Category Archives: Buyers

On the Mortgage Horizon

I just got this from a lender we frequently do business with regarding the new Qualified Mortgage rule expected from the Consumer Financial Protection Bureau …it is an interesting read.

Mortgage questions?  Call us for answers! 703-836-1464

Mortgage questions? Call us for answers! 703-836-1464

This week CNN discussed the new Qualified Mortgage (QM) rule the Consumer Financial Protection Bureau (CFPB) is likely to release.  The new QM Rule is not expected to become effective until January 2014.

The new Qualified Mortgage (QM) rule is designed to establish new lending rules that will move us between the footloose times of no documentation loans and the current strict credit standards.  The QM proposes that borrower’s total debt to income ratios be capped at 43% of their monthly gross income.  It would also limit the risky products offered by lenders.  Such as, no more loan terms greater than 30 years, mortgage loans can’t have a balloon payment due, no loans in which the principle due increases over time, and interest only loans would go out the window as well.  Homebuyers who choose adjustable rate mortgages will no longer be qualified on low introductory teaser rates, but rather the fully indexed rate.

The QM rule is designed to help lenders determine the borrower’s ability to repay the loan by evaluating all aspects of their credit profile.  Such as current income and assets, employment history, credit history, the proposed mortgage payment to include insurance, real estate taxes, HOA dues, mortgage insurance and a borrower’s total monthly debt to income ratios.

This is not designed to alter the housing market’s recovery and assist consumers who can’t meet the 43% debt to income ratios, the agency said it was establishing a second, temporary category of qualified mortgages that meet most of the new guidelines and would qualify to be purchased or guaranteed by Fannie Mae or Freddie Mac.  Federal Reserve Chairman Ben Bernanke said, “The legitimate concern is that this will cement the tight mortgage underwriting standard that we currently have in place, and most people agree that they are too tight.”

Mary Ellen Podmolik of the Chicago Tribune reported:

Under the new rules, lenders who make qualified mortgages to well-qualified borrowers that carry a lesser chance of defaulting could be shielded from lawsuits from these prime borrowers who say the lender did not satisfy the ability-to-repay requirements.  Riskier, subprime borrowers could challenge the lender’s assessment of their ability to repay the loan but borrowers would have to prove that a lender didn’t adequately factor in the living expenses and other debts.

Diane Thompson, of counsel at the National Consumer Law center said, “They appear to favor lenders’ interest above consumers.  You have to prove what’s in the creditor’s records.  It may be that no homeowners are able to challenge it.  Otherwise, you’re relying on regulatory oversight, and we say how well that worked.”

In summary, the QM rule is designed to protect consumers from irresponsible mortgage lending and protect taxpayers from having to bail out Fannie Mae and Freddie Mac.  Lenders will be restricted from offering risky products to the consumer and charged with the task of responsible lending.  CFPB director Richard Cordray explained, the ability to repay rule is a common-sense answer to curb the borrowing and lending behavior that led to the financial crash.  Cordray says, “When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford.  Our ability to repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes.  This common-sense rule ensures responsible borrowers get responsible loans.”

Advertisements

ABCs of Closing Costs

You have found your dream home, the seller has accepted your offer, your loan has been approved and you are eager to move into your new home. But before you get the key, there’s one more step-the closing.

abcAlso called the settlement, the closing is the process of passing ownership of property from seller to buyer. And it can be bewildering.

As a buyer, you will sign what seems like endless piles of documents and will have to present a sizeable check for the down payment and various closing costs.  It’s the fees associated with the closing that many times remains a mystery to many buyers who may simply hand over thousands of dollars without really knowing what they are paying for.

As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary by locality, here are some common fees:

· Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.

· Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.

· Loan Origination Fee: This fee covers the lender’s loan-processing costs. The fee is typically one percent of the total mortgage.

· Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.

· Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.

· PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure.  Once an owner with a conventional loan has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.

· Prepaid Interest Fee: This fee, also known as interim interest, covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.

· Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months worth of homeowner’s insurance premium will be collected. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, eight months of taxes will be collected.)

· Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property. Make sure you consult a real estate professional in your area to find out which fees-and how much-you will be expected to pay during the closing of you prospective home.

Also, keep in mind that depending on the market, you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.

If you have any questions please do not hesitate to call or email your Alexandria Homes specialists and someone on our team of agents will be delighted to assist you!

Looking to Beat the Traffic Snarl?

Tired of the gridlock traffic driving from outer Fairfax County into work every day? Or on the flip side, are you tired of cramming the entire family and the dog into a shoebox so you can have a decent commute? Have you ever thought about a pied a terre in a luxury high rise as a possible solution?

Luxury High Rise

Northampton Place

More and more people in the Washington, DC area have found the balance between the conflicting desires of an easy commute and room to spread out in some of our close-in hi-rise condominiums for their Tuesday – Thursday crash pads while keeping their main residence further out in Fairfax Station or even out in the Shenandoah.

This week we picked up the listing on a perfect weekday retreat in the popular Northampton Place building located just off I-395 in Alexandria, Virginia.  Northampton Place 1306.

Buying New Construction?

Ten Benefits of Having a Buyer’s Agent

Many unwary home buyers stumble upon a new neighborhood under construction, walk into the on-site sales office, and contractually commit to buying a home through the seller’s or builder’s real estate agent without being represented by their own agent.  This is a bad idea for most home buyers.  On the surface, it might not seem necessary to involve your own real estate professional in a transaction where the desired property has been identified and viewed, and where you can easily deal directly with a builder or the builder’s agent, but believe it or not, using your own real estate agent is the smart thing to do, not only because doing so provides you with an experienced professional who is looking out to advance and protect your interest (and not that of the seller or builder), but also because it doesn’t cost you a penny since the seller typically pays the real estate commission.  Any home buyer who is thinking about new construction should consider the following advantages to using a Buyer’s Agent.

Here are ten advantages to using your own real estate agent when buying new construction.

1. Just as a real estate professional calls on experience and knowledge of an area to help buyers locate pre-owned homes in a community, he or she can also direct buyers interested in newly-built homes to developments and communities that match client specifications.

2. A Buyer’s Agent can recognize and suggest builders with a reputation for delivering a high-quality product, responding quickly to issues, and being financially sound.  Not all builders are created equally, and neither are the houses they build.

3. A Buyer’s Agent may be familiar with how a builder prices his or her products and where there may be room to negotiate price or upgrades.  Typically builders are not very flexible on price but many have been known to add anything from “free” granite counter tops all they way to “free” bonus rooms to close the deal and some will offer substantial closing cost assistance if you can close by a certain date.

4. Without representation, you are one buyer purchasing only one home, whereas a buyer’s agent can bring more weight to the negotiating table since a buyer’s agent may significantly impact a builder’s bottom line by providing a steady supply of customers.  [Note: The builder may require your Buyer’s Agent to accompany you on your first visit to the site.  Check with the builder or better yet, play it safe and have your agent accompany you on the first visit.]

5. The lender approval process may go smoother if a Buyer’s Agent is involved scheduling visits, accompanying you to lender meetings, and helping expedite required documents.

6. What might seem like a simple transaction can grow legally complex and risky – you need adequate projections to ensure you don’t forfeit your deposit otherwise have to buy a house that it not what you were promised.  A Buyer’s Agent is familiar with those complexities and the risks inherent in the home buying process.  When such questions arise, Buyer’s Agents can steer buyers to the right advisors and services.

7. When relocating to a new area, Buyer’s Agents can be particularly valuable resources. In addition to providing local area information regarding schools, day care or elder care services, public transportation, proposed development, and so on, once construction is under way, they can periodically stop by the work site, supply you with progress reports, and photograph or videotape phases of the construction.

8. A Buyer’s Agent can assist you as you face hundreds of design choices and consider which upgrades could potentially add value to the home when it comes time to sell.

9. A Buyer’s Agent can accompany you at the site while you okay the plumbing and electrical locations prior to dry walling, as well as on the walk-through or builder orientation.  Recognizing a missing or oddly placed plumbing or electrical outlet is a skill that comes with experience and can save you lots of headaches and money later.

10. Lastly, and as stated above, most often the builder pays the Buyer’s Agent’s commission, thereby allowing you to enjoy the individual attention, support, and protection afforded by your own agent at no cost to you.  You enjoy individual attention and support at no cost to you.

Purchase Your First Home with Confidence

This is a little article I had published in the Alexandria Times a while back… the information is still as relevant today as it was when the paper featured the story.

If you are considering purchasing your own home, your timing is great. Interest rates are still at historic lows and the market has shifted to favor the buyer. Now is a great time to buy a home! While purchasing a home and making one of the largest investments of your life can easily be a daunting and overwhelming undertaking, if you go into the process well prepared and with the right support, your first home purchase can be a great experience. Here are some tips from a seasoned professional that should get you off one the right footing.

Get Educated – Before starting out, educate yourself a little bit on the process. Believe me, it is a whole lot less daunting when you at least have an idea of what to expect. Check your local bookstore, or go online, to find one or more many good “how to” instruction guides on buying a home. For example, the U.S. Department of Housing and Urban Development has an entire section on its website (www.hud.gov) devoted to homebuyers. It has a list of common questions from first-time homebuyers, information on mortgage and home-buying programs, access to housing counselors, downloadable tools such as a wish list and home-shopping checklist, tips on selecting a real estate professional, etc. Other informative sites to check out are http://www.Realtor.com and one of my personal favorites, iAlexandriaHomes.com. In addition to printed resources, you should also consider some face-to-face education, which you could find by checking your local newspaper for homebuyer seminars that you can attend. And, of course, you should expect to receive no end of information and education from your real estate agent.

Your real estate professional is also a great resource. Your agent’s job is not only to help you find the right house but to educate you on the home buying process. Do not hesitate to let him or her know that you are new to the process. Your agent will walk you through the steps of the home buying process and help you navigate what would otherwise be a very confusing maze. Your agent expects you to have questions at each step-from house hunting, to making an offer to the closing.

Money Matters – The finances involved in the purchase of a home can be overwhelming to first-time homebuyers and seasoned purchasers alike. Buying a home is often the largest purchase someone will ever make… until he or she goes through the whole process again and buys his or her second, or third, or even forth home. There are questions of affordability, mortgage costs, down payment, closing costs, and making offers to think about.

Affordability – There are mortgage costs, the down payment, and closing costs to think about. By looking at your income and debt ratio, your sales professional can help you calculate how much you can afford each month in mortgage payments. But before determining your price range, you should also take into consideration other factors that will affect your monthly budget once you are a homeowner, such as property taxes, insurance, utilities, and maintenance.

Pre-Approval – Fear of being rejected for a home loan is one of the main concerns for first-time homebuyers and not something you want to be worrying about when looking at homes. To lessen the stress and to make you a more effective negotiator, you will want to get pre-approved for your loan before looking at prospective homes. This pre-approval process is quick and painless and usually only takes a few minutes of your time. Being pre-approved by a lender will not only help you feel more confident, it will also give you an advantage during negotiations. In addition, the fact that your loan has already been approved is of great value to the seller because it shortens the purchase process, and there is less of a chance that the buyer will back out of the sale. If you don’t have a specific mortgage lender in mind, ask your sales professional for a recommendation or two.

Down payment – The down payment amount varies depending on the value of the home you choose and your mortgage lender. The traditional 20% down payment rule is not so much the norm anymore for homebuyers. Often times it is closer to 10% down, and in some a home can be purchased with no money down. Your real estate agent and mortgage lender will be able to explain the different options available to you and help you figure out what makes the most sense for your situation.

Take Your Time – Do not feel pressured into making an offer on the first home you see but do not pressure yourself into looking at every single house for sale. These two extremes are common mistakes of many first-time homebuyers. You want to make sure you view enough homes that you are able to get a feel for the marketplace but you do not want to view so many that you skip over the perfect home. Your agent knows and appreciates the fact the process takes time and should encourage you to move at a pace with which you are comfortable. With the right support and professional resources, and a little invested time and energy on your part, the American dream will come true for you too.

Above all, remember there are no silly questions. Make sure you understand and are comfortable with every aspect of the transaction. Your real estate professional can be an invaluable asset in helping you make educated decisions so that your first home purchase is a rewarding experience.

Questions?  Please feel free to ask.