Home Buyer Tips Archives - Page 5 of 12 - Real Estate News and Commentary

September 19, 2008November 23, 2021

FHA 203k; renovation loans are still available

by Dan Krell
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Are you considering purchasing a distressed property, such as a foreclosed home or a short sale, and need to make repairs on the home prior to moving in? Or maybe you have decided to stay in your present home for a few more years, but want to make updates or possibly expand the present space. The question you may have is, “how can I get a loan for these types of repairs and renovations?”

Even during the ongoing credit crunch, there are still renovation loans. One of the most popular renovation loans today is the FHA 203(k). Much like the FHA loan everyone is familiar with (FHA 203b), the FHA 203(k) loan can be used to purchase a home too! The difference is that the FHA 203 (k) provides funding for necessary repairs, updates and/or renovations on your new home; and it is all in one loan. Additionally, home owners needing funds to renovate, update, or expand their current homes can refinance with the FHA 203(k), as long as they have owned it for at least six months.

The FHA 203(k) was first introduced in 1978 through a change in the National Housing Act, section 203(k), which endorses the maintenance of the Nation’s housing. The FHA 203k is HUD’s primary device to meet their goal of “community and neighborhood revitalization” while expanding homeownership opportunities (HUD.gov). Additionally, HUD promotes the use of the FHA 203k to lenders and community organizations as a way to meet the goals of the Community Reinvestment Act.

Of course not all homes are eligible. Some of the eligibility requirements include that your home must be one to four units, the home must be at least one year old and meet neighborhood zoning requirements. FHA allows for major rehabilitation on homes that have been razed provided that the foundation still exists.

Improvements that are eligible for the FHA 203(k) include (but are not limited to) additions, unit conversions, and cosmetic repairs. However, luxury items and items that are not permanently part of the home (such as hot tubs) are not eligible. With the FHA 203(k), the home owner can add or expand a room, add a deck, convert a 1 unit home to a multi-unit home (up to four units), or convert a multi-unit home to a one unit home, and make cosmetic repairs (including giving your kitchen and bathrooms a facelift).

Do you want to make your home more energy efficient? Making your home “green” can save you lots of money down the road; however the transformation can cost quite a bit of money. The good news is that the FHA 203(k) loan allows for many “green” upgrades! Some items that may be eligible include replacing your HVAC and/or windows, waterproofing your basement, and installing solar panels.

The process of obtaining the FHA 203(k) is a little different than a standard mortgage, as additional underwriting requirements include architectural plans and repair estimates (materials and labor) from licensed contractors. The funds for the repairs/renovations are released in draws to ensure the work is completed as intended as well as meeting all zoning, health and building codes.

For more information about the FHA 203(k) mortgage, or to find a FHA 203(k) lender, you can visit the HUD website (HUD.gov).

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of September 15, 2008. Copyright © 2008 Dan Krell.

August 27, 2008November 23, 2021

Being Organized Will Facilitate the Mortgage Process

by Dan Krell
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Are you ready to jump into the real estate market? Maybe you already own a home but need a larger home; or are you thinking of downsizing to a condo near the town center. If you’re like the average home buyer, you’re planning to finance most of your purchase. Although the mortgage landscape has changed, many things remain the same. Whether you are a first time home buyer or a seasoned home owner, getting organized and being prepared will make the process more enjoyable.

Some home buyers have an idea of how much home they can afford, while others are unaware. Talking to a loan officer can give you an idea of mortgage rates and trends as well as how much you can afford. Putting things in perspective at this stage will shape your home search as you decide the type of home you want as well as where you want to live.

Although many things about mortgages have recently changed, qualifying is still based on your income, credit and assets. Before you talk to a loan officer, get your financial information organized so you can provide accurate information. Providing accurate information to the loan officer will allow them to provide you with an accurate price range; this will save you the time and heartache of looking at homes you cannot afford. Although mortgage rates change daily, the loan officer can guide you with any necessary corrections.

Maryland mortgage applications now require you to provide proof of your income to support your mortgage payment, so getting organized prior to talking to a loan officer is a good idea. Start your own mortgage file; your file should have your recent paystubs, W-2 statements, bank statements, 401k statement, and any other financial information you think you may need (which may include child support or disability income). Self employed individuals will need whatever documentation they can muster (including tax returns) to support their declared income.

Checking your credit report should be considered a sensitive issue as having too many credit checks within a short period of time will lower your credit score, and in some cases alter your ability to obtain a loan. Rather than having your credit checked by every loan officer you talk with, it is a good idea to request your own credit report from three credit bureaus (and place it in your mortgage file).

You are entitled to a free annual credit report from the three credit bureaus. Although many credit companies advertise “free” reports with snappy jingles, you can request your credit report directly from the three credit bureaus (Equifax, Experian, and Trans Union). Be careful, however, many web sites (even the credit bureau websites) will bombard you with offers to watch your credit as well as other credit products for a fee.

Loan officers will request your recent paystubs, bank statements, W-2’s, and your permission to check your credit. However, until you choose a mortgage lender, you may decide to protect your personal information by providing verbal information derived from your documents.

The lender you ultimately choose will require original documents as well as your authorization to check your credit. Your up-to-date file should assist the loan officer in making the mortgage process easy and enjoyable.

July 30, 2008October 5, 2019

Are Real Estate Concierge Services a Fad or the Next Trend?

by Dan Krell

Have you ever used a hotel concierge? It is sometimes amazing how some provide spot-on service and great advice about where to eat and the sights to see. Once only offered to wealthy clients, real estate concierge services are becoming more popular and offered to everyone as way to provide a value added service by real estate brokers and agents (who are now trying to scrape out extra market share in a quickly shrinking real estate market).

The origin of the concierge is rooted in serving others. According to Miriam-Webster.com, the word concierge is a French word derived from Latin meaning “fellow slave.” Although historical references agree that the origin of the concierge originated in medieval times as a royal trusted advisor, the described function differs from an officer of the royal court who executes justice to a member of the court who kept the room keys of visiting nobility (concierge is often referred as the French definition of “keeper of the keys”), while fulfilling the desires of the nobility.

Concierge services developed into an indispensible part of European culture. Concierge services were found everywhere, from apartment buildings to the government; the concierge only served those who lived or worked within their service areas. Modern concierge services are commonly found in hotels and spas; because they often obtain the hard to get items for guests, concierge services often have the reputation of obtaining the unobtainable.

Concierge services (sometimes known as errand services) are becoming more popular to save us time in our hectic lives. Real estate concierge services often range in services from preparing the home for sale to moving home owners to their new home. Some real estate concierge services offer expanded services where you can find just about any service in and out of the home! In fact, one prominent real estate concierge service that is provided by a real estate broker lists over one hundred services; incredibly, the list is described as being “a partial list!”

Home builders have also begun to offer concierge services. Additionally, home builders are adding the concierge services as a “premium service” built-in to communities as a way to lure home buyers to their communities.

Offering services other than real estate, these real estate concierge services are another attempt for real estate brokers and agents to be a “one stop shop” for home related services. Needless to say, the quality and level of service of real estate concierge services may vary. Many real estate concierge services enlist the services of highly regarded local professionals to provide their services, while some real estate concierge services only “recommend” professionals who are willing to pay for the privilege of having their service listed.

Taking Ben Franklin’s advice, “an ounce of prevention is worth a pound of cure,” it is good idea to investigate unknown service providers with local consumer advocacy groups. For example, the Montgomery County Office of Consumer Protection offers advice to consumers about some service specialties. Additionally, it is also a good idea to research the license status of service providers who are required to be licensed, certified, or insured. The Maryland Department of Labor, Licensing and Regulation Division of Occupational and Professional Licensing (www.dllr.state.md.us/pq) allows you to check the status of home improvement contractors, plumbers, electricians, and HVACR services (among other professionals).

July 23, 2008November 23, 2021

Can Title Insurance Save Your Home?

by Dan Krell © 2008
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Would you sign a hold harmless letter if you decided not to purchase an owner’s title insurance policy? Prior to her recent home purchase, a local home buyer was asked to sign an affidavit holding the attorney, the real estate brokers, their agents and employees harmless from any future claims arising from any title problems. She declined purchasing an owner’s title insurance policy. However, once the attorney explained the potential problems that may occur and how the title insurance could protect her interests, she decided to purchase the title insurance.

Believe it or not, the actual number of paid title insurance claims is relatively low (about four to five percent). Fortunately, many title problems are resolved without a claim, while some problems are resolved in an effort to not pay a claim. According to a 2005 survey conducted by the American Land Title Association (ALTA is the national trade association of the abstract and title insurance industry), about one third of all residential transactions have title problems; title issues in the previous 2000 survey were reported at being 25% (ALTA.org).

Although title problems do occur, most are resolved. According to ALTA, the most frequent title problems that occur (and need to be resolved) include unreleased and unpaid liens (including first and second mortgages, unpaid child support, tax liens, and other judgments). Other frequent title problems that occur include unreleased mortgage or deed of trust assignments and recording errors (legal documents having the wrong names, addresses, and legal descriptions).

The reason for the increase of title issues is twofold. The recent real estate market expansion saw a significant rise in the number of real estate closings, which gave rise to the opportunity to find additional title blemishes. Additionally, the fast paced environment of those years gave rise to the opportunity for mistakes to be made by overworked and/or inexperienced title agents and county employees.

Title insurance critics say that purchasing an owner’s title insurance policy is an unneeded closing expense placed on the home buyer for the title agent’s benefit (who makes a commission). Some passionate critics describe title insurance as a “scam” or “rip-off” because most title problems are easily resolved.

The few title problems that cannot easily be resolved can be catastrophic, as was the recent case first reported by the Columbus Dispatch on May 31, 2008 (Dispatch.com). The Ohio family’s home is being foreclosed on because of a typo that appeared on the previous owner’s line of credit. The line of credit was filed under the misspelled name of the previous owner.

The present owner reportedly felt it unnecessary to purchase an owner’s title insurance policy because the title search showed no problems. Unfortunately, the line of credit went unnoticed and the previous owner did not pay off the line of credit (reportedly being $150,000) at closing. Needless to say, the present owner was shocked to find out the previous owner’s mortgage company decided to foreclose on his home after years of non-payment. Could the foreclosure have been averted if the owner had title insurance?

State laws governing title insurance vary; purchasing owner’s title insurance is optional in many states. If you are planning to purchase a home, consult an attorney about title insurance.

June 20, 2008November 23, 2021

Buying vs. Renting

by Dan Krell
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Is buying a home right for you?

A home owner recently told me that he had no idea that he would be able to sell his home for more than double his purchase price. When he purchased his home eighteen years ago, he recalls having kept to a strict budget so he could afford his mortgage payments and other related housing costs. Now, he will have a sizeable profit from the sale to purchase his dream home. This home owner’s story is like many other home owners’ stories of wealth building through home ownership.

Unfortunately, due to recent market fluctuations, some home buyers have questioned the value of home ownership. Decreased consumer confidence along with almost daily stories of foreclosure might make you wonder if any homes are selling.

Additionally, some renters feel that home prices continue to be too expensive for them to make the jump into home ownership. Economic commentator, Barry Ritholtz (bigpicture.typepad.com), believes that too; although the rent to buy cost ratio for the Washington area has dropped significantly from an all time high of 21.4 to around 16.6 (according to Moody’s economy.com), he feels that home prices are still too high nationwide as compared to the rent to buy cost ratios of the 1980’s and 1990’s (when the average ratio ranged from 10-14). However, even with a decreased consumer confidence, many understand the benefits to home ownership.

Many analysts and commentators agree that owning a home is typically better than renting. For example, Suze Orman has stated in a Yahoo Finance exclusive (biz.yahoo.com/pfg/e10buyrent) that “there’s no better investment.” Although Ms. Orman does strongly suggest having your financial matters in order as well as making certain that you can afford all the housing related costs before you make a move, she does state that “home ownership is a great achievement and a terrific investment.”

Although the benefits of home ownership are touted by many in the industry, owning a home is not for everyone. Renting does offer limited maintenance and the flexibility if you need to move, but home ownership offers tax incentives (tax breaks and deductions) as well as a chance to build equity.

Before you buy your first home, you might consider how long you intend to live in it before selling. For example, the National Association of Realtors reports that the typical home owner intends to stay in their home for ten years (although the actual time of ownership varies). Financial and affordability factors to consider before buying a home include interest rates and market conditions. However, some considerations are not financial but emotional; for example, some renters are concerned about their security deposit as well as dealing with an obnoxious landlord or management company.

Freddie Mac (FreddieMac.com) offers the following benefits to homeownership: Owning a home can facilitate your participation within a community, the home can be passed through many generations as a source of security, the tax benefits typically offset the amount you might otherwise pay for rent, your monthly payment won’t increase if you have a fixed rate mortgage, and building equity through home ownership “is the single greatest source of financial security and independence for the majority of people who’ve taken this step.”