Tag Archives: lenders

Appraisals Explained

Appraisals are one of the most confusing aspects of buying or selling real estate. When a buyer and seller agree on a sales price, it can be frustrating to hear that the appraisal came in with a value too low. It’s not enough for the buyer and seller to agree to the price, the appraisal is the lender’s way to ensure they are not loaning money over the actual market value of the property.

The appraised value is reached by a licensed professional who looks at the real estate market in which the target property is located. They start with the target property and then look for recent sales in the area of comparable properties. These comparable properties will be located within a short distance of the target home. They should also be of comparable size and often fall within the same housing development.

Once these homes are identified, the appraiser will adjust for the specific differences. For instance, does the target home have an upgraded kitchen or swimming pool? They add or subtract value based on such things as location, view, lot size, upgrades, additions, condition, and many other factors. They can then arrive at a valuation for the target home.

Once the appraisal has been completed, the lender is notified of the value. At this point, the loan amount is either confirmed or declined. If the appraisal comes in too low, the buyer and seller can choose to make up the difference in the sales price, lower the sales price, or cancel the transaction.

An experienced real estate broker will help you manage the appraisal process. By learning about recent sales in your area ahead of time, you can price your home appropriately up front; then the appraisal should come back as expected.

New Changes Coming to Buying and Selling Process – What You Need to Know

The Consumer Financial Protection Bureau (CFPB) is a Congress-established agency with regulatory control over federal consumer protection laws. Their goal is to make rules in our various financial markets more effective and consistent to protect consumers. Recently the CFPB created some new rules aimed at helping buyers and sellers have a better understanding of the borrowing process. Below are some of the changes you can expect to see beginning August 1, 2015.

Buyers buying their home with a mortgage will receive a standardized Loan Estimate document from the lender which outlines variables such as the type of loan, payment schedule, interest rate for the mortgage, information about prepayment penalties and other terms of the transaction (such as balloon payments or mortgage insurance), costs to close the loan, and State Law provisions. This document is provided to the loan applicant no more than three days after the buyer submits a loan application.

In addition, Buyers will receive a Closing Disclosure no less than three days before the loan is scheduled to close which reiterates the above variables.

The mandatory three day review period for both of these documents was put in place to allow borrowers the time they need to read through them and have a thorough understanding of exactly what they are committing to. Furthermore, these documents include instructions to the borrower to compare the Loan Estimate to the Closing Disclosure verifying the two documents have the consistent information.

The biggest impact of these changes is that the lender will need more time to process your loan and turn documents over to escrow. At a minimum, it is likely buyers will need 3 more days, but more likely it will be 5-10 days.

The forms themselves have been streamlined and are easier to understand. The interest rate, monthly payments, and the total closing costs are clearly indicated on the first page of the documents for easy reference and to make it easier to compare loan products with different lenders.

Both the Loan Estimate and Closing Disclosure are used for closed-end mortgages, meaning they are not used for home equity lines of credit, reverse mortgages, or for any loan not attached to land. Furthermore, these rules do not apply to creditors who produce fewer than five loans per year.

These new policies will make the process easier and more transparent to borrowers. If you are buying or selling a home this summer and expect the contract for purchase and sale to come in around the end of July, remember that these policies may impact your transaction as lenders and closers navigate through the new documents and timelines. I have attended several workshops on the changes and would be happy to answer any questions you may have. Please give me a call: (206) 790-0081 or send an email to :jamie@jamieflaxman.com.

Sources:

http://www.consumerfinance.gov/

http://files.consumerfinance.gov/f/201503_cfpb_tila-respa-integrated-disclosure-guide-to-the-loan-estimate-and-closing.pdf

http://files.consumerfinance.gov/f/201506_cfpb_factsheet_will-the-new-mortgage-disclosures-delay-my-closing.pdf

 

Does it Matter Which Lender I Use?

Yes, and it matters more than you think. Buying a home will likely be the largest financial transaction of your life. Do you want to trust a random person on a website or at an 800 number, or someone you can call anytime (including evenings/weekends on their cell phone) or even meet with in person?

I am representing 2 buyers on transactions that close in the next few weeks. One is using a local mortgage broker and the other a large national lender. I also just had a transaction close with one of the big banks.

Here’s the main difference I have experienced with these different lenders – how well they communicate what’s going on with the loan. The local lender sends a weekly update on the loan; she also calls or emails relevant information as they come up. I was notified immediately when the appraisal came in (whereas the national lender never told us it was in or approved, we had to call repeatedly to learn that). With the national lender and the big bank, I had to reach out to both of them if I wanted any information. And it was hit and miss if a phone call or email was returned.

The most important question, of course, has to do with whether the lender can close the loan on time. While the big bank did close on time, it wasn’t because of their efforts. The bank wanted to extend closing; however, the buyer was adamant about the loan closing on time and between her and the escrow officer, they made it happen.

While I’m fairly confident the national lender will close on time, they are saying they wish they had more time (they already have 35 days). Local lenders are closing loans in as short a period as 10 days; 35 days should not be necessary.

You know the phrase “buy local,” let’s expand that to “mortgage local.” With the connection you make with the local mortgage officer (and with national lenders, there may be many different people you work with), you are more likely to have a smooth transaction. Plus, our local economy benefits when you mortgage local.

For a list of recommended lenders, contact me at jamie@jamieflaxman.com or 206-790-0081.