Feb 012017
 

Closing TableDefinitions: Closing Costs in New York.

When people think of closing costs typically they think of the fees paid at the closing table. The fact is, closing costs are all fees associated with the purchase (or refinance) of a house. For our purposes in this definition, we’ll concentrate on closing costs associated with purchases in New York.

 

The bulk of closing costs are indeed paid at the closing table. These include:

• Origination fees and other miscellaneous fees (application, underwriting, document prep, etc.) paid to your mortgage lender
• Flood Certification Fee paid to independent verification of flood zone
• Title charges paid to the title company (including searches and insurance for you and for your mortgage)
• The fee paid to your attorney to represent you (you might pay a retainer fee to your Attorney in advance of the closing)      Closing Attorney
• Municipal fees paid to record your mortgage and record your deed
• Taxes or transfer fees required to be paid to your state, county, or local municipality
• Escrow deposits to create your escrow accounts for the purpose of paying your annual homeowner’s insurance renewal premiums and property tax bills when due
• Miscellaneous Fees associated with your loan application and/or closing: Title Closer “pickup” fee, Title endorsement fees, Bank Attorney, and etc.

You will pay other fees in advance of closing, too. These include:

• Home Inspection: All Homebuyers should obtain a Home Inspection report from a Certified Engineer or Home Inspection Service. This report will give you advance warning of the condition of the plumbing, heating, electrical, roofing, foundation and other structural and age-related issues for the house you wish to purchase.
• Appraisal Fee: An Appraisal determines the value of the house for the purpose of making a lending decision. Typically the appraisal fee is paid for within 5 days of the Lender sending you a Loan Estimate of Closing Costs. (Lenders are not permitted to incur any fees on your behalf such as an appraisal fee or application fee or an origination fee until 4 days after they have sent a Loan Estimate to you; you must have time to review this document and agree by signing an “Intent To Proceed” form before a fee such as an appraisal fee can be charged to you)
• Application Fee: Many Lenders charge application fees in the beginning of processing a loan application.

Preparing for Closing

Prepare for closing by reading your Closing Disclosure

• First Year Homeowner’s Insurance: When you buy your home you are required to purchase, prior to closing, the first full year of Homeowner’s Insurance for your home. You must present proof of this insurance, including a receipt indicating the insurance premium has been paid in full for one year, prior to closing your mortgage loan. If you are including escrows in your monthly mortgage payment for your insurance and property taxes (required by all Lenders for FHA Insured Mortgage Loans and most Conventional Loans), then your Lender will pay your renewal premium every year after your first year from your escrow account.

Closing Table

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Happy House Hunting!

Jan 252017
 

The National Association of Realtors (NAR) released their 2016 annual report. The good news: sales of existing Single Family homes (including Condos and Co-Ops) are the best in a decade. The bad news: Inventory of homes for sale hit a record low.

I’ve experienced this low inventory trend anecdotally through my experiences working with First Time Home Buyers here in New York.  

Lawrence Yun, NAR chief economist, said, “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,he said. However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Here’s my advice to you First Time Buyers out there:

First, you must be prepared before you hit the streets looking for homes. If there are not enough homes available, but lots of Buyers walking around competing with you for that limited supply of houses, then being well-prepared can put you ahead of the crowd. One of the best ways to beat out another Buyer when competing for a house is to have “all your ducks in a row” even if your Offering price is LOWER! I’ve seen it happen, time and time again.

Second, you must strike while the iron is hot. If you see a home which comes close to your “Wish List” for location, features and price, present your OFFER the same day! The early bird gets the worm!

With homes inventory at record low I have also seen in my travels lots of homes that have no business being on the market! Yes, there are homes out there which you actually cannot or should not buy. The reasons are many and varied but they range from unrealistic Sellers with over-priced homes and a stubborn refusal to negotiate price to bad Listing Agents who tell you that your financing package won’t work for their Seller if it’s an FHA or VA loan to homes with serious physical or legal problems (mold in the basement; ancient and leaking roof; an extension without permits/certificates; a deceased owner with improperly filed estate documents, and etc., and etc.).

If you are prepared with a solid team of professionals they will guide you away from potentially harmful or crazy deals. Which brings me back to being prepared!

I have seen it time and again when existing home inventory is low: the Buyer who is clear-eyed and prepared wins and accomplishes their goal of homeownership!

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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Happy House Hunting!

NEGOTIATE Your Offer: Hit Them Like a Freight Train!

 First Time Homebuyers, How-To Negotiate, Uncategorized, Veterans  Comments Off on NEGOTIATE Your Offer: Hit Them Like a Freight Train!
Jan 182017
 

I have a client making an Offer tomorrow on a multi-family house in The Bronx. This client—a First Time Buyer and a Veteran of the Armed Forces using VA financing—has been working very hard to find the right house.

Three weeks ago he was moments away from signing a contract to buy a home. He had done the home inspection and there were serious concerns about the property. He presented these concerns to the Seller through the Seller’s Agent, notably, a very bad roof and a serious water and mold problem in the basement. The Seller’s response: not gonna fix it. Have a nice day. Home inspection fee of $550 out the window; in the garbage; down the drain. Not really. “Money well spent,” I told my client. “You found out for minimal cost the potential money-pit-nightmare this house could become for you. Walk away.”

And walk away he did. Yesterday he saw another house he really likes. This time, I suggested we go at the Seller like a freight train bearing down on him.

Hit ’em hard. Provide a clear and concise layout of the price and terms of your Offer. Let me, the Mortgage Banker, speak to the Realtor about how well-qualified you are and the rapid timeline for an approval and closing. Put it all in writing. Have all your “ducks in a row” with the Offer spelled out with price and closing timeline, Attorney information, date for the home inspection, and your Prequalification Letter for VA mortgage financing.

As if that isn’t enough of a speeding train on the tracks, give the Seller a deadline: just over 24 hours to respond. Present your Offer mid-day Thursday; require a response by 3pm Friday. Tell the Seller’s Realtor you have appointments to look at other houses starting Saturday morning.

WOW. FREIGHT TRAIN!

Listen, anyone, any Buyer anywhere can do this. You need two things to see this through. One, have your Prequalification letter and your “team” lined up: Attorney, Home Inspector, Mortgage professional. Two, just DO IT. You have nothing to lose and everything to gain. You’ll find out if the Seller is serious; if they really want to have a constructive dialogue with a Buyer; if the Realtor is a serious professional.

Line ’em up on the tracks, make your Offer, run at them like a freight train and hit ’em hard. I promise you, this method WORKS.

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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Happy House Hunting!

Can You Use a VA Loan to buy a CONDO in New York?

 First Time Homebuyers, The Affordable Home, Uncategorized, Veterans  Comments Off on Can You Use a VA Loan to buy a CONDO in New York?
Jan 172017
 

Yes it is possible to use a VA loan to purchase a condo in New York. BUT…the condo must be a VA approved condominium. If the condo is not on the list, you cannot use a VA loan to purchase the condo.

Find VA Approved Condos HERE.

Everyone wants an affordable home…but there are other considerations you must take into account when considering a Condo.

As an advocate for First Time Buyers, I always give this advice to clients who are considering purchasing a condo. First, consumers often have the mistaken impression that condos are “cheaper” or have lower monthly payments than you would have for a home purchase, say of a Single Family Home.

While this may be true on the overall price of the property, in terms of the monthly payment, a condo can often be nearly equal to that for a single family home. This is because the monthly expense for a condo is not only Principal, Interest, Insurance and property taxes (and mortgage insurance depending on the loan program if other than VA), but also the monthly expense for the Homeowners Association. This “HOA” cost can be prohibitively expensive. When I prequalify a client for a condo in NY Metro area, I use an average monthly HOA expense of $650. Obviously HOA fees vary from one condo to another, but this is a fair average cost based on my experience.

So,when factoring that $650 into a monthly housing expense, the overall monthly expense for a condo can be almost or exactly equal to that of a single family home.

Therefore, I advise first time buyers to look at the other aspects of condo living to make a determination as to whether this is a good “fit” for their home buying experience. If a condo is considered as a “starter home” experience, then I would caution a first time buyer that a single family home is probably a more reasonable property to accomplish that goal.

Other factors to consider with condos:
When real estate markets turn “down” Co-Op, Condo, and 3 & 4 Family homes tend to suffer first in the potential for resale. So, if you own one of these properties, and you MUST sell, but the market has turned south, you will face significant challenges in getting your home sold.

-Living in a condo means you will often be living “up close and personal” with your neighbors. Very much similar to living in an apartment building, even if the condos are townhome style properties.

Condo living comes along with restrictions—more often than not—on what you can and cannot do to your property.

Overall costs for a condominium can increase dramatically if the condo is poorly-managed, or if an unexpected major incident—such as a heating system failure or roof collapse—occurs and winds up costing the condo monies in excess of their “capital reserve” account. If a condo association needs to increase its capital reserve account for any reason, this means a special assessment for the individual condo owners, maybe as much as several hundred dollars a month.

I often say to first time buyers that Condo living differs from owning a single family home not in the monthly payment, but rather by asking this question: “Do you mind shoveling snow?”

BOTTOM LINE: Approach a CONDO purchase by reviewing ALL variables in the experience and don’t focus solely on cost.

Read about the Basics of VA loans HERE.

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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Happy House Hunting!

May 182015
 

inspector 1You definitely want to be present at the inspection; budget anywhere from 2 to 5 hours for the inspection. Dress as if you might get dirty; bring a flashlight. You’ll go through the house side by side with your Inspector. After the inspection, your Inspector will discuss with you any major issues you need be aware of to discuss with your Attorney. You’ll get a written report shortly after the inspection day.

Typically your Home Inspection will alert you to problems in five key areas, and these key areas directly relate to the contract of sale in a New York home purchase:

1. Foundation: sound and solid
2. Roof free of leaks
3. Plumbing working and leak-free
4. Heating system sufficient and operating
5. Electrical system sufficient and up to code

image w definitions

If there is a serious problem with any of these five items, typically the Seller has a responsibility under the terms of the contract of sale to repair the problem at their expense, not the Purchaser’s expense. Sometimes a Purchaser will receive a credit at closing to repair one of these items (assuming the home and the defective issue has not compromised the Lender’s appraisal). When the Purchaser receives a credit at closing, the amount of the credit is based upon legitimate estimates for repair and negotiations between the Attorneys representing each party.

Other items you discover are in need of repair/upgrade (i.e. dishwasher not operating properly; air conditioner on second floor inoperable, etc.) can be negotiated for a repair credit or replacement at the Seller’s expense. Again, these negotiations are typically handled by the Attorneys.

It is not as common as you might think that a purchase price is reduced due to repairs from a Home Inspection. Best to consult with your Attorney for more detailed information in this area.

 

 
Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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Happy House Hunting!

Sep 072014
 

tax refundIt’s tax time and many homeowners receive large tax refund checks. Here’s some advice I’ve put together for you on different ways to use that money.

This article was the first in my series “The Affordable Home.”  In the series I seek to focus on the intangible benefits of homeownership by making them, well, tangible.  I believe the affordable home is the sensible and proper approach to homeownership; so many new homebuyers today specifically focus on the affordability of the mortgage loan instead of the “HGTV” aspects of a house. I find this attitude refreshing for two reasons.

First, it’s an “old” attitude: in decades past the idea of buying a home revolved around diligent budgeting to save up the down payment and the concept the monthly payment should be affordable.

1950-oct-28-crop

The features of the house—granite countertops, high end appliances, paved driveways—were minor considerations and certainly did not make for sound decision-making when buying a home.  Those features could be added later, if one so desired, and those “old-timers” (I was once one of them) knew that.

 

Second, during the past decade, during the “Boom” the focus was on something I considered completely nuts: buy a home, an amazing home packed with big rooms, big features, and big monthly payments, at any cost.  Affordability be damned.  I struggled as a mortgage professional during those years to try to talk sense into people.

Since it’s tax-time, the advertising from folks who want your refund checks are everywhere.  There was the TV advertisement: “Just in time for your tax refund we’ve received a new stock of bamboo flooring!”

bamboo

It occurred to me that this is the time of year when many people, especially homeowners, get large tax refunds and the sharks start circling looking to take a bite out of that refund check.  To this I say, “STOP!  Take a minute to reflect on what you should do with your money!  You worked hard for it, and you bought an affordable home so you could get that refund, don’t throw it away without giving it due consideration.”

Here are my suggestions to spend your tax refund wisely:

1. Consider investing the money for your future.  My pal Nick, the owner of the Westside Steakhouse  was at one time a stock broker.  Here’s his take on wisely using your money:: “Never spend more than you make and save some money every week.”  Awesome advice and I believe that fits very handily into my concept of the affordable home.   Especially in this day and age of doubt over pensions, we consumers must be smarter and more responsible with our planning for retirement.  Follow Nick’s advice and invest your tax refund to begin or supplement your savings plan.

The New York Times “Your Money” section featured a wonderful piece recently about a new vehicle that makes it easier for us to create a sound investment strategy without all the costly bells and whistles.  Here’s the link to that article:  Financial Advice for People Who Aren’t Rich

I have long advised my clients to consider retaining a Financial Advisor to provide counsel on all things finance-related: investing, budgeting and insurance.  You can find a local Financial Advisor in the your area here:  National Association of Personal Financial Advisors

And here is sound advice from a CPA about investing not just your refund, but investing throughout the year and the tax benefits/ramifications: Fund Your Retirement Or Your Child’s College?

2. Create an Emergency Reserve.  Take some or all of that refund check and put together your emergency reserves.  Park the money somewhere it’s inaccessible by debit card!  You’ll need ease of access, but putting it within reach of a debit card is a surefire path to disaster.  pile of cash

3. Pay down debt.  This tends to be the long held standard amongst many homeowners I’ve known over the years.  I believe this is an admirable activity, but I believe taking your tax refund to pay down debt should be part of a comprehensive plan for debt management.   To take a page out of my friend Nick’s finance playbook: don’t spend more than you earn.  I advocate tending to your credit use respectfully and as part of your total family budget every month.  This way you won’t necessarily have to take your hard won refund check and pay down a credit card balance.  Of course, if, during the year you experienced an emergency and needed to access your credit to assist with that emergency, then paying off that debt at tax time is a sound strategy since it’s a one time event.

I’ve found that Consumer Action is the best site on the ‘net for sound advice on all things credit related, including how to obtain lower credit card rates and fees and great counselling on preparing and maintaining a family budget.  Find them here: Consumer Action

 Another Smart Strategy for The Affordable Home: Take home more money in your paycheck; get a smaller refund at tax time.

I hope my suggestions are useful to you at this exciting time of year.  Of course, I also advocate that you really shouldn’t get such a large refund at tax time if you’re a homeowner.  I’ve long believed that you should incorporate into your homeowners’ “network of advisors” a great tax professional or CPA.  By doing so, you can lean on your tax professional/CPA to advise you on the correct withholding throughout the year to increase your take-home pay, reduce your end of the year tax refund (and prevent having to pay!), and enjoy the benefits of homeownership every month instead of once a year. Here’s the IRS page on how to calculate correct withholding, but I recommend you do this only under the guidance of your tax professional/CPA:  IRS Withholding Calculator

 

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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The document ‘drip’

 First Time Homebuyers  Comments Off on The document ‘drip’
Sep 242013
 

docs 1I once lost a client because he was annoyed with me for asking him to provide documents for his loan application.  He felt that my request for ALL the pages of his bank statement (he only provide page 2 of a 6 page statement),  various W2 forms and 1099 forms (he had varying income streams) and the complete contact information for his wife’s employer was “too much.”   He cancelled his loan application, and I was happy to see him go.

I believe my role as someone’s Loan Originator is to help them have a positive and tranquil experience with their Loan Application and approval process.   I believe I should use my extensive knowledge garnered from nearly 24 years in the industry to know most-all the documents an Underwriter will require in order to approve someone’s loan request.  So, I ask for a lot of documentation up front at the time of application.

Then there’s my childhood friend Bill who moved out west after retiring here in New York.

docs 3He found a house and applied for his loan.  I recommended a fantastic national mortgage banking company (I’m not Licensed in Bill’s state).  Instead, Bill chose his bank, where he’d had his money parked for many years.  A few weeks into the loan process he called me one evening ranting and raving.  It seems the bank kept calling him and asking him for more documents every day.  He said they were “papering” him to death!   We reviewed the requested documents together and I told him they were all reasonable requests. What was unreasonable was the fact his Loan Originator should have gathered these documents with the initial loan application.

As to my former client—the real estate agent who referred him to me told me after he closed how he was complaining during the many weeks it took to get his loan approved how the Loan Originator kept asking him for more and more documents every day.  The real estate agent said the guy was pretty stressed over those requests.

When you apply for your mortgage, your Loan Originator can either gather all your documents up front—the mark, IMHO, of a true and experienced PRO—or document “drip” you through to closing.docs 2

Here’s what you should be prepared to submit at Loan Application:

__Paystubs: most recent four weeks consecutive

__W-2’s: most recent two years

__Tax returns: Federal Tax returns for most recent two years including all schedules

__Bank Statements: most recent three months consecutive statements, all pages

__Other assets: proof of other cash assets: 401k, IRA, Employer Pension Plan, Retirement funds, Mutual Funds, Stock accounts: Most recent three month statement, all pages

__Photo ID

__Fully signed Purchase Agreement (Contract of Sale)

__Proof of your Earnest Money Depositdocs 4

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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Key Points for VA Loans

 First Time Homebuyers, The Affordable Home, Veterans  Comments Off on Key Points for VA Loans
Sep 052013
 

veterans 1More Veterans are using their Veterans Benefits to buy homes today with VA Loans.  The problem many of them encounter is this: Mortgage Loan Originators (MLO) don’t have sufficient experience with VA Loans.  This can make for some troublesome times when a Veteran is buying a home.  You definitely want to work with an experienced MLO, someone with at least 15 years experience.   Take some time when shopping for your VA Loan to interview the MLO before you make a decision.

Some key points for you to know when you interview a Licensed Mortgage Loan Originator (MLO) for your VA Loan:

VA Funding Fee is 2.15% of the Loan Amount (and is always financed) for Active Duty Veterans with at least 180 Days active duty. No Funding Fee for Disabled Veterans.

The Funding Fee is different for other service types/periods, including Reservists.

A Veteran can finance 100% of the purchase price of the home.modern home 191

A Seller can pay all of a Veteran’s Closing Costs, and more.

There’s a lot of misinformation out there about VA Loans and your MLO will need to be available to explain and reassure the Seller and the real estate agents of the VA process. For example, many Sellers and/or real estate agents believe that VA Loans take “a LONG TIME” to approve and close. Not true. (My average closing time on VA loans is about 6-8 weeks compared to 3-4 weeks for FHA). They also believe that VA Appraisals ALWAYS slash the value of the house. Not true. I’ve only seen one VA Appraisal come in slightly less than purchase price in the last couple of years, and, in that case, both the Listing Agent and I suspected the value might be tight before. Bottom Line: your MLO has to have clear communication to make it easier for you to negotiate with Sellers when competing against other Buyers with different financing terms.

If your MLO asks you for your DD-214 right away, then you know you’re dealing with someone with experience. You don’t need the Certificate of Eligibility or COE as we MLO’s can obtain that directly from VA on your behalf.

thank you veteransFor a New York Purchase you’ll need some cash for your “Good Faith Deposit” when you sign the contract of sale. It’s the rare Seller who will sign a contract with a Buyer who doesn’t at least put $10,000 on the contract (refundable to the Veteran at closing due to the 100% financing). Not that it’s impossible (I’m working with 3 Veterans right now who have less than $5,000 to put down), but it will require serious negotiating on the part of your MLO, real estate agent, and Attorney.

VA Condos: few and far between because the VA just doesn’t approve enough Condos, so focus on Single Family Homes. Find VA Approved Condos

Two Family Homes: unless you have experience in property management (and can prove it), you’ll have to qualify with your own INCOME for the purchase; rental income will be excluded from the qualifications.

You’ll need a Termite Report but YOU CANNOT PAY FOR IT, the Seller must pay.

We qualify Veterans’ Income two ways: a percentage of monthly gross income, or “Debt to Income Ratio” AND a residual income method which is similar to doing a family budget, so it’s a pretty cool way to qualify you. idyll

 

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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Ask Trevor A Question
Aug 282013
 

Often First Time Buyers rely on family to provide extra money for the purchase of a home in the form of a Gift.

In general, before using Gift money from family, I recommend you have a discussion with the Mortgage Loan Originator (MLO) who prequalified you. Depending on the Loan Program she used to qualify you, there may be restrictions on using Gift funds or there may be other requirements.

Gift funds, like all monies used in the purchase of a home, must be “sourced.” That is, your Lender will need to see the source of the Gift money from your family member. In most instances the Lender will also need to track the transfer of those funds from your family member into your bank account.

Again I caution: Speak with your MLO before using Gift monies for the purchase of a home.

A question that often comes up when Gift monies are involved is:

“What are the tax consequences of using

Gift money when buying a home?”

I’m happy to refer you to the website for my good friends at Burns & Rodriguez for professional guidance in this area from tax professionals:

http://www.brodtax.com/newsletter.php#6

 
Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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It’s Not Enough: 6 Months Reserves

 First Time Homebuyers  Comments Off on It’s Not Enough: 6 Months Reserves
Aug 272013
 

I’ve noticed a trend on the ‘net over the past two years or so where lots of folks advocate buying a home ONLY when you:

  • Have 20% Down payment
  • Have the cash for your closing costs (here in New York 4.5%-5% of purchase price!)
  • Have 6 to 12 months monthly budget in reserves

 

6-12 months reserves is NOT enough.

Look at the recent recession: many, many, MANY Americans were out of of work for several YEARS. Lots of folks tapped into their savings and retirement accounts to survive; lots of others lost their homes altogether. Clearly, having ONE Year in reserves wasn’t enough.

 

Granted, this recession was more severe than those in recent memory, but do you really believe 6 to 12 months reserves is enough?

 

I can understand a more conservative mindset; it’s a natural reaction to the excesses of the “Boom and Bust.”  Believe me, I really do understand because I lived and worked through that debacle.  I still cannot believe people’s behavior in those days.  Lunatic is a good way to describe it.  From the Account Rep’s at the Sub-Prime Lenders to the amateur real estate agents and loan officers to the barely qualified consumers who simply wanted “MORE” I’m still shaking my head to this day.

 

And so we’re left with a new consumer mentality that, when it comes to buying a home, you should almost pay cash for the house, never mind the mortgage loan.

 

I applaud such an attitude.  

The shame is it’s not based in reality.

Even were one to eliminate all unnecessary debt, never dine out, never rent a movie, brown bag your lunch, hand wash your business clothing, commute on public transportation, take a second (and maybe a third) job, the REALITY is that—for most folks—it would take years and years, not to mention incredible discipline, to achieve this perfect home-buying nirvana.

 

Again to the reserves.  Most definitely a commendable behavior.  Maybe worth postponing the purchase of a home and tightening up a family budget to aspire to this noble goal.   But many families want a backyard for their kids to play in today.   Many other folks are well and truly tired of paying rent to complacent landlords.

 

For those folks, there’s a mortgage loan and

the option to purchase a home sooner rather than later

with the available means.

 

Commendable though it may be, saving oodles of cash to put 20% down, pay all your own closing costs and be left with many months of emergency reserves just isn’t practical for many people.  And it doesn’t help those same folks achieve the goal of home ownership.

 

 
Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

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