, during the past several years we have seen properties devalue. In Oklahoma, we have been very fortunate that most of our values have remained flat or had a minor adjustment in value. This is frustrating and scary to the homeowner but if you’re able to make the current mortgage payment then I suggest that you continue to do so. The likelihood is that the economy will improve at some point and the value of these homes will increase.

The bigger problem occurs when life changes–people lose jobs, get divorced or have a serious medical condition –and you cannot continue to make your current mortgage payment.   At that point the borrower has a few options: Contact their lender and try to work out a payment plan, do a deed in lieu, allow the house to go to foreclosure, or attempt to do a short sale.

In order to do a short sale, the lender is going to want to know why you can’t make the mortgage payment. They will want to see your bank statements for the past two months, pay stubs, and a hardship letter explaining why you cannot pay the mortgage. In addition, they are going to want to see your tax returns.  They are verifying that you truly cannot make the payment.

Short sales do have a negative effect on your credit. The hope is the lender will forgive the deficit and mark the file paid. This does not always happen. I have had a file where the lender wanted the borrower to sign a promissory note for a small amount of money to be paid after the closing. This is a possibility. There could be tax liability issues. Most of the time though the lender accepts the short sale as payment in full and does not pursue the borrower for additional money.

In a future blog, I will discuss in more detail about short sales and what a buyer and seller should expect.

In the meantime, if you have questions about short sales, or other real estate questions, please feel free to contact me at 405-213-2992 or visit my website  http://www.sandiwalker.com