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Laying the groundwork for the best mortgage

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With mortgage rates having doubled what they were in early 2022, getting the lowest rate possible could mean the difference in being able to buy a home or at the very least, makes it much more affordable.   Some people are waiting for rates to come down and while they are expected to come down some this year, most experts agree that they'll never return to the three or even four percent range.   There are things that a buyer can do to be eligible for the best rate available.   Obtaining the most favorable terms is based on the loan-to-value, your credit rating, and your ability to repay the mortgage. While lenders can impose their own underwriting criteria, the basic qualifying guidelines are identified as the 4 Cs: Capital - money and savings, plus other investments providing for down payment, closing costs, and reserves for unexpected expenses in the future.   It could also include gifts from family members, grants, and down payment assistance. Capacity - ability
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Handling an Appraisal Gap

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An appraisal gap describes the difference between the sales price and the lower amount of the appraisal required by the mortgage being obtained by the buyer.   It becomes an issue if the seller is not willing to lower the price or the buyer is not willing to pay the difference in cash. Looking at the issue from the seller's perspective, "if the buyer wants my home and he can't get the loan he wants, he'll have to make up the difference in cash."   The buyer might have a different view like "If an independent appraiser can't justify the price, I'm not going to pay more than appraised value." Pay the difference in the appraised value and the purchase price in cash.   Solution - Assuming the buyer has adequate cash reserves and is willing to pay above appraised value, this will satisfy the lender. Decrease your down payment percentage to apply toward the appraisal gap.   It may trigger mortgage insurance which will increase your paym
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Make your home offer the most appealing

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Sales in March 2023 were down 2.4% month over month and still down 22.0% year over year according to the NAR Housing Snapshot.   The median sales price dipped 0.9% to $375,700 and there are 2.6 months supply of homes on the market compared to 2 months a year ago. "Inventory levels are still at historic lows, and consequently, multiple offers are returning on 28% of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�. It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.   The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation. Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.   Include the written pre-approval letter along with the offer.   When you
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Protect yourself with a new construction inspection

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Builders of new homes offer or are required to warrant their work for a specified period.  Municipal inspections are generally required during different stages to "ensure the life, health, safety, and welfare of the public" but even if something is missed, the ultimate responsibility for building to code belongs to the builder, even if the municipal inspector misses something. There are four basic stages of residential construction including: The foundation stage begins with excavation, footings, foundation walls or slab, waterproofing, backfill, compaction and underground rough plumbing and electricity.   Municipal inspections are done prior to pouring the foundation while items are visible. The framing stage includes the wood or steel framing, exterior walls and roof sheathing, exterior trim and siding, windows, doors, and roofing.  Depending on the municipality, there could be inspections of the rough framing separate from the roofing.  Next in this stage
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Higher Interest Rates May be the Help You Need

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Like opening and closing a faucet increases and decreases the water flow, lowering interest rates increases home sales and raising interest rates decreases home sales. When home sales increase during periods of limited inventory, demand increases and prices go up.   Contrarily, when home sales decrease, demand could lessen and prices moderate.   There is opportunity with higher rates because it affects sales and demand, which in turn keeps prices in check.   By waiting for rates to come down, and no one knows by how much but certainly not to the 3-4% range, buyers' pent-up demand will affect the already low supply and cause prices to increase. Let's look at a scenario where you could buy a home today for $400,000 with a 90% loan at 6.5% for 30-years with P&I payments of $2,275.44.   If interest rates drop to 5.5% in one year but in that same period, the price goes up by 10%, the price would be $440,000 with a 90% loan at 5.5% for 30-years with P&I payments
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Shopping Mortgage Rates

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Nobel Prize recipient, Richard Thaler, in his research into seemingly irrational economic behaviors, "found that consumers generally search too little, get confused while evaluating complex alternatives, and are slow to switch from past choices, even if it costs them." "Why are consumers leaving money on the table?" Based on this behavior, a borrower securing a mortgage might depend on their existing banking relationship or a single referral from a friend or agent rather than shopping multiple lenders. When shopping for a lower mortgage rate, consider that not all lenders share the same business practices.   Some may lure unsuspecting borrowers to a rate, knowing full well that they cannot deliver on it.   After making a loan application and supplying information necessary for approval, they reveal that the rate is not available for "whatever" reason. They're counting on the borrower wanting to get into the home because the closing dat
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Who Benefits from Selling a Home "As Is"?

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A person's decision to sell their home comes with a lot of other decisions causing an owner to stress or procrastinate.   Early in the process, the owner will consider selling the home "As Is" to avoid the looming issues that accompany selling a home. From a seller's standpoint, "as is" means the buyer will purchase the home in its current condition without asking for any repairs.   While it is convenient for the seller to take this approach, the normal trade out is the property will not result in the highest possible sales price. Regardless of how the home is sold, the seller is required to disclose all defects which include repair history, condition of systems and appliances, water damage, pest infestation, radon, and other things that affect the value and livability of the home. From a buyer's point of view, they may think there is something wrong with the home which could result in them avoiding the home completely or making a substantial
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