Thoughts on mortgages real estate and first time buyers
I queried anonymous members of the Craigslist Housing Forum for their feedback on “Starter Homes.”
I queried anonymous members of the Craigslist Housing Forum for their feedback on “Starter Homes.” The comments and suggestions I received were excellent.
http://forums.newyork.craigslist.org/?ID=38811961
My “Starter Homes” ads on Craigslist sprung from a mission I had with my wife, The Realtor last fall.
I have been advertising on Craigslist to first time homebuyers: “Starter Homes.”
If you’ve read anything on my website or of my postings at the Craigslist Housing Forum or NYTimes.com Housing Forum you know one thing about me above all else: I believe in owning your own home.
Strip away your agonizing thoughts about interest rates, the economy, the global state of politics, oil prices, the jobs outlook, and just about any other distracting negative news that prevents your from achieving this most important goal. And if you’re working with me I’ll peel away the distractions from your brain for you. No problem. My pleasure. Really, I will bring you back to the most important reality, and the only one that counts: you’ve got to own your own home.
My “Starter Homes” ads on Craigslist sprung from a mission I had with my wife, The Realtor last fall. A young woman was referred to me by her aunt. Lorraine and I were entrusted with the task of finding this young lady her first home, located in Nassau County, and priced no more than $330,000-340,000. Whoa. This seemed a daunting task.
More about our experiences with that house purchase here: https://www.tcurranmortgage.com/blog/?p=7
We very quickly discovered the lie to our perception about the Nassau County market. You didn’t have to spend $500,000 to buy a home! Wow! In fact, we found over 140 houses in that first search. And these homes were located all over Nassau. Best news yet: the homes were all priced less than $350,000!
We helped our young customer make her dream come true. I saw this as an opportunity for my clients. I meet so many homebuyers who have the strong desire to live here on Long Island, yet can’t afford the prices. Thus began our work to help as many homebuyers as possible make their dreams come true with homes priced in a range affordable to their monthly budgets.
Now, these homes are what I call Starter Homes and I will write these next blog articles specifically to discuss what I mean by that term. I can tell you in advance: it’s a good thing!
Will there be a Seller’s concession?
A client inquired about using a charitable “down payment assistance” program like this one Partners In Charity when she buys her home.
This is a program whereby the Seller of the house must repay the charity at closing for the amount of the assisted contribution. The Seller then possibly qualifies for a tax deduction based on the charitable nature of the reimbursement (depending upon the final tax return and the personal qualifications for such. As usual: check with your tax professional.).
I have investigated several non-profit DP assistance programs similar to this one. In an “up” market as we have been experiencing for the better part of 9 years it is a tool that is really unnecessary. In the event, you would use the charitable contribution/tax deductibility as a way to convince a homeowner to provide a Seller’s concession for closing costs. In our current market in the NY Metro area, homeowners and their agents/attorneys agree to such concessions on a regular basis. In fact, I would daresay it is so common an occurrence as to be an unremarkable part of doing business every day.
When I started out, and up until around ’95-’96, many Sellers and/or their attorneys and real estate agents were reluctant to agree to concessions. The idea was not so commonly applied in those days. Back then, I would spend considerable time “selling” the idea to the other side in a real estate transaction. Nowadays the listing agents and/or attorneys usually call me first to ask, “Will there be a Seller’s concession?” It’s about as common a question as, “Would you like an apple pie with your Big Mac?”
Once you make an offer on a property, the mechanisms necessary to add your closing costs into the transaction and to provide the 100% financing you need to purchase the home automatically kick in to gear.
This should hearten those of you who have been used, abused, overused and generally maltreated in this Seller’s market.
Okay Buyers, you might be getting a little bit of peace on your side of the negotiating table. Follows is a quote from an editor at Kiplinger’s on CBS Early Show. This should hearten those of you who have been used, abused, overused and generally maltreated in this Seller’s market.
Two things to remember:
1. It’s still a Seller’s market; those Sellers are going to have ‘attitude’ for awhile, yet. Tread cautiously.
2. Interest rates are climbing. Already this week the median rate for a 30yr fixed rate loan is 6.47%. Act soon.
From Kiplingers/CBS Early Show
“It was always a sellers market; now let’s just say there’s more of a balance between the buyers and sellers.
“If you are looking to buy, it’s still a good time to buy because rates, while they have been edging up, are still low, a little over 6 percent and, if you wait, rates are going to be higher and you could price yourself out of the market. It’s a good time to buy now, too, because sellers are getting a little anxious, winter is coming up, it’s a very slow season and sellers may we more inclined to give you a better price, certainly better than what was going on in the summertime.”
No matter how you may feel about war in general or any wars in particular, Friday is the day reserved to remember and thank those men and women who sacrificed their time, or their lives, in service to our country.
Friday is Veteran’s Day. No matter how you may feel about war in general or any wars in particular, Friday is the day reserved to remember and thank those men and women who sacrificed their time, or their lives, in service to our country.
I try to call Veterans I know, through acquaintances or clients, and thank them. It’s a small thing I can do to show these people I value the contribution they made to our society. Service for a Veteran may have been hard, or it may have been easy. All I know is these folks are just regular people like you and me and I don’t mind taking a few minutes out of my day to stop, make a phone call and say, “Thank you for your service to our country. We’re here and able to do what we do because of people like you.”
Some Veteran’s Day links you may find interesting:
These articles focus on the new internet tools available; there is a wealth of good advice for anyone involved in the purchase and sale of real estate.
NYTimes.com Technology section has an excellent series of articlesabout internet resources for homebuyers and sellers. These articles focus on the new internet tools available; there is a wealth of good advice for anyone involved in the purchase and sale of real estate. I strongly recommend you visit the site to add some valuable insight to your buying or selling experience. NYTimes.com in general is an excellent resource; I read and refer to it often (in case you hadn’t noticed!).
One of the articles (linked below) is “Location, Location, Location. Research, Research.” This article gives an overview of internet resources and some advice. I disagreed with some of the advice and wrote an email to the editor.
Here is the text of my email:
“Hello,
I consider NYTimes.com a valuable and authoritative resource. I refer clients, business associates, friends, and family to your site on average of thirty to forty times a week verbally , on internet postings and in my business blog.
I found the article “Location, location, location. Research, research,” to be informative but flawed in a few ways.
I am a Mortgage Banker with sixteen years experience in the New York metro marketplace. My comments are specific to that area.
I have discovered when participating in conversations at the Craigslist Housing Forum (a valuable resource not mentioned in your article) real estate situations can be so localized and market-specific as to make even the most fundamental “general” advice useless. While NYTimes.com is writing for a national readership, it might be useful to mention this dilemma prominently in your articles.
The article advises Buyers and Sellers on two very specific situations; as a Mortgage Banker working closely with my Buyer-clients, I must disagree with your recommendations. In my opinion, the advice provided does not synch with real-world conditions.
BUYERS: I always recommend engineer inspections to my clients. I am reluctant to proceed on any mortgage application where the buyer has not committed to this most important protection. Your article states that buyers have let this behavior slip due to a frenzied market. Yet, there are many real estate, legal and mortgage professionals like me who would not allow that. When the inspection report is in hand, you recommend asking for cash-for-repair concessions from the Seller, “as much as you want.” While this works wonderfully in a full-on “Buyer’s market,” this is a flawed strategy in the current climate. There is no lack of Buyers in the NY Metro market. A Seller who is pushed aggressively for concessions is likely to send a Buyer packing, regardless the price offered. The reason is simple: a Buyer who makes the Seller’s life difficult from the beginning is a potential troublemaker through the entire purchase/closing process. The Seller may well ask, “If they’re this fussy today, what are they going to be like three weeks from now before and during the closing?” A Seller wants to get to closing quickly and with the least drama possible.
This doesn’t mean Buyers shouldn’t ask; I say only the method and expectation of outcome should be treated with more caution and optimism than simply, “…ask(ing) politely.”
It’s best for a Buyer’s attorney (in New York we use attorneys for contracts and closings) to handle these requests directly with the Seller’s attorney. This is a delicate negotiation. Further, on Long Island, Brooklyn and Queens, we are not seeing a disappearance of the “sold as-is listings,” as stated in your article. MLS listings and contracts of sale state, “Property is being sold in as is condition.”
Finally, a Buyer has no knowledge if there are other offers on a property or not.
SELLERS: The article suggests Sellers would gain more value researching local comparables instead of increasing commissions to Buyer’s agents. Research of market values should be a given for any Seller, not a substitute for other important activities. Regarding the commissions paid to listing and buyer’s agents, after sixteen years in the business I can state with complete confidence that you “get what you pay for.” I admire new and different efforts to sell real estate. The new Seller’s assistance flat-fee and no-commission business models are worthy attempts to market from a different perspective. In many real market situations, unfortunately, these business models provide a disservice to both Sellers and Buyers.
My wife, Lorraine, is a Realtor with a Century 21 office. We work together; I prequalify and refer buyers to her, she shows and sells them homes. When researching properties on MLS, she will go right past properties that list a commission less than 2% for Buyer’s agents. It’s just not worth her time in real dollars to work for 1 or 1.5%. She is paid a portion of that commission: her broker takes his part after paying a franchise fee to Century 21. For a commissioned salesperson, time is money; time invested does not guarantee a payday. “Buyers are liars,” is an old adage amongst Realtors. Buyers are notoriously fickle. In a perfect world where buyers a) returned calls, b) showed up on time for appointments, c) made honest representations of likes and dislikes, and d) never stood up agents for appointments, then a lower commission would be satisfactory compensation. Heck, you’d probably have real estate agents working on salary because of the “certainty,” of the sale. But the agent’s real-world experience is filled with wasted time and uncompensated efforts. Agents take this into consideration when deciding how much money they are willing to work for.
My wife’s recent and first experience with a 1.5% commission would discourage any other new agent (she’s had her license just a year). She sold a cute $329,000 starter home on Long Island to one of my clients. Our Buyer was a pleasure to work with. The Seller and their listing agent and attorneys were impossible to work with. All the trouble occurred on the other side of the table, both during the escrow period and the closing. The listing agent (who earned a 4.5% commission) was especially difficult to work with, if you could even get him to return a call or email. Lorraine wound up doing all the contact work with the Seller for home inspections, contract-signing, appraisal and closing. The listing agent is responsible for these activities. Had my wife been a new agent (the only kind who will work for such a low commission, in my opinion) she might very well have given up on a real estate career considering how little money was earned in relation to the amount of work required to close the transaction. Lorraine had the benefit of the excellent broker she works for and me to guide and encourage her.
In conclusion, I realize the difficulty of presenting general information to a national readership. But this difficult is aggravated by making bold statements that ignore the realities of local market conditions. Care must be taken first to verify then compare and contrast these local trends. NYTimes.com can then present different perspectives and advice as a local “seasoning,” for a national readership.”
Qualifying a borrower correctly is difficult to do and requires the experience of understanding underwriting guidelines, knowing the questions to ask of the borrower, and the ability to read and comprehend income documentation.
I replied today to a question over at the Housing Forum on Craigslist.
The person inquired about No Doc loans. These are loans where the bank does not verify your income or your assets, only your credit score and the appraisal for the house. Rates are considerably higher for these loans, anywhere from 1% to 2% higher than market rates for loans where we verify your income and your assets.
Here’s my reply:
“No Doc” loans and other No-Income-Verification type loans determine the approval using the credit score.
If your question is about the loan amount, then, yes, No Docs are available for that loan amount.
But, as life888 points out you might qualify for a Full Income verification loan (Full Doc). With today’s rates so low, assuming good credit (at least 620) and low monthly debt, income needed to qualify for 100% loan of $280,000 (assuming taxes and insurance of $250 a month) is less than $85,000 annually.
Remember that rates on NIV loans are at least 1% higher than market. Before you start talking “No Doc,” your loan officer should exhaust all possibilities to prequalify you correctly.
I had lunch with a real estate attorney yesterday. We agreed that in the current market mortgage “professionals” take the easy way out on qualifying all too often. They see a good credit score and they stop there. Next thing, the borrower is signing docs for a NIV loan with a higher rate than they could have gotten if they’d been properly qualified.
Let me tell you, qualifying a borrower correctly is difficult to do and requires the experience of understanding underwriting guidelines, knowing the questions to ask of the borrower, and the ability to read and comprehend income documentation. For too many mortgage people this is just too damned much work for them to be bothered doing, so they take the easy way out and go “No Income Verification.”
Link to the discussion: http://forums.newyork.craigslist.org/?ID=34883185
Rate quotes are nothing more than a disturbance of the air around the mouth of the speaker. Or a few blips of 1’s and 0’s transmitted in the blink of an eye across the internet.
I don’t know where I got the expression, but it’s a good one: A quote is a quote is a quote.
Too often people focus on the interest rate they are paying for the mortgage loan. I’m not saying that interest rate isn’t important, it is! But if you can’t get the mortgage loan you want, need or are qualified for, what the heck does it matter how many banks you call and ask for rates?
Getting a rate quote is like putting the cart before the horse. Once the horse starts walking, that cart is going all out of whack all over the road. There’s no steering the cart from behind!
I prefer to qualify people first. First, can I even approve you for a mortgage? Next, if it’s a YES to that first question, then what type of loan is available that meets your qualifications? I want to know what your personal and professional life goals are so that I can recommend loan products. Frankly, I like good old-fashioned thirty year fixed rate mortgages. When I understand what your plans are for the future then I can make recommendations to different loan products.
Finally, once we know all of the above, then I look for the best interest rate for your needs.
To me, that seems like a very sensible way to conduct business. Out there in “the world” it is painfully obvious that a lot of other mortgage “professionals” conduct business differently: they start with the rate. Later on, I guess, they deal with all the other complicated stuff about qualifying and approving mortgage loans.
Of course, this is a sales technique like any other. You see, for example, the car advertised for, “$99.00 a month lease new car!” You run to the dealership Saturday morning only to discover the cheap lease was for three selected cars and, oops, sorry, they’re sold already! But we have these other models of the same car. Lease price? $329.00 a month!
Hey, they’ve got you in the showroom. That’s half the battle. Now they’re going to sell you something. The same thing holds true with a quote. Quote, quote, quote, and quote some more. Eventually people arrive in the showroom. Cart-in-front-of-horse.
Me, I’ll put the horse in front of the cart and steer straight and true every day of the week. It’s good for me and it’s good for my clients.
Lessons for First Time Homebuyers in this insane, crazy, wacky, greedy, lunatic-fringe “Seller’s Market:”
You will feel pushed around and rushed. Get used to the feeling. There’s seemingly no time to breathe before you’re putting your signature on binders, calling lawyers, engineers and mortgage bankers, and whoooooosh you’re in the middle of it.
Your first reaction as a buyer will be to pull back and demand some time for caution. This is the biggest decision of your life and you’re expected to decide, respond and sign in a few hours? Yes!
It’s a Seller’s market and these homeowners are calling all the shots.
Here’s a snapshot of my and my wife’s experiences over the past seven days with a buyer we’re working with:
-Tuesday last week, offer, counter-offer, new higher offer from buyer, firm answer on counter offer from seller, buyer agrees to counter offer price. This all happened over the course of the afternoon, five hours tops. You can bet the buyer felt rushed.
-Wednesday, last week: 9a.m. and the Buyer’s attorney receives the contracts of sale via fax. There’s a clause in the contract that NO buyer anywhere wants to see, “Time is of the essence.” This means if the buyer signs and doesn’t close by the close date (October 13th, less than a month!) the buyer could lose her downpayment!
-Sunday, the buyer’s only day off from work (she’s a nanny), she meets with the attorney and signs the contract. We agree our strategy will be to have her attorney hold the contract until the engineer’s inspection is satisfactorily completed (won’t even wait for the report, just the verbal okay on the day of inspection!).
-Monday, Lorraine, my wife spends the entire day trying to schedule an appointment for the engineer. The listing agent doesn’t return her call until 6 in the evening! Appointment set for Wednesday at 1:30pm
-Wednesday: engineer’s report goes off perfectly. Engineer calls the house excellent and sturdy. Minor problems to be addressed.
-Wednesday: at the very same moment the engineer is inspecting the house, the Seller’s attorney calls the Buyer’s attorney and cancels the deal! They’re taking another offer because the buyer is just moving too slowly! Holy Cow!
-Thursday, today: Buyer increases her offer by $4,000 after Seller’s attorney tell’s her attorney they’ll sign if the new, higher offer is faxed over this afternoon.
To be sure, the Buyer’s head is whirling.
It didn’t used to be this way; it’s nuts, it’s crazy, but it is what it is. Buyers are completely at the mercy of the Seller’s and the market conditions driving buyers against buyers.
Here’s a great post on Craigslist forum today about all the great reasons to own a home: