Category Archives: Disclosures

Homebuyer FAQs: Mortgage and Closing Costs

What You Need to Know about Mortgage & Closing Costs

Whether you are a first-time homebuyer or a seasoned homeowner ready for your next home, it is important to understand mortgage and closing costs. Here are some frequently asked questions to help you better understand your options.

Buying a Home: Homebuyer FAQs re Mortgage Costs and Closing CostsQ:  What factors impact a mortgage interest rate?

A:  There are many factors involved when determining a homebuyer’s interest rate including credit score, loan type, home price, down payment and mortgage costs (for example, points, mortgage insurance and closing costs).

Q:  What other credit-related factors are important when financing a home?

A:  The better your credit, the lower your interest rate for a home loan is likely to be. Mortgage lenders consider your overall credit score, but they also consider your credit history with them, the amount of debt you already have, how much money you have in savings, your total assets and your current income. Learn more about credit reports and scores here.

Q:  What are points?

A:  Also called discount points, points lower your interest rate in exchange for a fee paid at closing. When you choose to pay points, you pay more at closing, but you lower your interest rate and pay less for the home over time. Points are related to the loan amount, and one point equals 1 percent of the loan amount. For example, on a $200,000 mortgage loan, 1 percent of the loan amount would be $2,000. Points are listed on your loan estimate and on the closing disclosure.

Q:  What is mortgage insurance?

A:  Many lenders require mortgage insurance for borrowers who put less than 20 percent down on the purchase of a home. The mortgage insurance lowers the risk to the lender, making it easier for you to qualify for a home loan. The cost of the mortgage insurance is included in your monthly mortgage payment, increasing your monthly mortgage payment. The cost of private mortgage rates varies depending on the borrower’s down payment and credit score.

Q:  What closing costs will I have to pay?

A:  Closings costs, the amount of money you’ll need to pay when you close on the purchase of your home, vary. Sometimes these costs are paid out of pocket, but some lenders will roll these costs into the total loan amount of your mortgage. Certain closing costs may also be negotiated with the home seller and the home seller’s agent. Common closing costs include appraisal fees, title insurance, government taxes, tax service provider fees, and prepaid expenses (for example, property taxes, homeowner’s insurance and interest between the time of closing and the time your first payment is due).

For more information on interest rates, credit, points, mortgage insurance, closing costs and more, download this free home loan toolkit offered by the Consumer Financial Protection Bureau. It has some great information and checklists to help you through the home buying process. An experienced Realtor® can also answer these questions and guide you as you make decisions about buying a home.

Good luck!

Sources: Consumer Financial Protection Bureau

New Mortgage Disclosure Laws: What You Need To Know

New Mortgage Disclosure Laws: What You Need To KnowStarting October 3, mortgage lenders are required to start using new consumer disclosure forms that break down the costs and terms associated with home loans, said the New York Times. The new rules are designed to make the mortgage loan process more transparent and easier for homebuyers to understand.

Here’s what you need to know about the new mortgage disclosure laws.

  • Instead of four disclosure forms, there are now only two: a Loan Estimate and a Closing Disclosure.
  • The three-page Loan Estimate shows the loan amount, interest rate, borrower’s monthly payment, estimated taxes and insurance, and amount of cash needed to close the loan. Lenders must provide homebuyers with this form within three business days after they submit a loan application.
  • Homebuyers should receive the five-page Closing Disclosure three business days before the scheduled closing. This form includes the final closing costs.
  • Prospective homebuyers should check all details on the two forms to be sure the deal is what was agreed to, including loan term, rate lock, loan amount, interest rate (fixed or adjustable), prepayment penalties, balloon payments, etc.
  • Because the disclosure laws are new, closing times may be longer until the industry adjusts to the new process. Experts anticipate that standard closing times may grow from 30 days to 45 days.
  • Borrowers can expedite the process by providing all requested documents when requested, scheduling inspections as soon as possible, etc.
  • Changing the loan in any way will extend the time until closing.
  • Lenders will be penalized for not meeting the stated timing requirements.

The bottom line: the lending and loan closing process may initially be a bit longer, but it will help homebuyers better understand the financial commitment and the loan terms they have agreed to. An experienced Realtor® will have had training about the changes and can walk her clients through the process, step-by-step.

For more information, visit the Consumer Financial Protection Bureau’s “Owning a Home” pages, or contact your favorite Realtor®. She’ll be able to help!

Top 10 Reasons to Work with a Realtor

NAR circle logoDid you know that not every real estate agent is a Realtor®? There is a big difference. A real estate agent is anyone who has a real estate license. A Realtor®, however, is a real estate agent who is a member of the National Association of Realtors®. Here’s why that distinction is important to you as you buy or sell a home:

  1. Realtors® follow a strict code of ethics and standards of practice. This includes giving full disclosure of problems with a property and being truthful in advertising.
  2. A Realtor® belongs to the National Association of Realtors (NAR) which has more than 1.1 million members as of Sept. 30, 2015, giving NAR a strong voice between industries and consumers and their government.
  3. Buying a home is probably the largest financial investment you’ll ever make. When you work with a Realtor®, you’ll get the best professional advice available.
  4. An experienced Realtor® can help you navigate the home buying or selling process, which can be complex, time consuming and frustrating at times.
  5. A trained Realtor® is a client advocate, a marketing expert, sales person, customer service rep, data analyst and a master negotiator all rolled into one. She wears many hats, but all of those roles work to serve YOU and your best interests!
  6. Your Realtor® will help you find the most qualified buyer for your home and help you negotiate the best offer for your home.
  7. A good Realtor® will be able to refer you to other professionals you’ll work with during the home buying or selling process: mortgage lenders, insurance agents, home appraisers, home inspectors, closing company staff, and more.
  8. One of a Realtor’s most important roles is to be an objective observer, to help sellers see beyond their personal connection to their home, and to help buyers stay calm and reasonable during the home buying process.
  9. A Realtor® can save a buyer money by knowing how to negotiate and what to look for in a home, and a Realtor® can help sellers get the most for their home.
  10. A Realtor® is customer-focused. Regardless of what obstacles come up or details that must be worked through, your Realtor® will focus on you and your needs.

Sure, you can sell your home yourself (though we don’t recommend it) or you can work with a real estate agent – but wouldn’t you rather work with a Realtor® who is always working for YOU?



8 Tips for First-Time Homebuyers

8 tips for first-time homebuyersTired of apartment living? Have a growing family? Want a space you can call your own? Buying your first home can be complicated, but these tips will make buying your first home easy-breezy.

  1. Know how much home you can afford. Look at your average monthly budget and see what you can spend on your mortgage comfortably. Find a home that fits in your budget, but that also has the features most important to you. Skip the upgrades if they don’t fit in your budget, and ask your Realtor® to tell you what closing costs to expect.
  2. Know what you need and want in a home. If you need lots of space, make that a priority. If you love cooking, make sure a well-equipped, modern kitchen is a must have. Make sure you also include neighborhood, schooling, and commute in your list of priorities as well.
  3. Get pre-approved for a loan. This will also help you figure out how much you can afford and make things less scary when trying to figure out which houses are not only in your budget, but also in your priorities list.
  4. Explore your mortgage options. Are you a person who never plans to buy another home, and are only interested in a fixed-rate mortgage? Do you want to use this as a starter home and have an adjustable rate mortgage? Compare different banks and home loan options, and don’t be afraid to do your homework. Need a referral? Your Realtor® will be able to help.
  5. Find the right Realtor®. You need someone you not only trust, but like to work with. You want quality advice when you need it. Ask friends and family who they have worked with, and if they had a good experience. This won’t work if you’re moving to a new city, however. Ask potential agents how many homes they’ve sold in your target area or what certifications they have. You can also look for testimonials for Realtors® in the area where you’re moving.
  6. Understand the offer process. So you’ve found a house. Know how long the house has been on the market, how the asking price compares to different homes in the area, and how comparable other properties are. Negotiation is normally inevitable, so make sure to leave a little leeway. Make sure your offer also includes other factors like financing and property inspections, and be aware of any deal breakers (e.g., cracked foundation, a roof that needs to be replaced, etc.) before you make an offer.
  7. Get a home inspection. This will tell you if there are any problems with the home that you weren’t aware of when you made the offer. Know what’s inside the walls, underneath the floors, if the roof leaks or there is flood damage. You’ll be happy you did. Check with local associations to find a reputable inspector or ask your Realtor® for a recommendation.
  8. Know what you’re signing before you sign. Ask for draft copies of anything you are supposed to sign before the closing date. This will help you figure out what you’re signing. If you don’t understand something, don’t be afraid to ask someone in your network of contacts to explain.

Still have questions? Ask an experienced local Realtor® what you need to know before buying your first home.




Who Puts YOU First in a Real Estate Transaction?

Realtor Marti Reeder celebrates 10 years in the business and other theWe recommend that, when buying or selling a home, you work with not just a real estate agent but that you choose a Realtor® to represent you – someone who holds a real estate license but who also is a member of the National Association of Realtors® and agrees to uphold NAR’s code of ethics. The NAR does a good job of explaining that here.

Taking that one step further, HouseLogic and Chase partnered in an article called “Who Represents You in a Real Estate Transaction?” earlier this year. In this article, the companies explain who represents whom in a real estate transaction. This information is important, so that you understand who represents YOU when you’re buying or selling a home. Here are the basics, according to HouseLogic and Chase:

Buyer’s agent: An agent who represents a homebuyer in a transaction. The sales commission can be paid by either the home buyer or home seller at closing.

Seller’s agent or listing agent: This person represents only the sellers. The seller pays the seller’s agent’s commission at closing.

Subagent or cooperating agent: If you find a home online and call the agency (e.g., John L. Scott) that is offering the home for sale and an agent shows you the home, that agent represents the seller. If you aren’t sure whom the agent represents, be sure to ask. In this situation, the seller’s agent shares his or her commission with the subagent.

Dual agent: In some states, one agent can represent both the buyer and the seller. There are potential conflicts of interest, so the agent should disclose up front that he or she represents both parties. In the case of a dual agent, the sellers typically pay the commission.

Designated or appointed agency: To avoid a dual agency situation, a broker may designate someone in their agency to represent the buyer and another to represent the seller. The sellers pay the commission, and the designated agents share it.

Nonagency or transaction brokerage: Some states allow a real estate agent to serve as a facilitator of a real estate transaction. Roles and responsibilities vary by state.

Regardless of the relationship you enter into, make sure you understand who an agent is working with before you sign any contracts. If you aren’t sure, please ask. An honest Realtor® will be open and transparent about their relationship and will be happy to explain what their role is and where their loyalties lie.

Home Buyers: 10 Common Closing Costs

taxes 2When you’re planning to buy a home, you’ve already saved your down payment and maybe some money toward closing costs, but there are many costs that homebuyers don’t necessarily plan for, especially first-time homebuyers. Here are 10 common closing costs you should know about, compliments of the National Association of Realtors®.

  1. Earnest money. This is a 1 to 2% deposit you make to show that you are serious about buying a home.
  2. Escrow account. If you are putting less than 20% down, your mortgage company may ask for escrow to be sure you have enough money for taxes, mortgage insurance and other related expenses. Escrow is mandatory for FHA loans, and may be required by your lender for other types of mortgage loans.
  3. Origination fees. An origination fee compensates a mortgage lender or broker for its costs and services. It is usually around 1%, but this varies. When shopping for lenders, be sure to ask what they charge.
  4. Home inspections. Home inspections are an important part of the home buying process. Consider getting the entire home inspected as well as requesting specialty inspections like radon and pest inspections. Prices will vary.
  5. Attorney fees. Some states require an attorney at a closing. Though it is unnecessary in most cases, hiring an attorney can be beneficial in extreme situations.
  6. Credit report. You will likely have to pay the lender for ordering your credit report. Costs are typically in the $30 range.
  7. Additional insurance. If you are in a flood zone, you may be required to get flood insurance. Know the area where you are moving (or ask your Realtor®), so you can budget accordingly.
  8. Every home requires an appraisal to determine fair market value. Appraisals vary in cost, but typically range from $200 to $400.
  9. Title company. The title company charges a fee for doing a title search. Ask your Realtor® or lender for a referral.
  10. Occasionally, home buyers will want to hire a surveyor to determine where property lines are. Costs vary.

To estimate these costs, talk with your Realtor® and mortgage lender. Thanks to the NAR for this educational information!



7 Costly Selling Mistakes to Avoid

house-and-magnifying-glassBuying a new home can be an exciting process, but first you have to sell your current home. Here are seven selling mistakes you can avoid to expedite the process, adapted from the National Association of Realtors®.

  1. Ignoring sales prep. If you are eager to move, you may skip the steps needed to properly prepare your home for sale. We urge you not to do this. Instead, take the extra time to add an extra coat of paint, make minor repairs, and do a deep cleaning of your home. No time? Ask your Realtor® for referrals for local painters, handy men, and professional cleaning services.
  2. Failure to disclose necessary information. It is prudent to be forthcoming about your home’s trouble spots, even if they’re hidden from view and might not be identified during an inspection. Be sure to mention leaks, needed repairs and replacements, flooding issues, and any other problems that could make negotiating more difficult and to avoid a potential lawsuit down the road. Think about the things that would be important to you as a buyer to put yourself in a prospective buyer’s shoes.
  3. Pricing your home too high. Even in a seller’s market, it is important to sell your home at a fair price. Otherwise, it may be overlooked by potential buyers and remain on the market too long, which creates its own set of problems. Work with your Realtor® to identify nearby, comparable properties and unique selling features, and set a reasonable price for your home.
  4. Not working with a Realtor®. Experienced Realtors® who are affiliated with the National Association of Realtors® have additional skills and training and make a promise to uphold the industry’s highest ethical standards. Sure, you can sell your home on your own, or work with your cousin Bob, who just got his real estate agent’s license, but choosing a qualified, experienced Realtor® will streamline the process for you and help you get the best price for your home.
  5. Ignoring curb appeal. Just like ignoring sales prep, failing to boost your home’s curb appeal can be costly. Visit our recent blog post for ideas on how to improve your home’s curb appeal quickly and easily.
  6. Not depersonalizing your home. Another important part of selling your home is depersonalizing it, so that potential buyers can imagine themselves in your home. If you fail to do so, you could lose a potential sale. Here are some tips on how to maintain your home’s attractiveness while making it a little less “you.”
  7. Being unprepared for next steps. There are so many complexities in the sale of a home that it is important to understand them and what each step entails, as well as who is responsible for what. Working with a qualified Realtor® can help you understand the steps and prepare for contingencies during the process.

Have questions? Want more information about any of these topics? Contact your local Realtor® or visit the National Association of Realtors® online.

How real estate commissions work

bigstock-Money-5164563According to the National Association of REALTORS®, only 9% of homeowners in 2012 sold their home without the services of a real estate professional, and only 12% of homebuyers purchased their home without the help of a real estate professional. With so many people valuing and using the services of a real estate agent or REALTOR®, it is important to know how they are paid. Here’s how it works.

Many professionals bill their clients by the hour, but real estate professionals aren’t paid until the sale of a home is closed, whether they are representing the buyer, seller or both. The real estate professional works for his or her clients for months at a time, but is only paid if the transaction results in a home purchase or sale. If that doesn’t happen, the real estate agent does not get paid.

When a transaction is complete, however, the real estate professional will earn a commission. A typical commission is a percentage of a home’s sale price with that commission divided between the listing agent and the buyer’s agent. Sometimes the split is even, but a different split can be negotiated. How the commission is to be split should be explained in the listing agent’s contract with the seller. The commission is technically paid by the seller at closing, where the fee is subtracted from the proceeds of the home sale.

If you have questions about how real estate commissions work, please give me a call at 253-859-8500. I’d be happy to help!

*Source: How Do Real Estate Agents Get Paid?