Archive for July, 2009
Hidden Fees – How to Avoid Surprise Loan Charges
One of the very most important decisions first time buyers need to make prior to buying a home is financing. Because the cost of borrowing can vary quite a bit from one lender to another buyers should start shopping for a lender early in the buying process.
You should interview several lenders before deciding. Insist that the lenders you interview provide you with a detailed Good Faith Estimate (GFE) that itemizes all lender fees and charges and shows the Annual Percentage Rate (APR). The APR is the interest calculated after all loan related costs are taken into account.
In some cases the interest rate one lender quotes might appear to be low but after their fees are added on the APR may be considerably higher than another lender who has more reasonable charges.
Not only does the dollar amount of fees charged vary from lender to lender so do the types of charges they may ask you to pay. For example, one lender may charge you a 1% loan origination fee on an FHA loan and another lender may not charge a loan origination fee at all. In fact, I recently reviewed the charges one local mortgage broker was charging his clients and was shocked to see that in addition to a loan origination fee he was charging his clients a substantial “loan application fee”, an “admin fee”, an underwriting fee and a number of other extras that increased the buyers total cost to borrow by a tremendous amount. In this case the buyer/borrower had no idea that loan fees varied from lender to lender and assumed that whichever lender quoted lowest rate was the best choice.
The amounts we are talking about are not small figures either. These type of charges can be many thousands of dollars. Over $5,000 difference in lender charges between two lenders GFE’s on one recent quote I reviewed and that was on a loan of less than $150,000!
With that in mind here are a few tips.
Getting prepared early to shop for a loan;
- Check your credit report for accuracy https://www.annualcreditreport.com/cra/index.jsp
- Gather your financial records ( 2 years tax returns, W2’s, Pay Stubs, Bank Statements, IRA’s, 401k’s, Investment accounts and other monthly bills or income)
- Avoid opening or applying for new lines of credit.
- Start saving cash.
- Consider postponing career or job changes.
Shopping for a loan;
- Consult your Realtor or other trusted advisor for a list of reputable lenders that include Banks and Mortgage Brokers.
- Schedule interviews with at least 3 lenders. (include both Banks and Mortgage Brokers)
- Print out this HUD lender GFE comparison work sheet and take with you to lender interviews.
- Insist on a printed detailed GFE (Should be based on the same purchase and loan amounts on all lenders estimates)
- Ask the lender to explain the charges and who they benefit.
- Keep GFE’s for later reference.
Don’t even consider using a lender if;
- If lender refuses or attempts to avoid providing a detailed GFE
- If lender encourages you to provide false or misleading information
- If lender guarantees that the home you purchase will be worth more than purchase price in the future.
- If lender attempts to persuade you to borrow more money than you can reasonably afford.
- If lender insists that you use a particular Realtor or Broker.
Be honest and forthcoming with your financial and employment information when you are interviewing the lenders. Let them know you are shopping for a loan and don’t want credit history checked over and over. If you know your credit score let them know. If not, only have it ran once during the loan shopping process. A good lender should be able to provide you with an estimate based on your verbal information.
Keep in mind that the GFE’s you get during lender interview stage are for the purpose of selecting a lender to work with when you find your home. A new GFE that is specific to your purchase offer financing should be provided to you when you actually apply for the loan. The important thing is that both GFE’s have similar charges and fees. Keep your GFE and bring it with you to your signing at close of escrow to compare to your closing statement.
The advantages of interviewing, selecting and getting pre-approved by a lender early in the home buying process are many. Not only will you have an idea of what price home you can afford including total monthly payment amounts, loan costs, necessary down payment and required source of down payment funds but you will also be in a strong position to act quickly when you find the home you want to buy. In this market that can be very important.
How To: A Short Sale Guide
Short Sales, The Art of Selling
Short Sales are on the rise in our real estate market for a variety of reasons. Many home owners purchased homes with adjustable rate mortgages and with the downturn in the economy have been unable to continue making payments and are unable to work out loan modifications with the mortgage holder. In addition to rising house payments many home owners have been impacted by unplanned for events such as job loss or transfer, divorce or illness resulting in the inability of the borrower to continue making house payments.
Not only is the prospect of losing a home financially troubling it can be an emotionally difficult period as well. No one purchases a home with the thought that a few years later they will lose their home and investment. When events transpire that cause the homeowner to be unable to continue to make payments on their mortgage it is not uncommon for them to feel some sense of remorse or failure. Because this event is personal in nature some find it difficult to discuss the situation with others and are reluctant to seek assistance. Because the short sale process can be very complicated some home owners just walk away from the home or simply wait for the foreclosure process to occur. More pro-active homeowners may decide that a short sale is the right decision for their situation but may be unsure on how to proceed. If you find yourself in this situation there are a couple things to keep in mind.
- Your neighbors need not know that your home for sale is a short sale. The home is marketed much the same as any other home for sale and all references to it being a short sale are in the private remarks section of the listing and only shared with real estate professionals and buyers interested in purchasing your home.
- There is no cost to the home owner to use the professional services of a Realtor to assist with the short sale process.
- A successful short sale will avoid the neighborhood trauma of foreclosure and blight and be a much healthier solution for your neighbors quality of life and property values.
- Not all Realtors have the experience or knowledge to successfully assist you through the short sale process.
- Your Realtor should be able to assist you with all the forms and documents required for a short sale, handle bank negotiations, understand how to complete an accurate BPO showing true market value and develop a pricing strategy that results not just in generating a buyer purchase offer but in a purchase offer that is acceptable to the mortgage holder (lender).
If you are ready to get started on the short sale process you should be prepared to spend some time putting together the short sale package (we can e-mail you all forms). Here is the basic list from start to finish.
1. Authorization to Release Information to Agent. This will allow your Agent to talk with the lender on your behalf.
2. Handwritten hardship letter showing compelling need to sell.
3. Short Sale Listing Agreement.
4. BPO of comparable sales from Listing Agent.
5. Last 2 years W2 Forms all borrowers.
6. Last two years tax returns all borrowers.
7. Last two months bank statements all borrowers.
8. Last two pay stubs all borrowers.
9. Borrowers financial statement. Be sure to accurately list all expenses, as unaccounted discretionary income can be an issue with lender.
10.Detailed estimate for any repairs needed.
11.Fully ratified Purchase Agreement.
11.HUD 1 statement or NET Sheet showing the lender what their NET figure will be and any other expenses owed on the property.
Feel free to contact us for additional information or to get started on the process of selling your home. Our short sale team has a proven track record of success and we look forward to being of service.
PREMIER SERVICE® is the focus of Real Estate Professionals/GMAC. We are located in Redding, CA (at the North end of the Sacramento River Valley) in the midst of river, lake, ranch and mountain terrain.
Our Customer Satisfaction Rating, based on an independent survey, exceeds 97%. This is reflected in our 2008 "QUIE" Award recognizing the TOP 10 REAL ESTATE COMPANIES in NORTH AMERICA! REP/GMAC in #2.
