SELLERS QUESTIONS:
Q. What is the first thing I should do?
A. First thing is to plan, sit down and strategize. Look at when you want the home sold, and what you want your time to look like. Build a plan.
Q. How much should I budget for repairs and improvements?
A. It’s tough to give you an exact amount on how to plan for repairs and improvements, It really depends on the conditions of the home and if there are any deferred maintenance items. Most sellers over estimate the cost to get their home Market ready
Q. What improvements give the best return on investment?
A. There are three most common areas that people are putting money into, in order to get the highest return. The simplest factors will be flooring, paint and appliances. Aside from that depending on the market, comps and neighborhood, you might also look into kitchen renovations, the ensuite bathroom and other areas might get you the highest return.
Q. What things should I fix when selling?
A. The basics: Buyers are expecting that there’s no dry rot, there’s no termites. There’s not significant damage to the roof. No major defects to the home. Any plumbing and safety hazards. Any health and safety things absolutely have to fix.
Q. What inspections should I do?
A. The three inspections that we basically do before selling a home are roof inspection, home inspection and pest inspection, which is really a termite and dry rot inspection before putting it on the market. Because those are also the three inspections that a buyer is probably going to consider doing and it’s good to know what you might run into before you’re in escrow and while you’re in escrow
Q. Who pays for staging and photographs?
A. I pay for photography, videos, 3 D virtual tour. Every cost associated with marketing in selling your home I cover because we want to make sure the photos look great. Staging consultations I cover. When it comes to physically bringing in furniture there is a significant return that’s an investment you would make and not us.
Q. Can I just offer a credit instead of replacing carpet?
A. Absolutely replace the carpet and not consider offering a credit in lieu of a credit. You want them to see fresh carpet and not come in and think oh I can get a credit, most people don’t think that way.
Q. Do we market to Bay area buyers?
A. There is a strategy I have that market’s to Bay area agents because if a bay area buyer is coming up here chances are there selling their property and moving here and having a good relationship with an agent critical. I market through MLS, Realtor.com, Zillows, Youtube, website, but the good thing is that I am heavily connected with agents throughout the state.
Q. What media is included with the listing?
A. Photos, 3D video, are tools that we use to effectively market your home so when buyers land on your website and they land in the experience that we created they have the right media to engage with and create an emotional attachment to your home.
Q. What do we do with the dog?
A When it’s time to show your home find a safe place for your do to go. Consider the buyer’s experience.
TIMING QUESTIONS:
Q. When is the best time to sell?
A. Timing, The perfect time to go to market. There are several angels to this question, it’s your life style, buyers, less competition, I sell homes all year long. Best time is generally when homes are on the market and when buyer and buying. September more homes on market and generally fewer people buying.
Q. How long will it take to sell?
A. Has to do with what it’s the competition, how quickly homes are selling in the neighborhood, pricing and exposure. Price, are you pricing it lower to start a biding war or are you pricing it fare market to attract the highest amount of buyers? That will have a huge impact on how fast your home sells.
Q. When will the first showing happen?
A. The home will be available to show the next day it appears on the MLS. Keep in mind you have the control as to when people see your home, but essentially after it goes on the MLS.
Q. Do we already have a buyer willing to buy right now?
A. Any many cases we have buyers in our database that are actively searching for a home just like your. We have been advertising and marketing homes in this area for so long and have acquired leads or opportunities for those that weren’t quite ready, we’re emailing constantly and they are searching our website site and we get 2,500 views per month so it’s very possible that we have someone in our database right now but not actively working with them so we may have a buyer for you yeah.
Q. When do we officially put my home on the market?
A. When it comes to putting your home on the market it has to do with timing, when do you want your home to be sold by, how long will it take to sell your home. When I actually build out a marketing calendar I put on there an anticipated Close of escrow date. How long to prepare and how long to market your home.
MARKETING QUESTIONS:
Q. Will you do an open house?
A. I love open houses, I have a week long plan in marketing your open house, it starts a week before, I’m preparing the invitations, post cards, calling people, preparing email to our database. If not a physical open house it will be virtually following the same process.
Q. What services do you provide?
A. We are going to create a beautiful online experience for the buyer. Most buyers is starting there search on line. We negotiate strong on your behalf, which is a critical componet in the process. And once we have a successful negotiation and everyone is in agreement then we move towards successfully finalizing the deal that it actually closes. We have to work with the buyer, work with the buyer agent, work with you and all of the other parties involved in order to actually close.
Q. What is the marketing Plan?
A. My marketing plan is designed to get your home the absolute highest amount exposure.
I’m going to advertise, place on listing portals (Zillows, Realtor.com, Trullia etc.), Classified services (Craigslist, Ooodles), All the major broker websites (Century 21, Re/Max, Keller Williams ect.) you have a favorite broker website? It will be on there as well. Google, facebook, Instagram, Youtube, Overstock.com. Call around the neighborhood, mail post cards, connect with other agents, open house and vendors.
Q. Can we save money by less marketing?
A. All of my marketing is included in my fee, it’s not a line item. I create a custom package for your home where I had success in the past of getting home sold. Think about earning more in the end.
PRICING QUESTIONS:
Q. How much is my home worth?
A. Depends on how much a buyer is willing to pay for it.
Q. Should we get our own appraisal?
A. Sure, if you insist on having a private appraisal than absolutely get one. It’s really for your own peace of mind. You are hiring me to market and sell your home to a buyer that is willing to pay for your home for the highest possible and an appraiser may not always agree with that.
Q. My home is nicer than all the other comps, what we do?
A. If your home is nicer than any other home that sold in the neighborhood, we might need to look within the city. In some cases the region. We would have to make upward adjustments for that. I would need to look a little wider than your neighborhood.
Q. Do you offer discounts for buying and selling with you?
A. If I do everything I offered here today, serve you at the highest level, list your home , sell it and mean while, do the same amount of work and effort help you negotiate the best deal on the home, help you find the perfect home, and you overall experience is a success and you’re asking me to take less of an income? The answer is no. I am incredibly focus in helping you be successful in making more money when you sell your home and save money when buying your home you would not need my small percentage of a discount because you’re going to make that and more.
PROCESS QUESTIONS:
Q What is your communication plan?
A. The number one complaint that I hear from clients that previously worked with other realtors was that they didn’t know what people thought of their home when it was on the market before. We don’t want you to be out of the loop in terms of what’s going on the feedback of your home. I have a system set in place when people see your home. When they schedule a showing of your home they’re entered into our system we follow up with them and request feedback. We ask them to fill out a form and if they don’t fill it out we make contact with them and fill it out for them. We collect all the data and share it with you every week so you can know what people think about your home.
Q. What if a home list for sale in my neighborhood?
A. If a home list for sale in your neighborhood, there are a lot of factors, what is the condition of the home, what’s the price of the home, how does it compete with ours, but generally speaking we can use that energy and that excitement, the activity also looking at that home to market yours and sell yours. We’re going to follow our marketing strategy proven to be successful with other clients we work with and your home is going to standout.
Q. Can we buy another home without having to sell this one?
A. In many cases the equity in the existing home is needed for the down payment for the new home so yes the home will need to be sold. There are some cases where the home does not need to be sold.
Q. Can a buyer back out after we accepted the offer?
A. The buyer can absolutely back out of an accepted agreement. There are major contingencies that enable them to inspect the home, will need to get a loan, that they would need to qualify, there is the appraisal so yes a buyer can back out.
Q. How much information do we need to disclose?
A. Disclose, disclose, disclose. The more information you can give them the more comfortable they are and will keep you from potential law suites.
Q. What is the first thing I should do?
A. First thing is to plan, sit down and strategize. Look at when you want the home sold, and what you want your time to look like. Build a plan.
Q. How much should I budget for repairs and improvements?
A. It’s tough to give you an exact amount on how to plan for repairs and improvements, It really depends on the conditions of the home and if there are any deferred maintenance items. Most sellers over estimate the cost to get their home Market ready
Q. What improvements give the best return on investment?
A. There are three most common areas that people are putting money into, in order to get the highest return. The simplest factors will be flooring, paint and appliances. Aside from that depending on the market, comps and neighborhood, you might also look into kitchen renovations, the ensuite bathroom and other areas might get you the highest return.
Q. What things should I fix when selling?
A. The basics: Buyers are expecting that there’s no dry rot, there’s no termites. There’s not significant damage to the roof. No major defects to the home. Any plumbing and safety hazards. Any health and safety things absolutely have to fix.
Q. What inspections should I do?
A. The three inspections that we basically do before selling a home are roof inspection, home inspection and pest inspection, which is really a termite and dry rot inspection before putting it on the market. Because those are also the three inspections that a buyer is probably going to consider doing and it’s good to know what you might run into before you’re in escrow and while you’re in escrow
Q. Who pays for staging and photographs?
A. I pay for photography, videos, 3 D virtual tour. Every cost associated with marketing in selling your home I cover because we want to make sure the photos look great. Staging consultations I cover. When it comes to physically bringing in furniture there is a significant return that’s an investment you would make and not us.
Q. Can I just offer a credit instead of replacing carpet?
A. Absolutely replace the carpet and not consider offering a credit in lieu of a credit. You want them to see fresh carpet and not come in and think oh I can get a credit, most people don’t think that way.
Q. Do we market to Bay area buyers?
A. There is a strategy I have that market’s to Bay area agents because if a bay area buyer is coming up here chances are there selling their property and moving here and having a good relationship with an agent critical. I market through MLS, Realtor.com, Zillows, Youtube, website, but the good thing is that I am heavily connected with agents throughout the state.
Q. What media is included with the listing?
A. Photos, 3D video, are tools that we use to effectively market your home so when buyers land on your website and they land in the experience that we created they have the right media to engage with and create an emotional attachment to your home.
Q. What do we do with the dog?
A When it’s time to show your home find a safe place for your do to go. Consider the buyer’s experience.
TIMING QUESTIONS:
Q. When is the best time to sell?
A. Timing, The perfect time to go to market. There are several angels to this question, it’s your life style, buyers, less competition, I sell homes all year long. Best time is generally when homes are on the market and when buyer and buying. September more homes on market and generally fewer people buying.
Q. How long will it take to sell?
A. Has to do with what it’s the competition, how quickly homes are selling in the neighborhood, pricing and exposure. Price, are you pricing it lower to start a biding war or are you pricing it fare market to attract the highest amount of buyers? That will have a huge impact on how fast your home sells.
Q. When will the first showing happen?
A. The home will be available to show the next day it appears on the MLS. Keep in mind you have the control as to when people see your home, but essentially after it goes on the MLS.
Q. Do we already have a buyer willing to buy right now?
A. Any many cases we have buyers in our database that are actively searching for a home just like your. We have been advertising and marketing homes in this area for so long and have acquired leads or opportunities for those that weren’t quite ready, we’re emailing constantly and they are searching our website site and we get 2,500 views per month so it’s very possible that we have someone in our database right now but not actively working with them so we may have a buyer for you yeah.
Q. When do we officially put my home on the market?
A. When it comes to putting your home on the market it has to do with timing, when do you want your home to be sold by, how long will it take to sell your home. When I actually build out a marketing calendar I put on there an anticipated Close of escrow date. How long to prepare and how long to market your home.
MARKETING QUESTIONS:
Q. Will you do an open house?
A. I love open houses, I have a week long plan in marketing your open house, it starts a week before, I’m preparing the invitations, post cards, calling people, preparing email to our database. If not a physical open house it will be virtually following the same process.
Q. What services do you provide?
A. We are going to create a beautiful online experience for the buyer. Most buyers is starting there search on line. We negotiate strong on your behalf, which is a critical componet in the process. And once we have a successful negotiation and everyone is in agreement then we move towards successfully finalizing the deal that it actually closes. We have to work with the buyer, work with the buyer agent, work with you and all of the other parties involved in order to actually close.
Q. What is the marketing Plan?
A. My marketing plan is designed to get your home the absolute highest amount exposure.
I’m going to advertise, place on listing portals (Zillows, Realtor.com, Trullia etc.), Classified services (Craigslist, Ooodles), All the major broker websites (Century 21, Re/Max, Keller Williams ect.) you have a favorite broker website? It will be on there as well. Google, facebook, Instagram, Youtube, Overstock.com. Call around the neighborhood, mail post cards, connect with other agents, open house and vendors.
Q. Can we save money by less marketing?
A. All of my marketing is included in my fee, it’s not a line item. I create a custom package for your home where I had success in the past of getting home sold. Think about earning more in the end.
PRICING QUESTIONS:
Q. How much is my home worth?
A. Depends on how much a buyer is willing to pay for it.
Q. Should we get our own appraisal?
A. Sure, if you insist on having a private appraisal than absolutely get one. It’s really for your own peace of mind. You are hiring me to market and sell your home to a buyer that is willing to pay for your home for the highest possible and an appraiser may not always agree with that.
Q. My home is nicer than all the other comps, what we do?
A. If your home is nicer than any other home that sold in the neighborhood, we might need to look within the city. In some cases the region. We would have to make upward adjustments for that. I would need to look a little wider than your neighborhood.
Q. Do you offer discounts for buying and selling with you?
A. If I do everything I offered here today, serve you at the highest level, list your home , sell it and mean while, do the same amount of work and effort help you negotiate the best deal on the home, help you find the perfect home, and you overall experience is a success and you’re asking me to take less of an income? The answer is no. I am incredibly focus in helping you be successful in making more money when you sell your home and save money when buying your home you would not need my small percentage of a discount because you’re going to make that and more.
PROCESS QUESTIONS:
Q What is your communication plan?
A. The number one complaint that I hear from clients that previously worked with other realtors was that they didn’t know what people thought of their home when it was on the market before. We don’t want you to be out of the loop in terms of what’s going on the feedback of your home. I have a system set in place when people see your home. When they schedule a showing of your home they’re entered into our system we follow up with them and request feedback. We ask them to fill out a form and if they don’t fill it out we make contact with them and fill it out for them. We collect all the data and share it with you every week so you can know what people think about your home.
Q. What if a home list for sale in my neighborhood?
A. If a home list for sale in your neighborhood, there are a lot of factors, what is the condition of the home, what’s the price of the home, how does it compete with ours, but generally speaking we can use that energy and that excitement, the activity also looking at that home to market yours and sell yours. We’re going to follow our marketing strategy proven to be successful with other clients we work with and your home is going to standout.
Q. Can we buy another home without having to sell this one?
A. In many cases the equity in the existing home is needed for the down payment for the new home so yes the home will need to be sold. There are some cases where the home does not need to be sold.
Q. Can a buyer back out after we accepted the offer?
A. The buyer can absolutely back out of an accepted agreement. There are major contingencies that enable them to inspect the home, will need to get a loan, that they would need to qualify, there is the appraisal so yes a buyer can back out.
Q. How much information do we need to disclose?
A. Disclose, disclose, disclose. The more information you can give them the more comfortable they are and will keep you from potential law suites.
When should I refinance?
It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.
What are points?
A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.
Should I pay points to lower my interest rate?
Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.
What is an APR?
The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.
The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.
Because APR calculations are effected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.
The following fees are generally included in the APR:
The following fees are normally not included in the APR:
What does it mean to lock the interest rate?
Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to "lock-in" the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.
What documents do I need to prepare for my loan application?
Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process.
Your Property:
Copy of signed sales contract including all riders
Verification of the deposit you placed on the home
Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved
Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)
Your Income
Copies of your pay-stubs for the most recent 30-day period and year-to-date
Copies of your W-2 forms for the past two years
Names and addresses of all employers for the last two years
Letter explaining any gaps in employment in the past 2 years
Work visa or green card (copy front & back)
If self-employed or receive commission or bonus, interest/dividends, or rental income:
Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)
K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.)
Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)
If you will use Alimony or Child Support to qualify:
Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year
If you receive Social Security income, Disability or VA benefits:
Provide award letter from agency or organization
Source of Funds and Down Payment
Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
Savings, checking or money market funds - provide copies of bank statements for the last 3 months
Stocks and bonds - provide copies of your statement from your broker or copies of certificates
Gifts - If part of your cash to close, provide Gift Affidavit and proof of receipt of funds.
Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation.
Debt or Obligations:
Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements.
Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation. Check to cover Application Fee(s)
How is my credit judged by lenders?
Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.
The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).
Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:
NOTE: These agencies may charge you up to $9.00 for your credit report.
You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com
What can I do to improve my credit score?
Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.
Nevertheless, scoring models generally evaluate the following types of information in your credit report:
Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
What is your outstanding debt?
Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
How long is your credit history?
Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
Have you applied for new credit recently?
Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
How many and what types of credit accounts do you have?
Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.
Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.
To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.
What is an appraisal?
An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.
What is PMI (Private Mortgage Insurance)?
On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.
What is 80-10-10 financing?
Surprising as it may seem, some folks with hefty incomes find that it’s mighty tough for them to save enough money to make a 20% cash down payment on their dream homes. Using conventional financing, such buyers must purchase Private Mortgage Insurance (PMI) which increases the cost of home ownership and, ironically, makes it even more difficult to qualify for the mortgage. However, if you’re a dues-paying member of the cash-challenged class, don’t despair.
Given that your income is sufficiently high, it’s eminently possible to avoid getting stuck with PMI. That is why 80-10-10 financing was invented. It is called 80-10-10 because a savings and loan association, bank, or other institutional lender provides a traditional 80% first mortgage, you get a 10% second mortgage, and make a cash down payment equal to 10% of the home’s purchase price. By using this method, you are no longer obligated to take out PMI on your property.
The same principle applies if you can only afford to make a 5% down, 80-15-5 financing is also available. However, because a smaller cash down payment increases the lender’s risk of default, do not be surprised when you are asked to pay higher loan fees and a higher mortgage interest rate for 80-15-5 than you pay for 80-10-10.
What happens at closing ?
The property is officially transferred from the seller to you at "Closing" or "Funding".
At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re out-of-state. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.
Most paperwork in closing or settlement is done by attorneys and real estate professionals. You may or may not be involved in some of the closing activities; it depends on who you are working with.
Prior to closing you should have a final inspection, or "walk-through" to insure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.
In most states the settlement is completed by a title or escrow firm in which you forward all materials and information plus the appropriate cashier's checks so the firm can make the necessary disbursement. Your representative will deliver the check to the seller, and then give the keys to you.
It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.
What are points?
A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.
Should I pay points to lower my interest rate?
Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.
What is an APR?
The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.
The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.
Because APR calculations are effected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.
The following fees are generally included in the APR:
- Points - both discount points and origination points
- Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
- Loan-processing fee
- Underwriting fee
- Document-preparation fee
- Private mortgage-insurance
- Escrow fee
The following fees are normally not included in the APR:
- Title or abstract fee
- Borrower Attorney fee
- Home-inspection fees
- Recording fee
- Transfer taxes
- Credit report
- Appraisal fee
What does it mean to lock the interest rate?
Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to "lock-in" the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.
What documents do I need to prepare for my loan application?
Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process.
Your Property:
Copy of signed sales contract including all riders
Verification of the deposit you placed on the home
Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved
Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)
Your Income
Copies of your pay-stubs for the most recent 30-day period and year-to-date
Copies of your W-2 forms for the past two years
Names and addresses of all employers for the last two years
Letter explaining any gaps in employment in the past 2 years
Work visa or green card (copy front & back)
If self-employed or receive commission or bonus, interest/dividends, or rental income:
Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)
K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.)
Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)
If you will use Alimony or Child Support to qualify:
Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year
If you receive Social Security income, Disability or VA benefits:
Provide award letter from agency or organization
Source of Funds and Down Payment
Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
Savings, checking or money market funds - provide copies of bank statements for the last 3 months
Stocks and bonds - provide copies of your statement from your broker or copies of certificates
Gifts - If part of your cash to close, provide Gift Affidavit and proof of receipt of funds.
Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation.
Debt or Obligations:
Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements.
Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation. Check to cover Application Fee(s)
How is my credit judged by lenders?
Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.
The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).
Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:
- Equifax: (800) 685-1111
- Experian (formerly TRW): (888) EXPERIAN (397-3742)
- Trans Union: (800) 916-8800
NOTE: These agencies may charge you up to $9.00 for your credit report.
You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com
What can I do to improve my credit score?
Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.
Nevertheless, scoring models generally evaluate the following types of information in your credit report:
Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
What is your outstanding debt?
Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
How long is your credit history?
Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
Have you applied for new credit recently?
Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
How many and what types of credit accounts do you have?
Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.
Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.
To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.
What is an appraisal?
An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.
What is PMI (Private Mortgage Insurance)?
On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.
What is 80-10-10 financing?
Surprising as it may seem, some folks with hefty incomes find that it’s mighty tough for them to save enough money to make a 20% cash down payment on their dream homes. Using conventional financing, such buyers must purchase Private Mortgage Insurance (PMI) which increases the cost of home ownership and, ironically, makes it even more difficult to qualify for the mortgage. However, if you’re a dues-paying member of the cash-challenged class, don’t despair.
Given that your income is sufficiently high, it’s eminently possible to avoid getting stuck with PMI. That is why 80-10-10 financing was invented. It is called 80-10-10 because a savings and loan association, bank, or other institutional lender provides a traditional 80% first mortgage, you get a 10% second mortgage, and make a cash down payment equal to 10% of the home’s purchase price. By using this method, you are no longer obligated to take out PMI on your property.
The same principle applies if you can only afford to make a 5% down, 80-15-5 financing is also available. However, because a smaller cash down payment increases the lender’s risk of default, do not be surprised when you are asked to pay higher loan fees and a higher mortgage interest rate for 80-15-5 than you pay for 80-10-10.
What happens at closing ?
The property is officially transferred from the seller to you at "Closing" or "Funding".
At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re out-of-state. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.
Most paperwork in closing or settlement is done by attorneys and real estate professionals. You may or may not be involved in some of the closing activities; it depends on who you are working with.
Prior to closing you should have a final inspection, or "walk-through" to insure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.
In most states the settlement is completed by a title or escrow firm in which you forward all materials and information plus the appropriate cashier's checks so the firm can make the necessary disbursement. Your representative will deliver the check to the seller, and then give the keys to you.
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