Alabama Mortgages R Us...

Closing Costs Issues

2008-08-04T08:55:00.003-05:00

In our part of the country there is a nine to twelve month inventory of "homes for sale" giving us a true "buyer's market". We're seeing "low ball" offers with buyers dictating the terms of closing costs. In the mortgage business we see Real Estate Purchase Contracts containing conflicting verbiage, ie. "seller will pay $2,000 of buyer's closing costs". No one knows what this actually means as there is no hard definition of "buyer's closing costs". It's just "closing costs" and it's all negotiable as to who pays what. Vague language in the contract brings another level of conversation between buyer, seller, Realtor and mortgage lender. Often this becomes a "blood pressure" moment that should have been eliminated early in the process.

We recommend that sellers order an appraisal before placing the home on the market. It's a $350 expense that eliminates a least half the "suprises" that occur during the entire sale process. With an appraisal, the seller knows the maximum amount he can expect from the sale of his property. For example, if the home appraises for $100,000, and the seller can live with

a net of $90,000; he can pay the Realtor's fee plus $4,000 of the total closing costs. Every seller wants to get every dollar he can from the sale, but you have to be realistic....you, the seller, are not going to net the appraised value of the home. Just doesn't happen in today's market.

Another place the "pre-listing" appraisal helps the sales process is that the appraiser will identify any "issues" with the property that must be correct prior to a sale. Most of the time they're minor wood rot problems that can be corrected with an afternoon's work with a hammer and saw. I remember one occasion when the Realtor and I put our tools in the back of the car and fixed the back steps on Saturday afternoon......the loan closed Tuesday.

Unless you have a cash buyer, don't expect to sell your home "as is" unless it is in pristine condition. Any flaw the appraiser notes in his report will have to be corrected prior to closing the loan. Just get the appraisal done first and avoid those "gotchas" that drive everyone crazy.

Good luck! If you have a mortgage question call me at 888-554-6755 or email jack@abcmortgageal.com.

How 'Bout Them Closing Costs

2008-06-11T13:02:00.000-05:00

When you apply for a residential mortgage, federal law requires your lender (or mortgage broker) to furnish a "Good Faith Estimate of Closing Costs" within three days of the application. This is not an exact number, but it should be close (within 10%) of your final costs on the "Settlement Statement" at closing. Unfortunately, we have some mortgage people who will surprise you at the closing table with a few thousand extra dollars in costs. Not only does this break several Commandments, it's illegal. They're counting on your need to close right then and accepting the extra charges. There's another Federal law that comes into play ... you must be furnished withe the final "Settlement Statement" twenty-four hours prior to closing. Insist on this.
When applying for a home loan, tell your mortgage person you want a zero/zero loan. This mean no discount points and no origination fee. This makes it easy for you to compare rates from one lender to the other. The broker will make their money on the "yield spread premium" which is paid by the lender. The lender will also require an underwriting fee, tax service fee, and flood certification; expect to pay close to $800 for these charges. The appraisal will cost around $350, and you should get a termite inspection for about $75. I'll make all my attorney friends mad and suggest you use a title company to close the loan. They'll work cheaper. Just make sure you get an "Owner's Title Policy;" this is an insurance policy to protect you against any title defects. It's rare, but it does happen, and the policy only costs $25. The recording fee is a charge by your County Clerk to record the mortgage and deed, and is based on the number of pages in the document. Some states and counties will also have documentary fees ... they are what they are, so don't worry about them. If I'm buying a piece of property, I want the seller to supply a survey showing the boundary lines.
Who pays each of these fees are negotiable between the buyer and seller.
Good Luck! If you have a mortgage question call me at 888-554-6755 or e-mail jack@abcmortgageal.com.

What's the Home Mortgage Interest Rate?

2008-04-25T12:51:00.000-05:00

Almost every day someone will call and ask, "What's the interest rate?" This is akin to calling your Ford dealer and asking, "How much is a new truck?" No one can give you an answer to either question without more information. With the mortgage question, a lender needs to know your credit score, do you have a bankruptcy, lien or judgment on your record, is it a purchase or refinance, what is the loan amount, what is the loan to value, what term do you want, is this a fixed rate loan, or adjustable rate, or interest only, or declining balance loan, how much income can you prove with tax returns or W2s, what is the source of your income, are you escrowing taxes and insurance, are you financing a single family residence, is it a detached home or condo, is it a primary residence, second home or investment property, are you left handed, are any of your children red headed and what is your age? By now your eyes have glazed over, and you may not realize the last three questions don't matter.
So, how do you find out, "What's the interest rate?" Visit your local mortgage broker and explain your needs. Before you give your social security number, ask if you can have a copy of your three file merged credit report. If they decline to give it to you, LEAVE. A reputable mortgage person will furnish you with your credit report, ask the questions above and quote you TODAY'S RATE. Now ask for a Good Faith Estimate of Closing Costs. You're only interested in the closing costs; at this point prepaid charges (interest, taxes, insurance and escrows) are not an issue. Now you can visit all the lenders your stamina can handle, and you will let them all use the same credit report. This way, your credit score will not be lowered by everyone pulling a new credit report. interest rates should not vary all that much as all mortgage people pretty much deal with the same pot of money.
Find a broker or lender who will provide a good rate, reasonable costs, and make sure you do business with someone you feel comfortable with.
If you have a mortgage question you can call me at 888-554-6755 or e-mail jack@abcmortgageal.com.