Archive for Buying a Home
Closing Costs Clarified
How much closing costs should a home buyer expect to pay? Closing costs average 5% of a home’s purchase price.
Closing Cost Estimates
Looking for the exact amount? Lenders are required to disclose all closing costs within three days of when a buyer applies for a mortgage. The forms used to list closing costs have been standardized and simplified. The new Good Faith Estimate (GFE), circa January 2010, helps buyers shop and compare costs from different lenders. Lenders are held accountable to ensure that all costs, even title fees, on the Good Faith Estate match the final numbers on the Settlement Statement (HUD-1).
Who Pays What
While Tampa area home sellers pay for the owner’s title policy, commissions and state doc stamps on the deed, buyers are responsible for: lender fees, the lender’s title policy, doc stamps on the note, home insurance, pre-paid taxes, and prorated CDD / HOA fees. See this RIS Media report on new HUD & RESPA regulations.
Buyer Costs Will Increase
If the amount of cash required to close is an issue, potential home buyers may want to act now. Tampa home sellers can still pay up to 6% of a buyer’s closing costs, but those days are numbered. New FHA guidelines will be phased in over the coming months that will reduce seller contributions to 3% most likely, and will increase the financed Mortgage Insurance Premium (MIP) by a half percent. We expect to see loan costs increase in the coming months as: lenders require larger down-payments (6% up from 3.5%), tax credits expire, credit requirements tighten, and interest rates increase from historic lows.
To take advantage of this historic buying opportunity, contact Team Bohannon at Coldwell Banker today at (813) 979-4963.
“I am Not a Lead” – The Privilege of Serving
Ran across this manifesto last year and was impressed. Spoke to Marc Davison of 1000 Watt Consulting and enjoyed his thoughts on the real estate business and the mindset that traditional agents have about ”leads”. Rather than relying on technologies that de-personalize or attempt to automate “lead response”, Realtors should focus on listening, absorbing and responding with accurate information. This is not about us, it is about the client. The fundamental approach should be to provide high-value, relevant information that is aligned with a client’s goals. One can only build a lasting relationship by treating individuals with respect. Realtors seeking to create “raving fans” and a durable competitive advantage must connect at a deeper level over an extended period of time to earn the privilege.
Social Media Presentation
We are witnessing the birth of social media. Why do we care? Team Bohannon’s goal is to maintain and strengthen our client relationships by delivering high-value, relevant content more quickly. Most people buy a home once every seven years, but most Realtors do not stay in touch with past clients for seven years. We use social media to meet clients where they are online. We want to understand our clients online behavior, what and whom they value, and how they might use social media in the context of real estate.
In researching the use of social media in real estate, I came upon this general presentation that offers a helpful look at “Understanding You Customer’s Social Behavior” posted by the Altimiter Group from the other bay area:
Why Buy Now? 2010 May Bring Higher Overall Costs
Should you wait and see if home values in the Tampa Bay area drop further before buying? Everyone wants to pay the lowest possible price. The sales price, however, is not the only factor that determines monthly payment if you will be financing the purchase. A 1% increase in mortgage interest rates would result in a higher monthly payment than an additional 10% drop in value.
The financing cost associated with buying a home should increase as the federal government begins easing off stopgap measures to boost the housing market over the next few months. What factors will cause the increase?
- Tax Credits for First-Time Home-buyers & Move-Up Buyers are set to expire
- Upfront Mortgage Insurance Premiums for FHA Loans will go up a 1/2 point
- Credit Requirements for FHA Loans have been tightened
- Down Payment requirements for FHA Loans might increase to 6% (up from 3.5%)
- Interest Rates are expected to increase from historic lows
- Seller closing cost contribution limits may decrease from 6% to 3%.
Government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac have been the primary buyers of mortgage backed securities. The $11 trillion U.S. residential mortgage market has been dominated by GSEs since private investors exited the market in 2007. The Federal Reserve is set end its program of purchasing mortgage-backed securities by March 31. Such a move would likely cause mortgage rates to climb from record lows because private investors would demand higher returns to purchase residential mortgages. When combined with the above factors, we see cash-to-close and loan costs going up.
Consolidation in the credit markets may also be a factor. The concentration of power in the mega-banks, backed the Federal government guarantees, is limiting consumer choice. The remaining mega-banks can afford to enforce tighter requirements and charge higher rates since since much of their competition has been eliminated. Disintermediation has not been our friend.
To learn more about the Tampa real estate market and factors impacting home buying, contact Dale Bohannon at (813) 979-4963.
Don’t Get Soaked By Flood Insurance
We almost had a 300K short sale transaction fall apart at the last moment over flood insurance. The current owner was paying $1600 per year and the quote for the buyer’s insurance was $6000 per year because this older home was located in a Pinellas County flood zone that had recently changed. The high cost would have impacted the buyer’s loan ratios and willingness to buy. Flood insurance is not assumable if less than 6 months remain on the policy. The heroic efforts of everyone involved resolved the situation when we discovered the home was grandfathered into a different classification because the building permit was issued before the flood zones changed.
Why You Need Flood Insurance
Anywhere it rains, it can flood. While coastal areas have a higher risk of flooding, inland areas may also have a topography that is prone to flooding. Lenders insist on flood insurance if a property is located within certain flood zones to protect their collateral – the home. Most newer subdivision must be built at elevations above sea level and do not require flood insurance policies.
Elevation Certificates
If your lender and/or insurance agent claim that your home is in a flood zone, we may be able to obtain a Federal Emergency Management Agency (FEMA) elevation certificate, or flood certification, to verify that a home is above sea level and therefore may not need flood insurance. FEMA Flood Elevation Certificates are done by licensed Florida engineers in order to determine how much Flood Insurance a homeowner will have need. Sometimes flood zone classifications are incorrect. Even if a home in located within a flood zone, it may be grandfathered into a different classification. You might also perform a flood risk analysis to see how your home compares to FEMA’s risk assessment.
Flood Zone Maps
Flood-hazard maps have been created to show different degrees of risk for each area. FEMA updates digital flood maps and revises flood zones to offer up-to-date risk assessments. Click these links for Hillsborough County Flood Hazard Maps, Pasco County Flood Zones or general information from the Southwest Florida Water Management District about the watershed and the floodplain. See Flood Insurance Guide and consult flood insurance providers for more information.
If you are looking for an agent who has been in the trenches dealing with these issues for years, look no further. We have an experienced team, a repeatable contract-to-close process and an automated transaction management system to provide the peace of mind you deserve. Contact Doug or Dale Bohannon at (813) 979-4963.
Low Down Payment & First Time Homebuyer Loans
Looking to buy Tampa real estate with little or no money down? There are affordable home loans available for first-time home buyers looking to realize the dream of homeownership. If you are concerned about employment history, income qualifications, credit score or down payment assistance (gifts or grants), there are programs available today.
Government Sponsored Loan Programs
The obvious candidates are U.S. Government sponsored loan programs from FHA, VA and USDA. Some of these programs allow purchasing a home with no money down, while others allow seller credits toward closing costs.
Down Payment Assistance
Federal, state, city and county grant programs can also offer down payment assistance that makes the critical difference. The Florida Homebuyer Opportunity Program (FL HOP), Hillsborough County’s First Time Home Buyer Program and Pasco County’s Hombuyer Assistance Program are other places we can turn. See How to Buy a Home With a Low Down Payment. Not every lender has up-to-date information about the ever changing range of options that may help you move in to the perfect home.
Team Bohannon uses a systematic Lender Evaluation System to help you make better decisions and avoid costly mortgage surprises. To find the best loan, contact Doug & Dale Bohannon at Coldwell Banker today (813) 979-4963..
Appraisal Valuation Issues Persist
Many home sales have fallen apart due to home valuation issues. Rapidly changing home prices and evolving regulations have impacted appraisals. We have seen buyers wait 6 months for a successful short sale approval only to have their hopes dashed by a low appraisal from their own lender. We have seen sellers move out of their homes and commit to other properties only to see the sale fall apart due to a low appraisal. Don’t let a questionable appraisal derail the dreams of your family.
Why Appraisals Are Important
Home loans are contingent upon appraisals. Lenders need to determine the underlying value of a home before agreeing to make a loan. The purpose of a Residential Appraisal Report is to develop a credible opinion of the value of the improved subject property as defined by the Uniform Standards of Professional Appraisal Practice. The report contains supporting data, a final opinion of value, photographs and comments on market conditions.
A Conservative Approach
The melt-down in the mortgage markets caused many lenders to appoint Chief Risk Officers and take measures to limit the overall risk inherent in their loan portfolios. As lenders analyze their risk profiles, they may be hesitant to fund another Florida loan unless the appraisal valuation is very conservative. Once the appraisal is complete, it may need to go through underwriting, a lender’s appraisal review committee, and the PMI company for approval. A bank’s appraisal standards may penalize the valuation by 10% in areas with soft or declining market conditions. They may request two appraisals on a subject property, or may require buyers put between 10-20% down.
The Impact of HVCC
The Tampa Bay area has many excellent appraisers who face a rapidly changing business landscape. The HVCC (home value code of conduct) is a Fannie Mae and Freddie Mac requirement that prohibits a lender from choosing the appraiser – either directly or indirectly. The rule is designed to shield appraisers from any pressure to hit the values needed for the sales contract. Lenders now place orders for appraisals with Appraisal Management Companies who retain a sizable percentage of the appraisal fee for overhead. The actual appraisers may receive less than half of the appraisal fees they collected in the past. As a result, many experienced appraisers have left the business. We have seen the proliferation of “appraisal mills” who send appraisers from as far away as Lakeland who lack knowledge of local builders and neighborhoods. Appraisers who commit to lower fees and faster turn around times are winning more business, but they are more likely to produce problem reports. While there are many qualified and excellent appraisers in the area, this new middle-man has caused home valuation to be more of a wild-card. While the US Senate is discussing changing HVCC regulations (see H.R.4173, the Wall Street Reform and Consumer Protection Act of 2009), the law remains in effect. Once an home has been appraised, challenging the valuation has become nearly impossible.
FHA Appraisals
As the average sales price of Tampa Bay homes has fallen, a greater percentage of homes now qualify for FHA loans. Appraisals on FHA loans pose a significant risk for a homeowner, as an FHA appraisal will set the value of the home for anyone else using an FHA loan for 6 months. Appraisals using the Fannie Mae 1004 form and Freddie Mac 70 form, also known as the Uniform Residential Appraisal Report (URAR), are stored in a database for 6 months and must be used for any buyers during that period. New FHA regulations similar to HVCC have been implemented by the government-sponsored enterprises (GSEs) to ensure appraiser independence. The Department of Housing and Urban Development (HUD) has implemented ML-28, whereby FHA-approved lenders are prohibited from accepting reports prepared by appraisers who are selected, retained or compensated in any manner by a lender or mortgage broker. An appraiser will contact the listing agent for access to the home and a copy of the contract. While Realtors should not attempt to apply pressure, we can provide background information about the neighborhood, builders and comparable sales. Agents can communicate knowledge about the condition or circumstances of recent sales that may impact values. We can suggest near-by homes or neighborhoods with similar characteristics. Realtors can also convey information about pending sales, active listings and the absorption rate. Team Bohannon also details any upgrades to the subject property that help justify the sale price. And finally, we describe the marketing of the property and disclose multiple offer situations. The best practice is to communicate this information the day before the appraisal to allow time for comparable selection, planning and photos before the appraisal.
Realtor’s Role
Experience is a hard teacher. Don’t let your Realtor obtain on-the-job training at your expense. The average Realtor completes less than 4 transactions per year and may lack the experience required to manage the appraisal process. Contact Team Bohannon for an experienced team, a repeatable contract-to-close process, and an automated transaction management system to provide the peace of mind you deserve.
Why Buy Now – The Impact of Waiting
Business Week has an article that makes a case for buying now based on low interest rates. The article discusses the financial impact that interest rates have on the cost of buying and paying off a home. “Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed.” If you are waiting for Tampa Bay home prices to fall further, click here for the article.
Here is a quick excerpt:
You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is “more stable” and it’s safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.
If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you’re borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.
What I’m trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime. full article.
New Tampa Real Estate Market Report
Curious about real estate market conditions in New Tampa (33647)? Check out our market dashboard with charts about:
- Listing Prices vs. Sold Prices
- Number of Listings, Contracts, Sales & Expireds
- Days on Market
Click New Tampa Real Estate Report for 5 charts and analysis.
Did You Pick The Right Home? The Contract-to-Close Process.
Congratulations, your offer to buy the home was accepted - now what? Did you really pick the right home? Does your Realtor have a “Due Diligence Checklist” to help determine if this is truly the right home to match your needs across the four fundamentals of home buying? You need a proven process to ensure that you take advantage of every negotiation opportunity that arises during the inspection, appraisal and closing process. The goal is to confirm if this is the right home, reduce unpleasant surprises, and save you money by going way beyond what a traditional agent would offer.
Manage the Process
Once the home is under contract (in escrow), our team and system manage all the details. Using our tested Home Buying System, we coordinate the timelines, escrow, inspections, repairs, survey, warranty, appraisal, financing, home insurance, title and other aspects of the closing. There are over 125 steps, a multitude of variables, and several companies that must communicate and execute perfectly to close the transaction on time.
Fall Out Rate
National statistics show that 34% or more of transactions fall apart during the contract phase. While we cannot control every aspect and every company involved in the transaction, our system pro-actively manages the variables to ensure that you are buying the right home at the right price. When turbulence arises, you can have the confidence to know that we have encountered this situation before and have an alternate flight plan. Here are some examples of unpleasant mortgage surprises, but there are others for inspections, repairs and title issues.
Are you tired of agents who “wing it? Have you been left in the lurch before? Call today to experience a team with a repeatable business process that consistently produces raving fans.
