FINDING THE RIGHT HOME
The Only Source You Need
As your owner/broker of NorWisRealty.com LLC an independent real estate company, I can provide detailed information on almost any property currently listed for sale – whether it’s listed by a NorWisRealty.com LLC or another real estate company. If you see a “For Sale” sign or an ad in the newspaper that interests you, we have access to all the data. So call Scott Freimuth, your local NorWisRealty.com LLC real estate specialist for all the details:
- The listing price
- The description
- The special features
- The financing terms
And we will arrange an appointment to show you the property at your convenience. As your sales associate we will already be familiar with your housing and financial needs, so why go through the process again with someone else? We can save you time and take the hassle out of house hunting, and it won’t cost you a penny more!
Home Purchase Negotiation
Here are ten important questions you should ask me and why you should ask them.
- How long has the property been on the market? Why: The length of time a property has been on the market may indicate the seller’s willingness to negotiate.
- Have there been any price reductions during the listing period? Why: The amount of any price reduction, as it relates to the overall purchase price, may indicate the seller’s desire to attract an offer.
- Have there been any other offers on the property? Why: It will be helpful to know what offers may have been turned down and for what reason.
- What is the motivation of the seller? Why: Motivation is a key element in any negotiation. As an example, if the seller has already purchased a new property, your ability to close quickly may be an attractive element of the negotiations.
- What personal items are included in the sale? Why: Anything the seller is willing to leave behind that you won’t need to buy when you move in has real value. Consider those items in your offer.
- What is the price range of sold properties in the area? Why: This information is important since it will indicate the top and bottom of that specific market.
- What is the average time on market for properties in this area? Why: Short market times may indicate a sellers’ market. If this is the case, you may face competition from other buyers.
- What is the list to sale price ratio in the area? Why: This information will indicate sellers’ past willingness to negotiate and by how much.
- What is the average sales price per square foot of recent solds? Why: This approach to establish value works best in a P.U.D. and/or where there are similar homes, lot sizes and improvements.
- What other known factors about the property or neighborhood could affect value? Why: Review the Seller’s Disclosure Statement very carefully with me.
Final Recommendation If you will be financing the property, get preapproved for a mortgage prior to making your offer. This will show the seller your commitment and ability to perform. Preapproval can be extremely important in a sellers’ market.
HOME FINANCING CHOICES
In today’s fast-paced real estate environment, homebuyers need every possible advantage. NorWisRealty.com has made home buying simpler by helping buyers get “preapproved,” and not merely “prequalified.” What is the difference? Preapproval vs. Prequalification What could be more comforting than the peace of mind that goes with knowing your mortgage is fully approved? You will have a greatly improved negotiating position when you are preapproved for a mortgage. Sellers are more apt to negotiate with someone who already has a mortgage approval in hand. The preapproval letter lets the seller know they are working with a serious buyer. A preapproved buyer can also close on property more quickly – another major consideration for a motivated seller. Obtaining a preapproved mortgage is essential in a “sellers’ market” or where supply is limited. Preapproval uses basic information as well as electronic credit reporting. It is a true mortgage commitment. Which means a commitment to financing your home and an indication of the total mortgage amount available to you. Cendant Mortgage, as well as other mortgage lenders, can help you through the preapproval process. In most cases, there is no charge for this service. Ask me for more information. Prequalification, on the other hand is not a full mortgage approval, but an estimate of what you can afford. When you prequalify for a mortgage, the lender collects basic information regarding your income, monthly debts, credit history and assets, and then uses this information to calculate an estimated mortgage amount. Of the over 50 different mortgage types available, the two largest categories are fixed and adjustable rate mortgages, each with advantages to consider.
FIXED RATE MORTGAGE
The fixed rate mortgage is a traditional method of financing a home. The interest rate stays the same for the entire term of the loan – usually 15 or 30 years – so the interest and principal portions of your monthly payment remain the same. Your payments are stable and predictable, but initial interest rates tend to be higher on a fixed rate mortgage than on adjustable rate loans. Many fixed rate mortgages cannot be assumed by a subsequent buyer. Adjustable Rate Mortgage (ARM) The interest on an adjustable rate mortgage is linked to a financial index, such as a treasury security, so your monthly payments can vary over the life of the loan – usually 25 to 30 years. Most adjustable rate mortgages have a lifetime cap on the interest rate increase to protect the borrower. The lower initial payments are ARMs make it easier for buyers to qualify. Some ARMs may be converted to fixed rate mortgages at specified times, usually within the first five years. Documents Needed to Apply for a Mortgage When you apply for a mortgage, you will need to furnish information regarding your income, expenses and obligations. It will save time if you have the following items available:
- Two most recent pay stubs
- W-2s for the last two years
- Federal tax returns for the last two years
- Last Two months’ bank statements
- Long-term debt information (credit cards, child support, auto loans, installment debt, etc.)
Repairing Past Credit Problems Have you had situations in the past that have put blemishes on your credit? There are many reasons why credit problems occur. Some explanations are:
- You were a co-signer on a loan that wasn’t paid on time
- You allowed someone else to use your credit cards
- You may have thought your spouse paid the bill
- You thought your insurance company was going to handle the payment
- You are divorced buy your former spouse had a credit problem
Some lenders will work with you to find a credit solution. They have special programs and financing options that allow you to get a mortgage even with minor credit blemishes. However, it is in your best interest to keep your credit report in good standing. Here are some helpful hints for your credit report:
- Never go over 90 days past due on any account
- Keep your credit card debt below 50% of your monthly obligations
- If paying bills after the due date, always pay within the grace period
Answers to Some Frequently Asked Financial Questions
Q. What is the difference between “Prequalified” and “Preapproved?”
A. A Prequalification consists of a discussion between a homebuyer and a loan officer. The loan officer collects basic information regarding the customer’s income, monthly debts, credit history and assets, and then uses this information to calculate an estimated mortgage amount for the homebuyer. The prequalification is not a full mortgage approval, but estimates what a homebuyer can afford. A preapproval, on the other hand, is a comprehensive approach using basic information as well as electronic credit reporting. Preapprovals, in most cases, are true mortgage commitments. The lender commits to financing your home and indicates the total mortgage amount available to you.
Q. What types of mortgage programs are offered?
A. Currently, there are over 50 different mortgage products available, including:
- 15, 20 & 30 year fixed rate loans
- adjustable-rate loans
- new construction financing
- VA & FHA loans
- 5 & 7 year balloon loans
- and many more
Q. How long does it take to process a mortgage application?
A. Usually about 45 to 60 days, although it can take a few as seven days and as long as 90 days for some transactions. The actual time depends on how quickly the lender can get an appraisal of the property, a credit report and verification of employment and bank accounts.
Q. What documents will I have to provide?
A. Be prepared to provide verification of income (including a pay stub and recent tax returns), bank account numbers and details on your long-term debt (credit cards, auto loans, child support, etc.) If you’re self-employed you may also be required to provide financial statements for your business. In recent years, lenders have been required to obtain more specific information from borrowers in order to package and sell loans to investors. If you were lending someone such a large amount of money, you’d want detailed financial information.
Q. Could anything delay approval of my loan?
A. If you provide the lender with complete, accurate information, everything should go smoothly. You may face a delay if the lender discovers credit problems – a history of late payments or non-payment of debts, or a tax lien. You may then be required to submit additional explanations or clarifications. You should also be sure to notify your lender if your personal or financial status changes between the time you submit an application and the time it’s funded. If you change jobs, get an increase (or decrease) in salary, incur additional debt or change your marital status, let the lender know promptly. You may be delayed if the home you selected fails to appraise for the agreed purchase price.
Q. What’s included in my house payment?
A. Principal and interest on your loan. Depending on the terms of your loan, the payment also may include hazard (homeowners) insurance, mortgage insurance and property taxes.
Q. Can I pay those other things separately?
A. Not if it’s an FHA or VA- insured loan. With most other loans, you can pay your own taxes and insurance if you borrowed no more than 80 percent of the purchase price or appraised value of your home. Check with your lender to be sure.
Q. What do the closing costs include?
A. Closing costs cover processing and administration of your loan. In addition to a loan fee, you’ll usually be asked to prepay interest charges, to cover the partial month in which you close, and impounds for property taxes, hazard insurance and mortgage insurance.
Q. When do my mortgage payments start?
A. Usually about 30 days after closing. The actual date of your first payment will be included in your closing documents.
If you have any more questions? Please Call Us.
Understanding the Language
|Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).||Adjustment Period: The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one year ARM, which means that the interest rate can change once a year.|
|Amortization: Repayment of a loan in installments of principal and interest, rather than interest-only payments.||Annual Percentage Rate (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the loan.|
|Appraisal: An estimate of the property’s value.||Assumption of Mortgage: A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.|
|Balloon Payment: A lump sum principal payment due at the end of some mortgages or other long-term loans.||Binder: Sometimes known as an offer to purchase or an earnest money receipt. A Binder is the acknowledgment of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.|
|Buydown: Permanent – prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary – prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.||Cap: The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.|
|Cash Reserves: The amount of the buyer’s liquid cash remaining after making the down payment and paying all closing costs.||CC&Rs: Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.|
|Certificate of Commitment: The lender’s approval of a VA loan, which is usually good for up to six months.||Certificate of Reasonable Value (CRV): A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.|
|Chattel: Personal property.||Closing Statement: The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance and mortgage insurance.|
|Commitment Period: The period during which a loan approval is valid.||Condominium: A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surface (walls, floors and ceilings) serves as its boundaries.|
|Contingency: A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.||Conversion Clause: A provision in some ARMs that enables homebuyers to change an ARM to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra.|
|Cooperative: A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.||CRB: Certified Residential Broker. To be certified, a broker must be a member of the National Association of Realtors, have five years experience as a licensed broker and have completed required Residential Division courses.|
|CRS: Certified Residential Specialist.||Debit Ratios: The comparison of a buyer’s housing costs to his or her gross or net effective income, and the comparison of a buyer’s total long-term debt to his or her gross or net effective income. The first ratio is housing ration; the second is total debt ratio.|
|Due-On-Sale: A clause that requires a full payment of a mortgage or deed of trust when the secured property changes ownership.||Earnest Money: The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.|
|Escrow: A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties’ instructions and assuming responsibility for handling all of the paper work and distribution of funds.||Equity: The difference between what is owed and what the property could be sold for.|
|FHA Loan: A loan insured by the Federal Housing Administration (of the Department of Housing and Urban Development).||Federal Home Loan Mortgage Corporation (FHLMC): Called “Freddie Mae”; a part of the secondary market particularly used to purchase loans from savings and loan lenders within the Federal Home Loan Bank Board.|
|Federal National Mortgage Association (FNMA): Popularly known as “Fannie Mae”. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the BA, as well as conventional home mortgages.||Fee Simple: An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.|
|Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.||Fixed Rate Mortgage: A conventional loan with a single interest rate for the life of the loan.|
|Fully Indexed Rate: The maximum interest rate on an ARM that can be reached at the first adjustment.||Gift Letter: A letter from a relative stating that an amount will be gifted to the buyer, and that said amount is not to be repaid.|
|Government National Mortgage Association (GNMA): Called “Ginnie Mae”, a governmental part of the secondary market that deals primarily in recycling VA and FHA mortgages, particularly those that are highly leveraged.||Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.|
|GRI: Graduate, Realtors Institute. A professional designation granted to a member of the National Association of Realtors Who has successfully completed courses covering Law, Finance and Principles of Real Estate||Home Inspection Report: A qualified inspector’s report on a property’s overall condition. The report usually includes an evaluation of both the structure and mechanical systems.|
|Home Warranty Plan: Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.||Index: A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.|
|Initial Interest Rate: The introductory interest rate on a loan; signals that there may be rate adjustments later in the loan.||Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent’s interest in the property.|
|Jumbo Loans: Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market; these jumbos must be packaged and sold differently to investors and therefore have separate underwriting guidelines.||Lien: A legal hold or claim on property as security for a debt or charge.|
|Loan Commitment: A written promise to make a loan for a specified amount on specified terms.||Loan-To-Value-Ratio: The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.|
|Lock-in: The fixing of an interest rate or points at a certain level, usually during the loan application process. It is usually done for a certain period of time, such as 60 days, and may require a fee or premium in the form of a higher interest rate.||Margin: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.|
|Mortgage Insurance Premium (MIP): The mortgage insurance required on FHA loans for the life of said loans; MIP can either be paid in cash at closing or financed in its entirety in the loan. The premium varies depending on the method of payment.||Mortgage Life Insurance: A type of term life insurance often bought by homebuyers. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the mortgage debt is automatically covered by insurance proceeds.|
|Negative Amortization: Occurs when monthly payments fail to cover the interest cost. The interest that isn’t covered is added to the unpaid principal balance, which means that even after several payments the borrowers could owe more than they did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren’t high enough to cover the interest.||Origination Fee: A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent for FHA and VA loans.|
|Payment Cap: The maximum amount the payment can adjust in any given time frame.||PITI: Principal, Interest, Taxes and Insurance.|
|Planned Unit Development (PUD): A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Use may be residential, commercial or industrial.||Point: An amount equal to one percent of the principal amount of the investment or note. Lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.|
|Prepayment Penalty: A fee charged to a borrower who pays a loan before it is due. Not allowed for FHA or VA loans||Private Mortgage Insurance (PMI): Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.|
|Purchase Agreement: A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.||Rate Gap: The difference between where the rate is now and where it could adjust to on an ARM. Also used to compare the difference between a current conventional rate and that of an ARM.|
|Realtor: A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors.||Regulation Z: The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.|
|Tenancy in Common: A type of joint ownership of property by two or more persons with no right of survivorship.||Title Insurance Policy: A policy that protects the purchaser, mortgagee or other party against losses.|
|VA Loans: A loan, made by a private lender, that is partially guaranteed by the Veterans Administration.|