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Do They Really Like Me

GETTING A LOAN

Once you ve figured out what amount of loan you re able to comfortably afford, it s time to talk to a mortgage lender.

Check to see if the home you re considering purchasing is in a special bond assessment district. Some homes in California can be assessed yearly bond fees  for up to 30 years or more  for things like school improvements, levee protection, new roads, street lights and so on.

Home Buyer Hint

Loan Pre-Qualification
Getting pre-qualified for a loan is a pretty casual once-over of your financial situation. You provide a mortgage broker or lender with financial information, and they give you a non-binding letter indicating how much you could possibly borrow.

The lender does not verify any of the information you give them. This gives you a good  jumping off point in deciding the price range you can afford.

Loan Pre-Approval
Getting pre-approved for a loan is a much more rigorous process. A lender will verify all of the information you ve provided including income, debts, employment and cash on hand. The pre-approval process signifies to a seller that you are a very serious buyer. The lender provides you with certain guarantees that they are ready, willing and able to fund a loan.

Check with your real estate agent to determine if you should get pre-qualified or pre-approved for your loan prior to house shopping.

Q-A Series – GENERAL FINANCING QUESTIONS:THE BASICS

Q. WHAT IS A MORTGAGE

Generally speaking, a mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.

Q. WHAT IS A LOAN TO VALUE (LTV) HOW DOES IT DETERMINE THE SIZE OF MY LOAN

The loan to value ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. Each loan has a specific LTV limit. For example: With a 95% LTV loan on a home priced at $50,000, you could borrow up to $47,500 (95% of $50,000), and would have to pay,$2,500 as a down payment.

The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV the less cash homebuyers are required to pay out of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require mortgage insurance policy.

Q. WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH

Fixed Rate Mortgages: Payments remain the same for the the life of the loan

Types
– 15-year
– 30-year

Advantages
– Predictable
– Housing cost remains unaffected by interest rate changes and inflation.

Adjustable Rate Mortgages (ARMS): Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limits

Types
– Balloon Mortgage- Offers very low rates for an Initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is clue or refinanced (though not automatically)
– Two-Step Mortgage- Interest rate adjusts only once and remains the same for the life of the loan
– ARMS linked to a specific index or margin

Advantages
– Generally offer lower initial interest rates
– Monthly payments can be lower
– May allow borrower to qualify for a larger loan amount

Q. WHEN DO ARMS MAKE SENSE

An ARM may make sense If you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren’t concerned about potential increases in interest rates.

Q. WHAT ARE THE ADVANTAGES OF 15- AND 30-YEAR LOAN TERMS

30-Year:
– In the first 23 years of the loan, more interest is paid off than principal, meaning larger tax deductions.
– As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.

15-year:
– Loan is usually made at a lower interest rate.
– Equity is built faster because early payments pay more principal.

Q. CAN I PAY OFF MY LOAN AHEAD OF SCHEDULE

Yes. By sending in extra money each month or making an extra payment at the end of the year, you can accelerate the process of paying off the loan. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal. Most lenders allow loan prepayment, though you may have to pay a prepayment penalty to do so. Ask your lender for details.

Q. ARE THERE SPECIAL MORTGAGES FOR FIRST-TIME HOMEBUYERS

Yes. Lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past. Lenders may now be able to help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or have experienced income irregularities.

Q. HOW LARGE OF A DOWN PAYMENT DO I NEED

There are mortgage options now available that only require a down payment of 5% or less of the purchase price. But the larger the down payment, the less you have to borrow, and the more equity you’ll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that you’ll also need money for closing costs, moving expenses, and – possibly -repairs and decorating.

Q. WHAT IS INCLUDED IN A MONTHLY MORTGAGE PAYMENT

The monthly mortgage payment mainly pays off principal and interest. But most lenders also include local real estate taxes, homeowner’s insurance, and mortgage insurance (if applicable).

Q. WHAT FACTORS AFFECT MORTGAGE PAYMENTS

The amount of the down payment, the size of the mortgage loan, the interest rate, the length of the repayment term and payment schedule will all affect the size of your mortgage payment.

Q. HOW DOES THE INTEREST RATE FACTOR IN SECURING A MORTGAGE LOAN

A lower interest rate allows you to borrow more money than a high rate with the some monthly payment. Interest rates can fluctuate as you shop for a loan, so ask-lenders if they offer a rate “lock-in”which guarantees a specific interest rate for a certain period of time. Remember that a lender must disclose the Annual Percentage Rate (APR) of a loan to you. The APR shows the cost of a mortgage loan by expressing it in terms of a yearly interest rate. It is generally higher than the interest rate because it also includes the cost of points, mortgage insurance, and other fees included in the loan.

Q. WHAT HAPPENS IF INTEREST RATES DECREASE AND I HAVE A FIXED RATE LOAN

If interest rates drop significantly, you may want to investigate refinancing. Most experts agree that if you plan to be in your house for at least 18 months and you can get a rate 2% less than your current one, refinancing is smart. Refinancing may, however, involve paying many of the same fees paid at the original closing, plus origination and application fees.

Q. WHAT ARE DISCOUNT POINTS

Discount points allow you to lower your interest rate. They are essentially prepaid interest, With each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point. When shopping for loans, ask lenders for an interest rate with 0 points and then see how much the rate decreases With each point paid. Discount points are smart if you plan to stay in a home for some time since they can lower the monthly loan payment. Points are tax deductible when you purchase a home and you may be able to negotiate for the seller to pay for some of them.

Q. WHAT IS AN ESCROW ACCOUNT DO I NEED ONE

Established by your lender, an escrow account is a place to set aside a portion of your monthly mortgage payment to cover annual charges for homeowner’s insurance, mortgage insurance (if applicable), and property taxes. Escrow accounts are a good idea because they assure money will always be available for these payments. If you use an escrow account to pay property tax or homeowner’s insurance, make sure you are not penalized for late payments since it is the lender’s responsibility to make those payments.

KEEPIN UP

So, you are in your home-sweet-home. Ownership has many rewards, so it is important to maintain that ownership!

Here are some tips and advice on how to keep your head above water:

  • Review the budget you set up for yourself. Are you staying within those limits
  • Check with a tax advisor to make sure you re getting the maximum write-off on your loan interest. This can mean hundreds of dollars a month
  • Watch how much you spend when you first move into your new home! This is a dangerous time to run up big credit card bills buying all of that furniture you want
  • Be sure to put a little extra away every month to cover unexpected expenses like a new hot water heater or dishwasher
  • If interest rates fall more than a half point in the months after you buy, consider refinancing your mortgage. This could save you a great deal of money over the life of the loan

Its a Jungle Out There!

Because there is so much money and so many different professionals are involved in the real estate purchasing process, there is always room for professional incompetence or outright fraud. Here are some things to look out for in the team that assists you in your purchase.

Real Estate Agents: This is the key person on your team! Make sure he or she is competent! We cannot stress this point more! Do your homework. All real estate agents must be licensed by the California Department of Real Estate. Visit the Department’s web site (www.dre.ca.gov) to determine the license status of an agent.

Also, talk to others who have used the agent. This is the one person you really need to trust in this process.

There are some unscrupulous lenders out there who only want their commission or points from a loan and couldn’t care less if you are getting the best loan product. There are some lending tactics that are outright fraud.

Beware of the following illegal lending practices and predatory lending tactics:
Flipping the frequent making of new loans to refinance existing loans
Packing selling of additional products without the borrower’s informed consent
Charging of excessive fees
Bait and Switch offering of very attractive terms which are not available and then pressuring the borrower into more expensive terms and hidden fees
Door-to-Door High Pressure Sales typically trying to sell home improvement contracts funded by home equity loans usually with less than desirable terms
Trust Selling salespersons who try to gain your trust based on some common background and then sell you something that might not be in your best interest
No Job! No Problem! encouraging home equity loans to those with no job or bad credit with the knowledge that the borrower will probably lose their home because they can’t make the payments
Pressuring for Immediate Sale insisting that a loan contract be signed immediately before the good deal is gone.

Prior to using the services of a mortgage broker or lender, make sure they are properly licensed by checking the California Department of Corporations web site (www.corp.ca.gov) and/or the California Department of Real Estate’s web site (www.dre.ca.gov).

Home Inspectors: The competency of this person is key in making sure you’re purchasing a structurally sound, safe home. A home inspector who misses details can end up costing you tens of thousands of dollars in the long run. Or worse, missed details could cause you or a family member harm because of bad wiring, cracked glass and other hazards.

Escrow Officer: The escrow officer is the referee in the home buying game. Just as with your favorite sport, an incompetent  or cheating  referee is a huge headache. If bad calls are made on the part of the escrow officer, it can cost you large amounts of money or kill the whole deal.

Tax Advisor: A tax advisor can be a great asset to you financially. Finding out that certain expenses are not tax deductible after-the-fact can put you in a real bind with the IRS. Ask your real estate agent, family members, friends or others you trust if they can recommend the services of a reputable tax advisor in your area.

7 Tips for Staging Your Home

By: G. M. Filisko

Make your home warm and inviting to boost your home’s value and speed up the sale process.

The first step to getting buyers to make an offer on your home is to impress them with its appearance so they begin to envision themselves living there. Here are seven tips for making your home look bigger, brighter, and more desirable.

1. Start with a clean slate
Before you can worry about where to place furniture and which wall hanging should go where, each room in your home must be spotless. Do a thorough cleaning right down to the nitpicky details like wiping down light switch covers. Deep clean and deodorize carpets and window coverings.

2. Stow away your clutter
It’s harder for buyers to picture themselves in your home when they’re looking at your family photos, collectibles, and knickknacks. Pack up all your personal decorations. However, don’t make spaces like mantles and coffee and end tables barren. Leave three items of varying heights on each surface, suggests Barb Schwarz of www.StagedHomes.com (http://www.StagedHomes.com) in Concord, Pa. For example, place a lamp, a small plant, and a book on an end table.

3. Scale back on your furniture
When a room is packed with furniture, it looks smaller, which will make buyers think your home is less valuable than it is. Make sure buyers appreciate the size of each room by removing one or two pieces of furniture. If you have an eat-in dining area, using a small table and chair set makes the area seem bigger.

4. Rethink your furniture placement
Highlight the flow of your rooms by arranging the furniture to guide buyers from one room to another. In each room, create a focal point on the farthest wall from the doorway and arrange the other pieces of furniture in a triangle around the focal point, advises Schwarz. In the bedroom, the bed should be the focal point. In the living room, it may be the fireplace, and your couch and sofa can form the triangle in front of it.

5. Add color to brighten your rooms
Brush on a fresh coat of warm, neutral-color paint in each room. Ask your real estate agent for help choosing the right shade. Then accessorize. Adding a vibrant afghan, throw, or accent pillows for the couch will jazz up a muted living room, as will a healthy plant or a bright vase on your mantle. High-wattage bulbs in your light fixtures will also brighten up rooms and basements.

6. Set the scene
Lay logs in the fireplace, and set your dining room table with dishes and a centerpiece of fresh fruit or flowers. Create other vignettes throughout the home-such as a chess game in progress-to help buyers envision living there. Replace heavy curtains with sheer ones that let in more light.
Make your bathrooms feel luxurious by adding a new shower curtain, towels, and fancy guest soaps (after you put all your personal toiletry items are out of sight). Judiciously add subtle potpourri, scented candles, or boil water with a bit of vanilla mixed in. If you have pets, clean bedding frequently and spray an odor remover before each showing.

7. Make the entrance grand
Mow your lawn and trim your hedges, and turn on the sprinklers for 30 minutes before showings to make your lawn sparkle. If flowers or plants don’t surround your home’s entrance, add a pot of bright flowers. Top it all off by buying a new doormat and adding a seasonal wreath to your front door.

More from HouseLogic
Spring cleaning guide (http://www.houselogic.com/articles/spring-cleaning-guide/)

Green cleaning products for the bathroom (http://www.houselogic.com/articles/green-cleaning-products-for-the-bathroom/)

Green cleaning products for the kitchen (http://www.houselogic.com/articles/green-cleaning-products-for-the-bathroom/)

Other web resources
How to make a small room look larger (http://www.lowes.com/cd_Ten+Ways+to+Make+a+Small+Room+Look+Larger_506205068_)

How to arrange bedrooms (http://www.dummies.com/how-to/content/arranging-your-bedroom-furniture.html)

G.M. Filisko is an attorney and award-winning writer who occasionally rearranges her furniture to find the best placement-and keep her dog on his toes. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

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