Checklist To Buying A Home

communication,seth jacobs,maine mortgage,southern maine realtor,craig candageIn honor of the Southern Maine Spring Market and all the new buyers, I thought it would be helpful to review a standard checklist on what to expect when purchasing a home in Maine. Depending on the location and type of property will determine the finer details of purchase.  For this article, I will present a general checklist for buying a single family home:

  1. Begin by understanding your finances – you will need to know what you can afford to pay monthly as well as determining how much money you will need for a down payment.  Prepare a monthly budget to put everything into perspective.  This budget should include EVERY expense each month.
  2. Choose your Realtor – you want to choose a Southern Maine Realtor you trust.  The cost to a buyer for their service is “FREE” and they will represent you and your best interest throughout the transaction.  In many cases, your Realtor can refer you to a mortgage broker as well as other vendors throughout the entire transaction, this becomes your “Team of Professionals” that will help you along the way to successfully purchase a home you feel comfortable with.  The Realtor acts as the “conductor” of the entire process from beginning to end just like in an orchestra.
  3. Get Pre-approved before you start looking for a home – understanding what you can afford before you step into a property will make the process more smooth and straightforward.
  4. Look for a home – after meeting with your Realtor, you now should have determined what your want, how much your willing to spend and where you want to look. Start house hunting!
  5. Make an offer – working closely with your Realtor, they will help you understand what the best strategy is to offer on the property based the most recent sales in the area.
  6. Under Contract – this is the most exciting moment for the buyer! Your Realtor will guide you through the all the timeframes that are important within your contract.
  7. Inspection of home – by now, you are anxiously wondering what condition the home you are about to purchase is REALLY in.  Your Realtor should be able to have a preferred vendor list ranging from home inspectors to air/water testing and everything in between when it comes time to inspect the home.
  8. Obtain Homeowners Insurance – it is best to get a few quotes from various companies to get the most affordable and best coverage for your new home. Your Realtor should have referrals for you.
  9. Pack and Move – If you plan to use a moving company, secure this early on in the process so you know how much you are going to pack and how much the company will pack and set the date.  The rates vary depending on how much you pack yourself.
  10. Final Walk Through – either 24 hours or an hour before the day of closing, walk through the home to make sure it is in the same condition it was when you last viewed it and all the repairs have been completed to your satisfaction, if applicable.
  11. Closing – Once the title company receives your loan documents, you will receive a HUD statement which reviews in detail your fees and then amount of money needed for closing.  In most cases the money need to close  must be in the form of a cashiers check, so make sure you allow time to go to the bank prior to going to the closing.  Your Realtor will arrange with the title company the day and time of closing where you will sign the loan documents.
  12. Congratulations, you are now a home owner – After signing the documents, you get your keys and move in!  If there is any personalization you want to make to the home, its best to do it prior to moving in if possible.
  13. ENJOY!

As I have said since the beginning, please call a local  Maine REALTOR for all your real estate needs no matter how big or small.  We are trained professionals here to make your life easier. It’s best to surround yourself with the right team of professionals that can continuously give you the right advice for all your circumstances.

Craig Candage

Landing Real Estate

Mobile: 207-653-2483

craig@landinghomesmaine.com

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3 Terms Every Mortgage Holder Should Know

Getting a mortgage can be a very confusing process. There is a lot of paperwork to sign, documents to read and procedures to be followed. You’d think you were applying to go to Harvard or Yale, except they don’t require that much paperwork for you to be admitted!

Going into a mortgage knowing just a few facts will help you immensely in understanding what type of commitment you are getting into.

The first term you should understand is, amazingly, the word “term”. Term refers to the length of the mortgage you are taking out – or the amount of time you are making payments.

Many mortgages run the gauntlet of between ten and thirty years. The longer the mortgage, typically the lower your monthly payment will be (and the more interest the mortgage company makes). Generally speaking, you should go for the shortest term you can comfortable afford – you’ll save potentially tens of thousands (and in some cases potentially over a hundred thousand) dollars in interest by keeping the length of the mortgage as short as you can.

Next, understand the interest rate on your mortgage and how it is calculated. The interest rate refers to the amount of interest charges you will pay for the money you are borrowing, expressed as a decimal – such as 5.2 for 5.2%. Is it fixed or adjustable? In other words, is it the same through the life of the loan or does it change at specified periods in time? Most home buyers should try and steer clear of adjustable rate mortgages even though they can look better up front. They can often reset to higher interest rates and come back to bite you if you aren’t ready for a jump in your monthly payments!

Finally, understand what closing costs are and how they are going to affect your purchase price. Often times, you are going to be responsible for coming up with these closing costs out of your own pocket. Closing costs consists of things such as appraisals done on the house, attorney fees, notary fee, deed fee – if there is a fee they can think of it usually falls under the term closing costs! Be a smart and savvy consumer, if you see a fee that you don’t understand or doesn’t seem right – speak up! Some mortgage lenders try to sneak in any fee they can think of to make a few extra dollars profit.

Understanding these three terms can help make you a more informed home buyer and help you find the mortgage that is right for you. As with any product, it is important to shop around for a mortgage when you are considering buying a house. Even a small change in the interest rate between two lenders can often to amount to thousands of dollars in savings.

Don’t be afraid to comparison shop – it’s your money after all!

FHA – to the Rescue?

With the recent Sub Prime Mortgage meltdown, FHA is now the big player nationwide.

FHA loans came into existence in the 1930’s during the Great Depression  in order to allow lower income Americans to borrow money for the purchase of a home. The government program was intended to provide banks with adequate insurance to insure against mortgage defaults that were subsidized by the government.

Unlike Sub Prime lenders in the past the FHA does not allow consumers to buy a house without putting something into the deal. Down payments generally are 3 percent along with additional differences between FHA mortgages and subprime: You can’t just “state” your income and get a loan. You’ve got to show proof to your mortgage originator that you earn what you say. The FHA never has offered “payment option” plans that allow borrowers to send in almost nothing while adding to their debt through negative amortization.

Well, the fall of 2010 should bring us a new refinance program for those with mortgages that are underwater (the mortgage amount exceeds the value of the home). However, the program is voluntary for  mortgage lenders.

The government will offer cash incentives tied to the total value of loan principal reduced. To participate in the program, lenders must write down at least 10 percent of the original loan balance, and the restructured loan amount must be less than the current value of the home.  After the principal write down, the new loan to value can be no higher than 97.75% of the new appraised value.

If you have a second mortgage, the lien holder must agree to subordinate their second mortgage to the new first mortgage, and must agree to write off any principal amount that exceeds 115% of current loan-to-value (LTV).

This option will be made available to homeowners with mortgages that are not currently insured by the FHA. Existing FHA-insured borrowers are not eligible for this program.

Eligibility requirements:

  • You must be current on your existing mortgage(s)
  • You must occupy the home as your primary residence
  • You must qualify under current FHA underwriting requirements (after principal write down)
  • Your FICO score cannot be less than 500
  • Your front-end debt-to-income (DTI) ratio can not exceed 31%, and the back-end DTI ratio can not exceed 50%
  • The existing lender must agree to principal write down
  • The second mortgage lien holder must subordinate to the new first mortgage, and cap the balance at 115% of the value of the home.

Other measures include:

  • Temporary assistance for the unemployed: the government will allow unemployed borrowers to reduce or suspend mortgage payments for 3-6 months
  • Helping Homeowners Move to More Affordable Housing (HAFA): Encourage short sales and deed-in-lieu transactions as an alternative to foreclosures. The government will increase payments to mortgage service companies and second mortgage holders who agree to participate and will double relocation assistance payment for borrowers successfully completing foreclosure alternative to $3,000 from $1500.

Keep in mind the principal reductions will occur over a three-year period and it’s unclear what the impact of these modifications will have on credit scores.

Call it what you want but it seems after the past few years being a free for all for Mortgage Modification’s handed to people so far in default it’s crazy, soon there may be a program to help those  who are actually making their mortgage payments on time… stay in their homes and catch a break.

Can Maine Save the USDA RD Mortgage?

The USDA Rural Development Loan is a congressional funded program. Due to the fact they are obviously showing interest in other issues at this time, we must contact them immediately explaining (and reminding them of) the obvious impacts.  We have an obligation as tax paying citizens to voice our concerns and displeasures to our local Senators and Congressman.  We have an obligation to work to reinstate this for our current and future clients.

Contact your Maine  representatives here:

Collins, Susan M. – (R – ME) Class II
413 DIRKSEN SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-2523
Web Form: collins.senate.gov/public/continue.cfm?FuseAction=Contact…
Snowe, Olympia J. – (R – ME) Class I
154 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-5344
Web Form: snowe.senate.gov/public/index.cfm?FuseAction=ContactSenat…

You may want to write something such as this sample letter:

Dear __________,
It has come to my attention that the funding for USDA Rural Development Loans for Single Family Residences will be exhausted by the end of April 2010.  This funding is vital to so many Maine home buyers in todays current economy.  The fact that these funds will expire in conjunction with the termination of the federal tax credit will be a detriment to the real estate and housing markets here in Maine and across the country.  Please consider applying additional funds for Maine’s USDA Rural Development Loans for Single Family Residences and/or extending the federal tax credit for first time and repeat home buyers.  Our economy depends on it.
Sincerely,
____________________

Feel free to cut/paste information from this blog post as needed.  Please feel free to re-blog this information…send it to your friends, family, real estate agents, mortgage professionals, and anyone else you can think of to help. Please take time yourself to act. I ask that you please spend the very small amount of time to accomplish this request. This affects the real estate industry as a whole.

When Maine works together, we make a difference.

Maine Home Equity Line – Good or Bad?


What is a home equity loan?

A home equity loan is a form of credit for which your home is pledged as collateral. Generally, home equity loans offer a fixed interest rate and a fixed monthly payment. A standard home equity loan (also called a second mortgage) is paid off over an extended period of time.

You can estimate your homes equity. The difference between the value of a property and any outstanding mortgage balance(s) or liens against it. Also referred to as owner’s interest by adding the balance of all the debts secured by your home, then subtracting the total from your home’s value.

What are the primary advantages of a home equity loan?
The two major advantages of borrowing with a home equity loan are lower interest rates and potential tax savings:

The interest rate you will pay on the average home equity loan is generally lower than the interest rate you will pay on the average credit card or any other type of non-secured debt.

For home equity loans, you can generally deduct the interest you pay. The interest you pay on credit cards and other types of personal loans is generally not tax-deductible. Consult your tax pro about deducting your interest.

Are there hidden fees? Can I make additional principal payments in order to pay off my loan early?

Yes. You may make additional principal payments. Include the additional amount with your regular monthly payment to have the additional payment applied to your account. If you wish to pay your loan in full, check your loan terms to determine if a prepayment fee will apply. Most home equity loans include a fee, which is charged upon full prepayment. If this prepayment fee applies to your loan, it will be disclosed in your final loan documents.

Your Maine Mortgage Specialist can advise you on all of your Equity Line options available within your Maine Home.

Borrowing Against Your Home has Its Benefits

Borrowing Against Your Home has Its Benefits

With fuel, food and home prices fluctuating, families are finding that a home equity loan can provide much needed financial relief to unexpected debt and large family expenses. Because an individual’s home is, most likely, their largest asset, homeowners are using the equity in their home to fund a variety of items like medical bills, education and even their escalating living expenses. Take a closer look at the basics and the benefits of tackling current and anticipated debt by borrowing against your home.

Before you begin the home equity loan application process with a Mortgage Specialist it is imperative to know the two types of home equity loans: fixed rate and lines of credit. Both loan types are offered with loan terms that generally range anywhere from 5 to 15 years and require the borrower to repay the loan in full if the home against which they are borrowed is sold.

Though there are borrowing and term similarities, each loan has its differences. A home equity loan (also known as a second mortgage) is a fixed amount that you borrow to be paid off over a certain number of months, while the home equity line of credit (HELOC) is a variable rate. Much like a credit card, a HELOC pre-approves you, the borrower, for a certain spending limit of which you may withdraw using special HELOC credit cards or checks. Call your banker/broker to determine which loan type (fixed rate or line of credit) best fits your needs and to discuss some of the home equity loan benefits listed below.

Benefits of Borrowing Against Your Home:

More Money for Your Effort
As you may know, loan applications are quite a hassle and often don”t provide enough monetary resources to fund large purchases like remodeling your home or sending the kids off to college. Home equity loans only require one application and can provide borrowers with an easy source of large amounts of cash.

Low Interest Rate
The home equity loan interest rate is much lower than credit cards and other consumer loan rates, which is one of the reasons why so many homeowners use their home equity loan or line of credit to pay off their credit card balances. Using a home equity loan as a debt consolidation tool is a viable option for many homeowners, yet it is important that the borrower is committed to limiting any future credit card use.

Tax Break
With a home equity loan, you, the homeowner, can borrow a large sum of cash for any purpose you like and still deduct up to $100,000 of the interest when filing your tax returns. Typically the $100,000 can be increased for any borrowing used to improve your home, such as a kitchen or bathroom remodel. For example, a borrower may spend a total of $100,000 on hospital expenses and college tuition and $10,000 on a new roof, the interest on the entire $110,000 would be deductible as home mortgage interest.

Borrowing against your home has many benefits and can be tempting to use in order to splurge on expensive luxuries. To avoid the perpetual cycle of spending and borrowing, work with your  mortgage professional and conduct a careful review of your financial situation before you apply for a home equity loan or line of credit. Your  mortgage expert will not only make sure you understand the terms of the loan but also check to ensure you have the means to make the payments without compromising other bills.


USDA Rural Development loans expecting to run out of funds by late April 2010

I normally hate titles that are meant to scare people into reading but unfortunately this time there is no exaggeration to the severity of the issue. USDA Guaranteed Rural Development loans, one of the best low/no down payment financing programs left, has recently announced they expect to be out of the funds they use to guarantee loans by late April. If no action is taken by Congress to re-appropriate more funds then it will be the next budget year, after October, before we have this financing option again.

But the Tax Credit deadline is looming

Exactly- This funding shortfall couldn’t happen at a worse time. Now as contacts are being negotiated, applications are being taken and plans are being made to ensure buyers meet the dates of the tax credit deadline, we throw a wrench in the system. Should a buyer proceed with USDA financing if they have just received a fully executed contract? Should a buyer that has been pre – qualified for a Rural Development loan continue house shopping? What can this mean to a buyer that is already in the process too far to turn back?

These questions must all be dealt with on a case by case basis, depending on a variety of factors. One of the most important factors to consider is current and anticipated turn times for your local USDA underwriting. Here in Maine USDA is at 7-10 business days so unless you can have your loan ready to go to the USDA by April 9th, there is a good possibility you may not make the funding cutoff. This is further complicated by the fact that USDA is the only loan program that does not require HVCC type appraisal restrictions (VA is a different animal but with the same results). This means if you commit to USDA financing now and are forced to revert to FHA or another program, you may need a new appraisal.

Buyers should follow the advice of their trusted lenders and know that proceeding with a USDA loan without enough time to make this cutoff is a gamble. We truly need an act of Congress to approve additional funds for these loans. Although it seems logical that they should want to avoid such a deep blow to the housing industry at this time, we all know oftentimes there is precious little logic in D.C. If you think I’m exaggerating the seriousness of this, do know the USDA Guaranteed RD program assisted   2,125 families  in home ownership  in Maine alone!  Sure, some may be able to qualify through another program like FHA or VA but many won’t.

Is there anything we can do to help?

Yes- please accept this call to action to contact your trade associations and express the severity of this. NAR, NAMB and the NAHB have all been made aware of this and I trust are beginning lobbying efforts to rectify it. You could also contact your members of elected officials in the House and Senator Susan Collins in the Senate and urge them to sponsor legislation and fast track it to minimize the damage a funding delay could cause. This is not a partisan issue, both sides of the aisle should be eager to approve this. This isn’t about bailing out the housing industry, it’s about maintaining funding for a loan program that has suddenly become much more popular than anyone expected due to the current environment of real estate.