Archive for the 'Escrow' Category
Condition of the Property: What Lenders Will (and Won’t) Lend On
Posted by Paul Gonzales | Currently 1 Comment »
The New Reality In Today’s Market
With today’s focus on the value of residential real estate, one of the most critical aspects of purchasing a property is it’s physical condition. The professional appraisal required to obtain financing is a very comprehensive analysis of the property’s value, including condition. In particular, when a Buyer is looking at foreclosed or bank-owned properties (known as Real Estate Owned or REOs) the property’s physical condition will come under very close scrutiny by both the appraiser and the lender.
Certain property conditions will be considered normal wear and tear, while others indicate a need for freshening up. Still other physical aspects fall into the category of health and safety issues. It is this latter category that concerns lenders and may affect the ability to obtain financing.
Financeable - Minor Deferred Maintenance and Functional Obsolescence
Those are mouthfuls, aren’t they? Common examples of deferred maintenance can include worn carpeting, neglected landscaping or the need for fresh paint. Functional obsolescence refers to issues such as obsolete floor plans (I.e. three bedrooms and only one bathroom), outdated fixtures or old-style floor or wall heaters. While these conditions may affect the over-all value of the property they are generally acceptable to lenders and will not (in most cases) affect the ability to get a loan.
Non-Financeable - Health and Safety and Structural Issues
This is the area where some Buyers are finding it difficult or impossible to obtain financing. These conditions can be found in any property but are more likely to occur with foreclosed, bank-owned properties:
- Open walls - holes knocked into walls or other damage
- missing fixtures or cabinets
- damaged or non-existent flooring - exposed concrete or subfloor
- roof with less than 5-years of remaining life
- a non-working pool or spa
- cracked foundation or slab
- extensive water damage or mold
- inoperable, damaged or missing heating systems
- damaged electrical or plumbing system
These conditions are generally not acceptable to lenders and unless they are remedied will disqualify the property for conventional financing.
Solutions - Yes, There Are Some!
Some Sellers may be willing to fix or repair the problem or credit the Buyer an amount of money to account for it. Of course, the Buyer also has the option of curing the problem at his or her own expense. However, the condition must be taken care of and verified by a follow-up appraisal report before the lender will agree to finance the purchase and the sale can conclude. If the Seller is a bank or lender, some may be willing to cooperate with the Buyer while others are selling the property strictly “As-Is”. Another option is to seek non-conventional financing such as “hard-money” or perhaps a construction or rehab loan. While an option, these types of financing are often difficult and/or expensive to obtain and ultimately may not be a viable alternative to the average home buyer or investor.
This is an area where a little knowledge will go a long way for the typical real estate Buyer. Being aware of how the property’s condition can affect your financing at the beginning, rather than several weeks into your escrow, can save you more than a few gray hairs!
contact Paul at (800) 775-7334 or paulforloans@aol.com
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Related Posts: Buyers, CW Mortgage, Education, Escrow, Financial news, Foreclosures, Home Loans, Interest Rates, Mortgage News, Short Sales, Uncategorized
Your Loan is Approved! Now Avoid These Four Pitfalls That Can Really Ruin Your Day
Posted by Paul Gonzales | Leave A Comment »
Your loan application has been officially approved by your lender and you are in escrow on your dream home. Just days before you expect to close your purchase and begin moving, your lender tells you that you no longer qualify for your financing. What happened?
During the typical thirty to forty-five day escrow, there is ample opportunity for the prospective home buyer to unwittingly sabotage his or her deal. These innocent mistakes can be grouped into four categories:
Credit Issues
Your initial credit report was good enough to qualify you, and then you went out and:
- forgot to make that dinky $18 payment on your J.C. Pennys account
- purchased a plasma screen TV with no payments due for a whole year (and now you have a new credit account with a subprime finance company)
- opened a new credit card or max’d out the balance on an existing card
- finally paid off that old traffic ticket that went to collection two years ago
Any one of these mistakes can have a dramatic effect on your credit score and disqualify you.
Employment
- you were a company employee, and now you are self-employed
- you still work for the same company but just switched from a salaried position to one that compensates you by commission or bonuses
- you have just made a significant career change, say from being an auto mechanic to a real estate agent
Lenders usually look for a stable employment and income picture for at least the last two years. Any significant change after your application is approved can start that “clock” over again
Income and Expenses
Your loan approval included a comparison of your present monthly consumer bills, together with the loan you requested, as a percentage of your monthly gross income, however:
- you or a spouse decided to switch from full-time to part-time
- you just made a major credit purchase such as a new car
- you have actually made no changes whatsoever, but you were qualified for a specific maximum loan amount to purchase a house. Now you want to buy a house or a condo that includes a $325 monthly homeowners association fee, or found a home in a neighborhood that has special tax assessments such as Mello-Roos.
Any significant decrease in income, or increase in expenses tied to consumer debts or the home purchase itself, can reduce the amount of financing you qualify for.
Financial Assets
Most loans require that the home-buyer have a minimum amount of financial assets such as money in the bank, investments or an IRA or retirement plan. Once approved, however, you:
- made a sizable cash purchase, such as furniture for the new home
- repaid a loan to Aunt Bethany
- took out a loan against your retirement plan
Your qualifying assets could fall below the minimum amount required to maintain your approval.
These mistakes are quite common and easy to make, because they involve normal activities and routine decisions that we make everyday. The key to avoiding any of these four major pitfalls is recognizing that your loan approval is like a photograph. It is literally a snapshot of you and your financial condition. Lenders will rely upon that snapshot right up until the time they wire the money to escrow, the title company records your new mortgage and your agent hands you the keys. There is nothing routine about that. So smile, look your best and stay “YOU” until your agent hands you those keys!
If you have questions or plan to purchase a home or investment property soon, call me at (760) 746-7388 or email me at paulforloans@aol.com
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Related Posts: CW Mortgage, Escrow, Home Loans, Mortgage News
Who’s fault is it anyway?
Posted by Mary Reynolds | Currently 1 Comment »
With the Real Estate Mortgage Crisis, many homes in San Diego have gone into short sales. Short Sale does not mean that the house is being sold for under market value. This has confused many buyers who think they are getting a “deal” looking for short sales and foreclosures.
I am in the process of finishing an escrow on a short sale. It has been an emotional roller coaster for all involved; the sellers, the buyers and the agents. We have been working on the sale for 3 months. The sellers are not only losing their home, they are having to negotiate with their mortgage company to accept less than they owe on the home. The buyers have agreed to buy the home “as is” which as we found out includes a bad roof, a bad heater and much termite work. The agents have worked many hours keeping the transaction alive and now wonder if the bank will allow them any commission at all. In a short sale, no one wins!
Who’s fault is this m
ortgage crisis? I think we are all to blame. In the height of the home buying frenzy, everyone in the transaction became greedy. The mortgage companies looking at adjustable rate mortgages, luring young buyers in with low interest rates but high early payment penalties. Agents wanting to make the sale. Sellers thinking that they should get 22% increases on their homes and buyers who wanted to get a “deal”. What we all forgot is that we were talking about peoples’ lives. Instead of the process being about finding a perfect home, it became a financial transaction. Now, families are finding that they are losing their homes because the financial transaction fell apart.
What is the answer? Well, if I knew that life would be great. Hopefully, the lesson we learned is that in the real estate process it is much more than financial, even for investors, and that peoples’ lives are at stake.
In my Real Estate business I try to make the transaction as easy for possible for my clients. It can be hard it some situations, but I pride myself on keeping the buyers’ or sellers’ interests at heart. Let me know if I can help you. 858 361-9726
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Related Posts: Area Information, Buyers, Escrow, Mortgage News, Real Estate News, San Diego, Sellers, Short Sales
