Buying a Home
What do I do to assist people who want to purchase a home? What kind of services are helpful?
Just a few thoughts on the home buying process.
I’ve helped a number of people purchase homes this year. In almost every case there were delays in closing caused by the lender, even though my purchasers were well qualified to borrow. I think this is the situation with virtually all lenders. They are being very careful and plodding in closing the loan, verifying, reverifying, asking for the same information over and over again. I do not blame them for being careful, but the delays cause anxiety for both purchasers and sellers. Some of my purchasers came to believe they were not going to be granted a loan and started calling other lenders. Some of the sellers came to believe the purchaser’s loan was being denied, even after provisional approval, and were getting pretty angry that their property had been off the market for a month or more waiting for a settlement they no longer believed would happen. In every case, after a good deal of anxiety and stress, the loans did close and the property did transfer ownership. The delays in closing spanned from a couple days to more than a month. Fortunately none of these purchasers had a moving truck parked outside their intended home, and none of the sellers were buying another property that they needed to close on in order to move out of their current home. My point: plan for delay. With luck you will close as scheduled or at least close to your planned settlement date. But if not planned for, delays can cause you big problems and cost real money. Hang in there!
THINKING OF BUYING A FORECLOSURE?
Foreclosure, foreclosed property, REO, bank owned… Pretty much all the same thing. It means that a property owner/borrower stopped making the monthly loan payment on his/her home loan and the lender or their representative took back ownership by various legal means (depending on the State the property was located in). By the time the lender has taken back the property it has been vacated.
The lender does not like doing this. It doesn’t want the inventory of homes that it needs to turn around and sell. Given the current state of the economy and the real estate market, there is a huge inventory of foreclosed homes. Not all are on the market. When on the market they tend to be priced below what market value should be for their location, thereby causing neighborhoods and the real estate market itself to decline.
Further, these foreclosed properties are often ‘distressed’, either from deliberate trashing by the former owner or through lack of upkeep. The lender frequently shuts off utilities, and this can be a disaster during the hot humid months of the summer when shut-up homes become habitats for mold. The values of these homes continues to drop until they are priced so low they attract investors who buy them up cheap, do fix up, and either rents them out or ‘flips’ (sells) them.
If you are thinking of buying a foreclosure there are some things to keep in mind: your purchase offer needs to be very ‘clean’ and straightforward, and you need to be pre-qualified for the loan you plan to apply for. Keep in mind that if you are going to use a conventional loan to purchase the home, the home itself will need to ‘qualify’. It cannot be so distressed that the lender will refuse to make a loan on it. You can buy a distressed property by using an FHA 203K loan, which has renovation funds built into the loan. The 203K loan process requires patience as there are some hoops to jump through, but it does may possible purchasing a sadly distressed property in a good location for a great (low) price, and at the end of the process have a great home worth more than what you have into it.
Banks, their representative, HUD, the VA, Fannie Mae, Freddie Mac… all of them are not interested in purchase offers that have ‘contingencies’ such as the purchaser needing to sell or rent their current home. Make your offer very clean. Some of these sellers, Fannie Mae in particular, sometimes offers to pay closing costs for the purchaser (depending on the agreed upon sales price) or to include renovation funding.
Good luck! This is a time of great opportunity for potential home buyers. Home prices can be very low, interest rates are low, and there is a huge amount of inventory to choose from. A few years from now a lot of people will look back at this time and think “Geez, I wish I had bought property back then when I had the chance.”
CONDO FINANCING
Many lenders in our market area will not make a loan on a condominium unit. Clients of mine recently did secure financing and at advantageous terms. They are getting 90 percent loan to sales price financing: an 80% of sales price loan at 4% interest rate with a 15 year term; and a 10% of sales price loan at 5% interest rate with a 22 year term. To say the least, they will quickly pay off the smaller loan. The larger loan at 4% interest rate is a terrific product, and they will save a great deal of money by paying off that loan in 15 years.
There are loan products out there that can finance the purchase of a condominium, it just takes a little scratching around to find them. And as you can see, the loan terms my clients are getting are very good indeed.
The City of Charlottesville is the crown gem of central Virginia. Home to the University of Virginia, Mr. Jefferson’s academic village, Charlottesville also hosts many other attractions. Good theaters, good restaurants, improving shopping. The downtown walking mall is the social focal point of this community sporting restaurants, small shops, businesses, street entertainers, and the amphitheater that hosts nationally known musical performers. Fridays After Five is a remarkable street scene with thousands of people crowding the mall to enjoy mall-side restaurant seating, the free concert at the amphitheater, or just to see and be seen. In fact there are always a lot of people on the mall most times of the week.
There are many neighborhoods that make up the fabric that is the City of Charlottesville. Starr Hill, Fifeville, Belmont, the Woolen Mills, Hog Waller, Greenbrier, Rose Hill, Meadowbrook Hills, and more. If you are moving here you will want to explore all these locations, especially if you are planning to purchase a home.
A lot of history took place right here in the city, some of it celebrated, such as the ride of Jack Jouett, and some of it shameful, such as the place at Court Square where slaves were sold. In the coming weeks I plan to write brief stories about the neighborhoods, the history and events, the famous and infamous, and the contemporary every day life of this remarkable city.
When a homeowner is no longer able to make the payments on the loan for his/her home and therefore sells it, but what they net from the sale of the home is not enough to pay off that loan. This situation is called a Short Sale, and because the price the home sells for does not cover the amount still owed, the lender can approve or disapprove the sale. In other words the lender gets to decide how much money it is going to lose as a result of the sale. A Short Sale can take a long time to get from contract signing to settlement, sometimes many months, and both purchasers and sellers need to be patient. After the sale, the lender may still seek recovery of the balance of the loan from the now former owner. In any event, the former owner’s credit record will be affected adversely. What does this have to do with a home buyer? Although a short sale will require patience and a little daring, the short sale price is likely to be LOW and a good deal for the home buyer. Contact me for more information.
When a homeowner stops making payments on their home loan, the lender will make several inquiries to see why and try to remedy the situation. However, if the homeowner is still not making their monthly payments the lender will begin foreclosure proceedings. Shortly thereafter the owners will be instructed by the sheriff’s department to leave the property, and depending on what ‘device’ is utilized to foreclose, the lender either sells it on the open market or auctions it off on the courthouse steps. The lender may still seek recovery of the balance of the loan from the now former owner. The former owner’s credit record will be affected adversely. I have helped many people purchase foreclosed, REO and bank owned properties. Why would a home buyer be interested in a foreclosed property? Such properties are likely to be priced way below what market value should be — in other words, they can be an incredibly good deal for the home buyer. Contact me for more information.
Finding A Home To Buy:
Central Virginia is a BIG area of the state. Albemarle, Greene, Louisa, Madison, Orange, Fluvanna, Buckingham, Nelson, Amherst , Augusta Counties… The City of Charlottesville and the towns of Ruckersville, Scottsville, Crozet, Madison, Palmyra, Lovingston, Nellysford… And lots of place names like Dyke, Nortonsville, Howardsville, Wintergreen, Belmont, Lake Monticello, Blue Ridge Shores… And many developments: Glenmore, Forest Lakes, Trailridge, Poplar Glen, Mill Creek, Lake Reynovia, and on and on.
Even if you lived here for a while you won’t know every location. But you may have a good idea about where you want to be and what you are looking for. An older home, a newer home or a historic home; renovated, a fixer-upper, or new construction; single family with a big yard or a small yard, an attached home or a condo (be careful about the latter); a farm or horse property; amenities & association fees… There’s lots to choose from and to think about.
If you are relocating here and are not real familiar with the area you will want to consider: why are you coming here (work, education, retirement), and how does that affect your decision of what type of property to purchase and its location?
Even if you already live here, let’s get in the car and talk while we’re seeing some properties. I can search for properties (listed by all realty companies & FSBO sites) based on your early assessment of what you want to buy, what you want to spend, and where you want to be. I refer to this as “doing homework”. As you see the different homes and their prices, condition and locations, you will start to refine your ideas about what you want and where you want it and what you can expect to pay for it. You will be developing a sense of the market. I can tell you a lot about the market, and I can show you the MLS sales record and the public tax record which is all very good information, but you setting your eyes on properties and locations is what makes it all real. Let’s get in the car and go see some properties.
And if you are not familiar with central Virginia, let’s cover some territory. Say you are taking a job at the university and you’d prefer no more than a 20 minute commute to work. A 20 minute driving time radius out from your work place at UVA covers a big territory. If you are unsure about where within that territory you want to be, the only way to find out is to get in the car and tour the area. And we’ll stop to see some properties along the way so you get a good idea about locations, property types and prices. Let’s get in the car and see some properties!
Financing Consultation:
Most mortgage loans today are structured around the individual borrower. In other words there isn’t much of a ‘rule of thumb’ any longer. There are many different loan products that can serve a variety of needs. There are also a number of web-based and remote lenders to choose from. The choice is yours to make, but it needs to be an informed choice. Do not be lured by promises of low interest rates and low lender fees. No lender lends money for free. What is given with one hand is usually taken back with the other, and at settlement when your attorney or settlement agent goes over the HUD settlement form with you, indeed there are no application fees or discount points. Instead you will find ‘wire service fees’, ‘money warehousing fees’, ‘document processing fees’, etc, etc, etc. Indeed most loans will come with fees other than just discount points and origination fees. Ask for the “Good Faith Estimate” of the transaction. By law, this has to be close to the reality you see at the closing table. And that LOW interest rate they advertise to get you in their office… You’ll find that rate is offered only to their most qualified borrowers.
Now let me say this, there are many lenders who are honest, straightforward, hard working and well serving. I find that many of my buyer clients who are shopping around for a mortgage product end up choosing a lender not based on the rate or fees (the straight-up lender’s products will all be fairly close) but on the personality of the person they talk to. They like that lender and feel comfortable working with him or her.
And I think it is a good idea to work with a local mortgage loan lender or broker. You can walk into that person’s office and see him or her face to face. The meaning of that will only dawn on you if you deal with a web-based or distant lender. Do be aware that underwriting may take place somewhere else and you may not see or communicate with the loan processors or underwriter, but your local lender will be known to them. Also consider that a local lender wants you and I to refer future business to him or her. That person will want you and I to be happy with the service you get.
Now just a quick word of advice in the event you are planning to purchase a home in the near future: Don’t make any big purchases (i.e., a new car, appliances, trips, etc. – anything that will show up on your credit record).
If you have debt that can be comfortably eliminated, do so. Your credit report may show debt that you have already paid off. You can generally get those items removed from your credit report fairly easily.
100 per cent loans are hard to get now. You will need money for down payment and closing costs. You will also need money for an earnest money deposit, a check that you will write at the time you make an offer on a property. The earnest money is applied towards your closing costs or the sales price of the home – it works for you dollar for dollar, and you will see it reflected on the HUD statement at settlement. You can ask the seller to pay some of your closing costs, but be aware that if the price of the home is reasonable to begin with, the seller will not want to give up very much.
I can give you the names and contact information for a number of mortgage loan brokers I have worked with in the past who are excellent. Just let me know.