You Are Entitled to a Second Opinion

You Are Entitled to a Second Opinion

What would you do if you were just informed you needed surgery on your knee, and it will be both expensive and extensive? These days it's common, and often prudent, to seek a second opinion. That same rule should apply to most things in your life, including your mortgage.

If you've already been pre-qualified or pre-approved for a mortgage, how can you be sure you're getting the best deal for you? And the "best deal" isn't always about the best interest rate!

The type of loan you're getting, and the structure of the loan, are just as important as the interest rate. Even Donald Trump, in his book The Art of the Deal, said, "The price that you pay is the least of your worries in a transaction. It's how the deal is structured that matters most."

Now, don't misunderstand—a great interest rate is important, but it may not be the most important aspect of your mortgage. Before signing on the dotted line, here are a few "second opinion" considerations:

• Should you decrease your down payment and use it to pay off debts, or put that money away?

• Should you pay points or origination fees?

• Does a no-cost mortgage make more sense for you?

• Are you better off with an adjustable or fixed rate?

• Did your lender show you how to save thousands of dollars, and take five years off the term?

There are many things to consider before obtaining a mortgage, and it will comfort you to know all of the options. It can only benefit you to seek a valuable second opinion, before proceeding with life-changing "surgery" on your financial future.

Contact me today for your thorough—and free!—second opinion.

How to Get Your Sellers Prepared for an Appraisal

How to Get Your Sellers Prepared for an Appraisal 

Waiting to Buy Homeowner's Insurance Can Be a Big Mistake

Waiting to Buy Homeowner's Insurance Can Be a Big Mistake

As mortgage professionals we see this scenarior more often than you would think: Your loan is approved, and then the Homeowner’s Insurance agent sends the final policy a day or two before closing.  We look at the premium and—*GASP*—it's MUCH higher than we anticipated!  This causes the payment to increase, and could even push the debt-to-income ratio over the allowable threshold.  At this late stage the Homeowner's Insurance Scramble begins, and everyone is frantically running around trying to find a lower premium.

This can be avoided by starting the hunt for Homeowner's Insurance EARLY in the process.  It doesn’t hurt to shop around to be sure you are getting the best Homeowner's Insurance policy and premium.  Keep in mind that credit score, previous claims, and age and location of the home all play an important role in the amount you will pay for insurance, as well as which insurance companies will be able to write the policy. 

By starting early in the mortgage loan process—even before the appraisal is completed—you can avoid last minute surprises.  Let's not fool ourselves—birthday party surprises are fun, but last minute mortgage loan surprises are NOT! Most insurance agents can give you a quote without an appraisal in hand, with the understanding that it may adjust slightly once they review the appraisal report. 

What should you do? Start shopping for your Homeowner's Insurance once you have a signed contract, and in doing so you will avoid another potential last minute surprise. 

HUD Continues to Increase FHA Costs

HUD continues to increase FHA costs. In their press release this week, HUD is increasing both the upfront mortgage insurance premium as well as the annual mortgage insurance premium on FHA borrowers.

Verbatim from the press release: "FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month.  These marginal increases are affordable for nearly all homebuyers who would qualify for a new mortgage loan." It is not at all comforting to me to hear the federal government state that their expenditure of your hard earned money is within their definition of affordability.

Verbatim again: "The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent." Again, the federal government is mandating a new tax on all FHA borrowers to help cover it's passage of the 2 month payroll tax reprieve. I am certain that we all are better stewards of our money than the federal government is. (On a $150,000 loan, that's $150.00 more per year for 10-14 years --- did you see $1,500 more in your paycheck for these last two months of temporary payroll tax waiver?) 

Despite the low capital ratio, HUD insists that the MMI Fund will, according to a press statement, "start to rebuild capital in 2012, and return to a level of two percent by 2014 - outpacing last year's prediction."

In the midst of a tough housing market, the FHA MMI Fund continues to be actuarially sound," says Carol Galante, acting FHA commissioner. "Because of the Obama administration's strategy to protect the FHA fund - tightening of risk controls, increased premiums to stabilize near-term finances, and expanded loss mitigation assistance to avoid unnecessary claims - this past year's endorsements had the highest credit quality ever recorded, and will yield historically high levels of net receipts in the years ahead."

Please tell your Congressional members that the assault on affordable homeownership through the FHA needs to stop.  Find your House and Senate reps.

Your Comments are Needed - HUD Proposal to Reduce Seller Concessions

HUD is at it again. Another assault on home ownership is under way and your comments against this proposal are needed to ensure that homeownership for many isn't just a dream.

So many will be harmed by implementation of this rule: buyers, sellers, real estate agents, escrow/closing/title agents, appraisers, home inspectors, pest inspectors, mortgage professionals, and all the other industries ancillary to every single real estate transfer.

The HUD press release from January 20, 2012 states the following in the next to last paragraph:

"In a separate Federal Register notice to be published soon, the FHA will propose to reduce the maximum allowable seller concession from its current level to one more in line with industry norms.  The current level exposes the FHA to excess risk by creating incentives to inflate appraised value."

First point, industry norms. The information below shows just what the industry rules are on seller concessions.
- VA: 4% generally, but technically no limit. Verbatim from the VA website: "The seller can pay for some closing costs. (Under our rules a seller’s “concessions” can’t exceed 4% of the loan. But only some types of costs fall under this 4% rule. Examples are: payment of pre-paid closing costs, VA funding fee, payoff of credit balances or judgments for the veteran, and funds for temporary “buydowns.” Payment of discount points is not subject to the 4% limit.)" The VA website link to this verbiage.
- USDA: 6% general rule, but there technically is no limit. Verbatim from the USDA website: "No maximum seller concessions or gift amounts - Purposes are limited". The USDA website link to this verbiage.
- Conventional: 3%, 6%, or 9%, depending on down payment. Down payments of less than 10% = 3% seller concessions; down payments of at least 10% but less than 25% - 6% seller concessions; down payments of at least 25% = 9% seller concessions.
- 203K: same as FHA 203B, 6%. But this amount stands to be decreased in concert with this proposal to reduce FHA seller concessions. The impact on 203K renovation loans will be dramatic with the inventory of distressed and neglected properties on the market. 203K is a great program, but the closing costs on 203Ks are slightly higher due to the inspections required for the renovations being completed. (HUD never gives any consideration to the 203K program as evidenced by the 2010 GFE rules that make GFEs on 203Ks harder to complete.)

Second point, inflate appraisal value. This is an interesting topic for HUD to raise given the May 2009 implementation of HVCC (Home Valuation Code of Conduct, AKA blind appraisal process) and the HUD mandate to follow HVCC shortly after 2009. Has anyone seen an inflated appraisal value since HVCC was required on all FHA loans? I cannot say that I ever have seen an inflated value come back on an FHA loan, and especially not since the appraisal process blind. All MLS platforms require that seller concessions be reported on all MLS sales. Appraisers have rules that require that seller concessions be reported for all comparable sales used on the URAR. And appraisers must comment whether seller concessions are within normal ranges or not. And appraisers must deduct on the URAR seller concessions deemed not within normal ranges (concession of 10,000 may not be normal, but 4,000 may be, so 6,000 would be deducted as excessive in this example). With these rules, is there a real risk of "creating incentives to inflate appraised value"?

Is HUD now going a little Seinfeld-esque, with the Soup Nazi yelling "NO HOUSE FOR YOU!".  Sure seems like it to me!

No, not every buyer needs 6% seller concessions, but reducing seller concessions today will be harmful tomorrow and in the many years ahead of us. Comparing to today, do you think closing costs will be lower, the same, or higher in three years? How many increases have you seen over the years to the various parts that make up closing costs: homeowners insurance, real estate taxes, deed and mortgage recordation costs, transfer taxes, appraisal fees, lender fees, title insurance costs, closing/escrow fees, and all the rest? Just in the last few months, I've seen lender fees and appraisal fees increase. In the last few years, insurance, taxes, and recordation costs have seen increases. Even if 3% seller concessions is "enough" for now, will be be "enough" in three years? I know my gasoline, food and electricity costs have risen each year, and that has cut into my ability to put extra away in my rainy day fund. And the same is happening to every single buyer today.

Buyers: Are you ready to wait another several months to be able to save more money to cover your closing costs (that the seller can otherwise pay today) if this rule is implemented?

Sellers: Are you ready to shave a small percentage off of your potential buyer pool?

Realtors: Are you ready to shave a small percentage of your closings off each year?

Appraisers: Are you ready to shave a small percentage of your report orders off each year?

Title Agents: Are you ready to shave a small percentage of your closings off each year?

Home Inspectors: Are you ready to shave a small percentage of your inspections off each year?

Pest Inspectors: Are you ready to shave a small percentage of your inspections off each year?

Mortgage Professionals: Are you ready to shave a small percentage of your loan closings off each year?

I know that I do not want anything else to harm our collective industry or paint buyers and sellers into an even smaller corner, especially not a misguided proposal such as this!

PLEASE, please, please weigh in and post your comments to this proposed HUD rule change to the FHA loan program. The time to sit idle is surely not now and surely not on this issue. Comment period closes March 26, 2012.

10 Commandments When Applying for a Mortgage Loan

10 Commandments When Applying for a Mortgage Loan

Are FHA Costs to Rise Again?

Are FHA costs to rise yet again? You betcha!

The latest HUD budget proposal has the department giving money to everyone, including funding a "self-sufficiency program". Isn't funding a self-sufficiency program proving that it's not self-sufficient? Why is HUD funding this program?

HUD has 2.5 million families in public housing, tenant vouchers for 2.2 million, 10,000 vouchers for the homeless, created 432,000 jobs, and general assistance to 5.5 million homes. HUD's programs do some good and show humanity for our fellow human beings, but why does it all of this have to come out of HUD's budget? Take the programs out of HUD or take it off the books.

What about funding FHA? Is that not a purpose of HUD as well? Raising the mortgage insurance rate on FHA borrowers is NOT the right way to fund every HUD program. How about making FHA a little cheaper for folks with jobs to buy homes, to help our economy, to help stabilize our home prices, and mend the FHA to ensure capitalization minimums are met. Some additional common sense is needed to ensure that the FHA loan program continues to be a viable financing alternative.  Video blog on this assault on FHA.

FHA held a briefing this morning on the President’s 2013 budget. On this call, they reiterated the upcoming single family premium changes for FHA loans (outlined below). The upfront premium of 100 bps has not changed. The mortgagee letter is expected March 1, 2012, with an effective date of April 1, 2012. Importantly, these changes are only the first of additional changes expected to be announced within the next few weeks. Although the FHA could not elaborate, the industry should expect additional changes to the premium structure, likely a small increase to the UFMIP. Finally, we expect an announcement of lower premiums for streamlined refinances as a means to help more families refinance without the benefit to borrower impacts.

For loans greater than 15 years, New Annual Premium, Effective April 1, 2012:

LTV less than or equal to 95%
Now:110 bps
Increase:10 bps
New:120 bps

LTV greater than 95%
Now:115 bps
Increase:10 bps
New:125 bps

All loans over $625,500 will incur an additional annual premium increase of 25 bps

Don't forget that the assault on FHA through reducing seller concession maximums is still coming.

Searching for Homes in Lynchburg

When it comes to searching for homes in Lynchburg, what is your best option to find the right home for you and your family? I feel it's a matter of finding the right Realtor and ensuring they completely understand your needs. A Realtor needs to know what you want and need in a home in order to show you homes that suit those desires. Is school district important? Do you need to be within a certain distance of your workplace? Do you want to be close to conveniences or is it more important to have additional privacy? Do you plan on expanding your family? All of these things need to be considered when you're choosing among the available homes in Lynchburg to ensure that your decision today fits your needs in both in the immediate and longer terms. As no one loves to move every year, be it the physical toll of moving or the financial burden or just taking the time to move, if you plan ahead, you can get the best option both for now and the near future.

There are some things that you can change about the homes in Lynchburg (paint, flooring, heat system, finishing a basement), but there are some things that you cannot (lot size, location) or cannot easily change (layout, style).

Take the time to go through what is important to you and determine what your needs will be in 5 or 10 years. Then call me to help you find a great Realtor in Lynchburg. Planning your mortgage in a similar fashion is always helpful to ensure that your mortgage loan suits your immediate and longer term needs, and I can help you with that piece, too.
 

Melanie Thompson, Registered Mortgage Advisor
434-846-3268 office
434-258-5626 cell
Melanie@MortgageEquityTeam.com
NMLS 197075; MLO-224VA

FHA Seller Concessions Under Attack

FHA seller concessions are under attack again.

Published in an email to me today, the FHA desires to reduce seller concessions from 6% to "one more in line with industry norms". Below is pasted directly from Friday's press release.

"In a separate Federal Register notice to be published soon, the FHA will propose to reduce the maximum allowable seller concession from its current level to one more in line with industry norms.  The current level exposes the FHA to excess risk by creating incentives to inflate appraised value.  The revised proposal reflects public comments received on an earlier proposal published in a Federal Register notice on July, 15, 2010.  The revised proposal calls for a 30 day comment period.  Following an analysis of the public comments received, a final rule will be issued."

The FHA is poised to open a comment period to gather feedback on this proposal. It is IMPERATIVE that every member of the real estate community and anyone concerned about homeownership comment on this proposal. The detrimental impact to the first time buyer market will be severe if the 6% limit is reduced. There are occasions where a buyer seeking a smaller loan amount or a renovation loan needs the full 6% maximum in seller concessions to make their loan work.

The FHA already requires that the buyer put 3.5% into the transaction in the form of a down payment. If another 3% is required from the buyer to close the loan, many deserving and otherwise well qualified buyers will be completely unable to purchase.

I am completely against the proposal to reduce seller concessions on FHA loans. Appraisal guidelines already require that seller concessions be deducted from the sales price when adjusting comparable sales. Adding this rule will absolutely not "inflate (the) appraised value" of a given property if appraisal rules are followed and enforced.

Please look for another post when the FHA comment period opens, and please forward to all of those in the real estate community and beyond to ensure that another poor reasoning is not implemented.

Mortgage Fees Would Rise Under Payroll Tax Cut Deal

Lenn Harley is usually spot on with her blog posts on ActiveRain, and this is a shining example. Thank you, Lenn! I'm honored to reblog.

"Mortgage Fees Would Rise Under Payroll Tax Cut Deal

SMOKE AND MIRRORS AGAIN ON CAPITOL HILL.  Read more HERE.

If you're a real estate agent, a real estate broker, a loan officer, a home buyer or a home owner,

YOU HAVE A TARGET ON YOUR BACK.

Congress has done it again.  The government has targeted one group of Americans to benefit another.  This is what Congress calls "paid for" when they design legislation to benefit one group of voters and sticks their hands in the pockets of another group to "pay for it".  In most cases of course, the group to benefit are expected to vote for the politician(s) who sponsor the legislation.  In this case it's an extension of the so called "payroll tax cut".  This is not a "payroll tax cut".  Never was and never will be.  It is a clear reduction in the withholding for FICA contribution to fund Social Security benefit recipients.  Of course, as usual, the benefit is immediate and the "pay" for it will be a charge to American home owners and buyer for the next ten years.  Have we ever seen Congress buy any votes by cutting one single $Dollar of spending???  Help me out.  I can't think of one.  What they propose today will be paid for by new fees on some group of Americans long into the future.  Even when Congress "reduces" an expenditure, it's only a reduction in the "rate of growth", not a cut as they cleverly claim. 

In this case, the reduction in FICA withholding is "paid for" by gouging home owners and home buyers and it will last FOR THE LIFE OF THE LOAN.

THE REAL ESTATE INDUSTRY HAS A TARGET ON IT'S BACK!  That's for sure.

"In exchange for a two-month tax cut, the Senate on Saturday approved a permanent increase in fees attached to mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA)."

The fee amounts to about $360 per household per year for an average $200,000 mortgage.  How much money will this hit on home owners and home buyers raise??  About $37,000,000,000.  Of course, that will extrapolate to $720 per household with a $400,000 mortgage.  That's a lot of $Billions and that's a lot of households.  $37,000,000,000 represents $Thirty Seven Thousand Million.  It represents a fee to every single home buyer who finances their new home purchase with a loan purchased or insured by Fannie Mae, Freddie Mac or the Federal Housing Administration, or about 90% of ALL newly originated or refinanced loans.

$37,000,000,000 is a lot of money and the saddest thing about the entire matter is that it funds the reduction in the FICA withholding for only TWO MONTHS. 

If Congress succeeds in passing legislation to reduce the FICA withholding for a year, which is the goal of many today, where will they get the money to PAY FOR that????

I GIVE UP!!  What I do know is that anyone involved in the housing industry, every home owner who may wish to refinance their home loan and every future home buyer for years HAS A TARGET ON THEIR BACKS!!

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

BTW, the "tag" for this post is "mortgage mess", now up to 245 posts with this one.  Why do I have a compendium of posts with the tag of mortgage mess??  Because, IMO, the "mortgage mess" was caused by, created by and exacerbated by actions of the U.S. Congress."
 

Link to Lenn's original ActiveRain post is here. 

Link to TBWS video blog covering some of the same issues is here.

Renovation Financing - How to Find the Right Loan Professional

Renovating a home is a rewarding experience. There can be struggles along the way, from prioritzing the projects to be done, to finding the right contractor to complete your repairs, from choosing the home to purchase, to choosing the right financing option for your needs. But nothing is insurmountable when you work with the right folks.

A great resource to making the choice in loan professional and/or renovation contractor is to talk with your local 203K Consultant. Look up your area's 203K Consultants here. The Consultants have worked on dozens of 203K projects, and they know from first hand experience and owner feedback which lenders and contractors have been great to work with.

I was surprised to hear from the Lynchburg area 203K Consultant of his opinion of me: "In 20 years of working with 203Ks, you are by far the best." I am humbled and honored to know from him that I help make 203Ks and renovation loans easier and more understandable. That comes from personal experience on two large renovation projects, as well as my knack for learning all that I can on a particular loan program and each lender's nuances for those particular loans.

If you want a great 203K lender who has options on projects from something as simple as a new roof or heating system to something as dramatic as a full redo down to the studs, I'll help you along the way. Renovation loans do not scare me, so long as we have the right team of professionals! Using the FHA 203K loan, or a conventional renovation loan program, I have options for you and can help navigate them to determine which fits you and your project best.

Let's get some of the diamonds in the rough transformed how you wish!

Is Buying Better Than Renting?

In Lynchburg, is buying a home better than renting? Homeownership is not for everyone. And renting isn't for everyone either. Let's look at the options and see what makes sense for you.

What are your goals? Do you want to put down some roots in Lynchburg, or do you need to have the flexibility to move with greater frequency? Do you want to be able to make changes to the property, or are specific updates and upgrades not important to you? Do you have specific needs that are not easily met in the Lynchburg rental market, or vice versa?

When you purchase a home, you have to maintain the home throughout your years of homeownership. For that reason, you should not overstretch your homebuying budget. If the water heater goes out, you will have to pay to have it replaced if you own the home, whereas your landlord is responsible for replacing it if you're renting. You should set aside money each month into a savings account for eventual home repairs, updates, and upgrades. How much you should set aside each month depends on factors of the house. It's inevitable that something will need to be replaced through the passage of years, just like it is for your car. Be it roof, gutters, plumbing, appliances, HVAC system, flooring, paint, etc., all of these items have useful life spans and will require replacement at some point. So it is best to plan up front and keep putitng money away to help make these eventual replacements easier to manage. If your ability to save for these repairs is slim to none, or none to nil, then owning a home may not be right for you right now. Pay down your debts, improve your job skills, and get to a better financial position if a goal of yours is to own a home.

Are you in a situation where finding a suitable rental will be hard (animals, large family, employment particulars, hobby)? A person who has large dogs, is a breeder, or has unusual animals may find it very difficult to find a suitable rental. Do you have extended family care needs? Are you a foster parent? Do you restore antique cars as a hobby or source of secondary income? Do you want to garden? Sometimes these particulars are very hard to meet in the rental market and are usually best served by purchasing a property. Typically, the house or land needs to have certain features in order to be suitable for you, and buying is sometimes a great fit. I have a client from Lynchburg who adopted 9 children from disadvantaged circumstances (ranging in age from 11-3). They have needs that would be very hard met in the rental market. I have many clients who work from their home full-time, or their job requires that some of thier work be performed from home. Depending on the line of work, a rental may or may not fulfill your needs.

Are you unable to care for a property due to health or work circumstances? In that case, owning or renting a single family detached home may be very hard for you (most landlords will not maintain your lawn or remove snow). Would you be better served in a Lynchburg townhome or patio home community? There are great ownership and rental options in the townhome communities throughout the City of Lynchburg.

Let's have a frank discussion of your needs and wants, what you future holds, and what you feel would be best for you. If it's purchasing a home in Lynchburg, there hasn't been a better time than now. Selection is great, interest rates are superb, loan options are good, and home prices in Lynchburg are extremely affordable.

3 bedroom home for sale in Lynchburg

Are There Days When You Feel Like a Superhero?

There are times when I feel like a superhero! Below is a borrower's own words on how I make a difference.

“My real estate agent then introduced me to a mortgage advisor friend, that if no one else could, she would be able acquire a mortgage for me. Melanie descended like an angel into a situation that was turning out to be one of my worst buying experiences. Her positive attitude, knowledge of mortgages, credit and the lending industry processes, and willingness to ask a few questions revived my hope of owning this home. Melanie's abilities are nothing short of impressive. She was able to close my home purchase under traditional loan terms, with $115.00 out of pocket, and at a total payment less than what I was paying in rent for an old, small apartment. She even closed my purchase for less out of pocket, less monthly payment, and a lower interest rate than another broker had quoted to me but could not obtain lender underwriting approval.

Strangely enough, she closed my loan with one of the lenders where the other broker’s loan submission for me had been denied. How is it that the same borrower, the same house, the same price, the same loan amount, and the same loan program can be approved through Melanie and denied through someone else? It is the substantial difference in knowledge and stick-with-it-ness that Melanie has that made the difference for me.

Because of my personal experiences in obtaining a mortgage and now living in the home I wanted solely thanks to Melanie's professional wizardry, I strongly recommend you let Melanie walk you through the process. There is no other call you need to make when searching for a mortgage. Save yourself the aggravation, exhaustion, and emotional upheaval of shopping around on your own and just call Melanie. She can do it all!

Issue I resolved: asking questions, understanding lender procedure

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com
NMLS 197075; MLO-224VA

Image credit

VA Funding Fee Changes

VA Funding Fee for Loans Closed on or after October 1st, 2011 until October 1st, 2012

The VA funding fee is required by law on VA Home Loans. The fee, currently 1.40% on no down payment loans for a first-time use, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 2.8%. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment.

For purchase and construction loans, members of the regular military fall into the category of first time user or subsequent user. For first time users, no down payment requires a 1.40% fee, down payment of at least 5 percent but less than 10 percent requires a .75% fee, and down payment of 10% or more requires a .50% fee. For subsequent users, no down payment requires a 2.8% fee, down payment of at least 5 percent but less than 10 percent requires a .75% fee, and down payment of 10% or more requires a .50% fee.

For the category of Reserves / National Guard, first time users with no down payment requires a 1.65% fee, down payment of at least 5 percent but less than 10 percent requires a 1.0% fee, and down payment of 10% or more requires a .75% fee. For subsequent users for the category of Reserves / National Guard, no down payment requires a 2.8% fee, down payment of at least 5 percent but less than 10 percent requires a 1.0% fee, and down payment of 10% or more requires a .75% fee.

Cash-out refinancing loans for regular military require a 1.40% fee for first time users and a 2.8% fee for subsequent users. For Reserves / National Guard, the requirement is a 1.65% fee for first time users and a 2.8% fee for subsequent users. On interest rate reduction loans, the VA funding fee is .50% and it is 1.0% on Manufactured Home Loans.

The following persons are exempt from paying the funding fee:

• Veterans receiving VA compensation for service-connected disabilities.
• Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.
• Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).

The VA has the final say on who is exempt. If you are not certain, we can send in a form and find out.

Choosing the Right Lender: Local v National

Buying your Lynchburg home is most likely the largest purchase you will make in your lifetime. Unless you've recently won the lottery or have a very generous rich uncle, you will need to qualify for a mortgage. When you begin to research lender options, knowing how to choose the right lender can be difficult. What are the differences between a local lender, mortgage lender, mortgage banker or credit union? And what do those differences mean to you as the consumer?

Working with a local lender that comes recommended from your Realtor, friend, co-worker, or neighbor carries a lot more weight than one you randomly find online. In fact, a recent study shows that 90% of consumers trust recommenedations from people they know, like and trust.

Why Work with a Local Lender:

You can look them in the eye - Sitting across from your lender while they explain the loan process is very different than trying to track somsone down that's across the country. How uneasy does it make you feel when you call to ask a questions only to find that the person you're talking to is not even qualified in your state to answer your questrion?

They cannot hide rates or fees - When you are sitting face to face with someone, it is very difficult to hide behind a computer screen. Working with a local lender allows you to go through every detail of the loan with a real person, not someone on the other end of a phone line.

They shouldwill show up at your closing - I cannot count the number of times I have been asked by a Realtor or buyer "what are you doing here?" when I show up at closing. It is my duty to make sure that you are taken care of from beginning to end, and that does include the final step of the process: loan closing. How can a national lender answer last minute questions or handle any final needs of your closing agent when they are in another state, and possibly in another time zone? No one knows your loan details better than I do. I have even held the hand of a closing attorney who was hesitant about closing a purchase loan when he was confused by the new closing forms.

Contrary to what national lenders may tell you, a local mortgage lender will be able to offer you the lowest interest rate, lowest fees and best customer service available. Just because they are smaller does not make them less effective. In fact, being smaller usually means greater efficiencies, greater knowledge and a smoother transaction.

Also keep this in mind when considering a national loaner: Many of those national mortgage companies are filled with loan sales representatives that will sell you a loan product, regardless of whether or not it is in your best interest. They are only interested in making the sale; its a numbers game that has nothing to do with what numbers work best for you. They worry about their bottom line, not which loan program is right for your family. Working with a local lender ensures that they have an established reputation within your community. And if its not a positive one, you will find this out through a little word of mouth research.

Need a great lender in Lynchburg that will work hard for your best interest? Let me Google her for you!

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com
NMLS 197075, MLO-224VA

In a Borrower's Words: A Good Stick-With-It-Ness Story

"After a lengthy house hunting period, there it was, like a puppy in a pet store window: a good house that suited most all of my needs. It was not my dream house, but I became very attached to the idea of owning it. The big problem was that I had one credit report flaw that could not be fixed. That one flaw ultimately led me to attempt to procure a mortgage with a broker, as brokers have more options and a broader ability to help a range of borrowers. Try as he might, he could not get my loan done with two different lenders.

Strangely enough, she closed my loan with one of the lenders where the other broker’s loan submission for me had been denied. How is it that the same borrower, the same house, the same price, the same loan amount, and the same loan program can be approved through Melanie and denied through someone else? It is the substantial difference in knowledge and stick-with-it-ness that Melanie has that made the difference for me.

Are You Paying Too Much? How to Appeal Your Property Taxes

Basic Buyer Knowledge

I was directed to an article online and wanted to pass this along for very basic buyer knowledge.

http://www.sacbee.com/2011/08/18/3845317/placer-county-woman-rues-buying.html

There are very basic things that you should know and that would raise an eyebrow during the buying process if they were missing. Doing just a little due diligence can easily prevent the issues that this article addresses:

1. Use a licensed and competent real estate professional to help you with your home search
2. If you do decide to buy your neighbor's home without the use of a professional assistance, be sure to check on basic permits with the county/city (building inspections and the health department can be great resources)
3. Call the local utility companies to ensure service connection time frames, and that there is service at the property address that you're buying (one call to the electric company would have halted this buying process)
4. Use a home inspector to make sure that you know what you're buying, even on new construction
5. If something looks odd, please investigate
6. Buying a home is one of the largest purchases you will ever make, so please use professionals to help guide you during the process (mortgage, title agent, realtor, home inspector, and insurance agent, just to name a few)

I am amazes by this article, as the "duped" buyer is a licensed insurance agent and licensed realtor. I wonder how competent the buyer really was to represent herself. Be sure to use a licensed, competent, full-time realtor when you're purchasing a home. If you need recommendations for professionals to help in your search, I am more than happy to help.

Melanie Thompson
Registered Mortgage Advisor
434-258-5626
Email
NMLS 197075

Why Use a Mortgage Broker: In a Borrower's Words

                                                                                                           "August 3, 2011

In April of 2011, I started the search to purchase a house. I was recommended to a local mortgage advisor, who I called. This advisor reviewed my application, and advised me that I would be unable to purchase a home at this time unless I was able to pay down two credit cards (approximately $6,000.00). I had all but given up on purchasing a home anytime in the near future.

 

There's No Such Thing as the Perfect House

I read this activerain blog post today and instantly recognized kinship with Colleen McConnell, Realtor in Tallahassee, FL.  http://activerain.com/blogsview/2417210/there-s-no-such-thing-as-the-perfect-house 

"Some buyers are not satisfied unless a house meets their every requirement - and they often have a long list. It might be the right neighborhood, size, price, floor plan, yard, and pool, and they really love the kitchen, but they can't sit in the living room and look out at the back yard, so it won't work. Or it didn't have a closet in the home office, so it's off the list even though it meets their needs. Their expectations are unrealistic. There are probably many houses that they could live in happily, but they demand perfection, down to the last detail.

Some of these buyers get discouraged and frustrated when they don't find the right house by the third showing and decide to wait a few years to buy. Others are sure they'll find the perfect house that meets every requirement and won't give up until they find it. They continue to look for months, and in extreme cases, years.

A good agent will help their customers understand that enough though it's a buyers market, it's not likely that they'll find a house that's perfect in every possible way for their lifestyle, tastes and needs. Rather, if they focus on the top 2-3 must haves, they will probably find several houses that are suitable and then be in a good position to negotiate for the one they like best."

One reply to her blog post was succinct in bringing home the issue that should be at the top of the list for every buyer: "The perfect house for me is the one that has my family in it. We still have 1962 counters and could care less."

What makes a home perfect for you?
 

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com
NMLS 197075

Five Reasons to Fall in Love with the VA Home Loan

What's so special about VA Home loans? I say "Plenty!" For years, few mortgage loan professionals have focused on this increible niche, and I am one of them, gladly serving those individuals who serve us all.

VA Home Loans have been a favorite of mine since I started in the business. My first loan closing was a VA Home Loan. Maybe I like the VA loan because I'm a pretty patriotic person. Or maybe its because my team and I love working with military borrowers and veterans. We all have come to appreciate the joy and satisfaction derived from serving our men and women of the United States Military, but the benefits of the VA Home Loan for our clients is second to none.

Below are what I believe to be the top five reasons to make you fall in love with the VA Home Loan, too:

1.  Competitive Interest Rates - even with credit ratings that are less than perfect!

2.  100% Financing - VA offers one of the few remaining 100% financing programs

3.  Flexible Credit Requirements, such as:

          a.  Higher debt rations are allowed for many borrowers

          b.  Lower reserve requirements (reserves = money left in the bank after closing)

          c.  Lower credit score requirements

4.  NO Monthly Mortgage Insurance. Monthly mortgage insurance on conventional and FHA loan products can add a heafty chunk to your monthly payment (up to $96 per month per $100,000 borrowed). With VA Home Loans, there is NO monthly mortgage insurance.

5.  The VA Funding Fee can be financed into the loan. If you have a service connected disability rating with the VA, it is likely that you are exempt from the VA Funding Fee.

If you have not researched the benefits of the VA Home Loan, you should get started today. You can contact me at Melanie@MortgageEquityTeam.com or find additional information by clicking the VA's link below:

Additional VA Home Loan Benefits

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com
NMLS 197075

Is financing a doublewide possible?

With all the rhetoric in the media and local markets, you would think a loan on a doublewide was harder to obtain than a winning $500M Power Ball ticket. Obtaining a doublewide loan is not a matter of luck, it's a matter of working with a seasoned mortgage professional who has more than one lender in her arsenal: ME!

Doublewides ARE tougher to finance, but financing IS possible. There are several good options when it comes to financing a doublewide, including lower down payment options through USDA, FHA and VA. Work with a professional. Know what your options are. And know what you need to do to improve your options if time is on your side.

There are good rates on doublewides with scores as low as 620. I have options for scores below 620 as well, but I do strive to get your score up to a 620 if it means a distinct difference in interest rate. As with all loans, the best rates come with the best credit scores. If your score isn't an 850, let's work on improving your credit score. There's a clear method to the credit score madness, and I help you understand and work on your score. With better credit scores come better insurance rates and better auto loan rates. And who doesn't want better rates?

The important aspect to financing any real estate is to talk with your mortgage lender BEFORE getting into contract.

I welcome the opportunity to help with your financing needs, be it for this home or another.

Are you tired of "home" work?

Does the home you want to buy not quite meet your family's needs or tastes?


Perhaps the home you already own has not been updated in a while?


There's a solution if the home needs a little updating, some TLC, or a major overhaul.

It's the FHA 203k renovation loan program!

With a 203k, you are able to get a loan to both purchase (or refinance) your home and fix it up. This is accomplished with ONE loan at a very good interest rate. There are two versions of the 203k program: the Streamline 203k and the Full 203k.

With a Streamline 203k, you can borrow up to $35,000 for improvements and repairs as long as you are not getting into structural projects. Below is a sample list of some of the items you can complete with a Streamline 203k:
 

• Roof  
• Gutters, downspouts
• Windows
• Plumbing repairs
• Bathroom remodel
• Siding
• Electrical
• Heating, air conditioning
• Painting
• Kitchen remodel (including new cabinets)
• Flooring
• Disability access retrofits
• Porches, patios, decks
• Basement finishing
• Basement waterproofing
• Well/septic repair/replacement
• Appliances

With the Full 203k, you can do all of the above things and exceed $35,000. As well, you can complete an addition, retaining wall, driveway or move a load bearing wall. The Full 203k even allows you the opportunity to finance your new mortgage payments for the time the home is unhabitable.

There are a few restrictions on the 203k. These loans are for owner-occupied properties only; no second homes or rental properties are allowed. The repairs must be completed within 6 months. Minimum credit scores apply (I have options for scores as low as 600). In nearly every case, the homeowner is not allowed to complete any of the work.
 

  

Some of the other really great features of the 203k:

• Your down payment is only 3.5% of the combined purchase price plus the cost of the improvements.
• The seller can pay up to 6% of the sales price toward your closing costs.
• With the Streamline 203k, a percentage of the repair costs are distributed at closing so that your repairs can begin right away.

The 203k is a terrific loan program that allows you to turn a so-so home into your dream home! I have personally completed a substantial renovation project and know first hand how satisfying it is to breathe new life into a home through renovations. This feeling can be yours, too!

Call me to discuss how the 203k project can work for your situation, or for someone you know.

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com
NMLS 197075; MLO-224VA

Buying IS Less Expensive Than Renting!

Imagine living in a first floor apartment with noisy neighbors. Hard to imagine? Not for many of our friends, co-workers and family members who are in apartments.

A client was renting a 1 bedroom, 1 bathroom apartment for $461.00 per month. If you think noisy neighbors were not enough, just imagine plumbing issues that no one will or cares to fix. His rental situation was bad. Sure, the $461 wasn't too bad a price to pay, but when you factor in the noise, plumbing issues and poor management, it becomes more than one should have to bear.

He was working with another mortgage lender who was not able to obtain an approval for his purchase. He was frustrated beyond belief. Upstairs neighbors were still noisy. Management could not fix the apartment's plumbing problems. His loan officer was stating that he was struggling to get his loan approved. And he finally admitted to his realtor that he did not think his loan officer was able to get his loan approved.

His agent told him to call me. I shoot straight and I get to the bottom of things quickly. So he finally called me. And he's very glad he did.  

I was able to help him purchase the 1200 sqft one story 3 bedroom home with an attached 2 car garage that the other loan officer could not. All this with only $114.48 out of pocket to buy his home. His $449.25 monthly mortgage payment includes taxes and insurance, bearing a note rate of 4.5%/4.806% APR. He's saving $11.75 per month over what he was paying in rent. He has neighbors who are respectful property owners. And the home's plumbing is in great shape. 

Another bonus he did not plan on receiving: because he moved from City to County, his car insurance rates went down, too.

If you have not investigated your options or have been told that you do not have options, please call me. I promise to work as hard for you as I did for him.

Buying is incredibly affordable!  Call me today and lets make your homeownership dreams a reality.

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com
NMLS 197075; MLO-224VA

Why a Large Lender Decided to Remove an Entire Loan Program

Wells Fargo announced late last week that it will no longer originate reverse mortgages because of unpredictable home values and restrictions on those loans. This decision follows a similar choice by Bank of America four months ago. Wells removed reverse mortgages from its wholesale channel in March, and since then had only been originating them in retail branches. Last year reverse mortgages totaled roughly 2% of the bank's $392.5 billion mortgage volume - perhaps a lot of legal exposure without much profit contribution. This announcement is interesting in that it coincides with the recent Harvard Housing Study indicating that the number of senior households will increase 35% by 2020.

The official Wells’ release said that its inability to assess borrowers' financial health was the biggest factor in leaving the business. Reverse mortgages allow people age 62 and older to use their home equity without having to make any payments. Instead, the bank pays the borrowers, though they continue to be responsible for paying property taxes and homeowner’s insurance. But banks are not allowed to assess borrowers’ ability to keep up with all their payments, and recently the press has focused on an increasing number of borrowers who do not have the ability to stay current on their homeowners’ insurance and property taxes, both of which have risen in many parts of the country.

Obviously if the senior owes more than the house is worth, it creates a risk for the servicer and for HUD in its Home Equity Conversion Mortgage program. And thus banks are seeing a rise in what are known as technical defaults, when homeowners fall behind on their taxes or homeowner’s insurance, both of which are required to avoid foreclosure. According to Reverse Market Insight, between 4-5% of active reverse mortgages, or 25,000 to 30,000 borrowers, are in default on at least one of those items. Lenders are responsible for making tax and insurance payments on behalf of delinquent borrowers until they submit an insurance claim to HUD, at which point the agency would be responsible since it provided the insurance against default.

In January, HUD sent a letter to lenders and reverse mortgage counselors that provided guidance on how to report delinquent loans to the agency, and what steps the lenders could take to get borrowers back on track, like establishing a realistic repayment plan that could be completed in two years or less, or getting a HUD-approved mortgage counselor involved to help come up with a solution. If one cannot be reached, the lenders must begin foreclosure proceedings. Both Wells Fargo and Bank of America have said they have not foreclosed on any borrowers to date.

As it stands now, borrowers are required to see a HUD-approved lender before they can apply for a reverse mortgage. Additionally, some type of process for assessing the ability for the senior to pay, and continue paying, taxes, insurance, and home maintenance into the future is being drafted. Up until earlier this year, Wells was #1, BofA #2, and MetLife #3 – and now the landscape has changed dramatically.

If you or a loved one is considering a reverse mortgage, please call me to thoroughly discuss the options. Reverse mortgages are now available for purchases, too! As an independent mortgage planner, it is my job to ensure you know the options available and to help obtain the best option for your needs.

Melanie Thompson, Registered Mortgage Advisor

434-258-5626

Melanie@MortgageEquityTeam.com

NMLS 197075; MLO-224VA

Someone’s Buying Your Name…and You Don’t Even Know It!

Your name is actually worth quite a bit. The only problem is that you aren’t the one benefiting from it. Very few people realize that each time their credit is checked, the information provided to the credit bureaus (Equifax, TransUnion, Innovis or Experian) immediately becomes a commodity that is sold not only to other lenders but also to companies that sell and resell the same names and personal information. 

The credit bureaus have found a way to increase their revenues at your expense….and without your permission. These ‘trigger leads’ include name, address, phone numbers (including unlisted), credit score, current debt and debt history, property information, age, gender and estimated income.

They are marketing your personal, confidential information to competing creditors and making millions. Your privacy is being sold, not just once, but over and over again. The lenders that have purchased these leads at a premium will then do everything they can to recoup their investment and turn a hefty profit. Often, bait and switch tactics are being used to lure clients away from their reputable lender. 

From one such website that offers these names: "Mortgage Trigger Leads are hard inquiries into a person’s credit report generated daily. These consumers have just had their credit checked within the past 24 hours, specifically for a mortgage loan approval. Simply give them a better offer and watch your closing ratios go through the roof." 

The good news is that you can make it stop! The consumer credit reporting industry has provided a way for you to “opt out” or remove your name from these lists. You can contact them by phone at 1-888-567-8688 or online at https://www.optoutprescreen.com/?rf=t. You must opt out at least 48 hours prior to having your credit checked to make sure it is processed in time. You can choose a five year or lifetime option. The lifetime option does require a signed form.

At this time the practice of generating and selling these lists is allowed by the law. If you would like complain about this or have been targeted after opting out, you can contact the Federal Trade Commission (www.ftc.gov) or your state Attorney General's Office. These agencies will investigate reported violations. In most cases, an agency's primary source of information is complaints from the public. 

As a consumer, it is your right to shop for the best service and price for a product, but this should be when and how you want to shop. These unsolicited marketing tactics are a nuisance and intrusive. Take your privacy back and refuse to be a part of this system.

I welcome the opportunity to help you shop for the best rates and terms available. If you or a loved one is in the market to purchase a home or refinance their existing mortgage, I provide an independent assessment of the options available, helping you choose the very best option.

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com
NMLS 197075; MLO-224VA

Monthly Rent Payments on the Rise

Does it make more sense to continue to rent? Or is it now the time to buy a home?

Here are the latest facts:

According to a national real estate website’s data, it is now less expensive to own a home than to rent one in 72% of American cities.

The percentage will likely increase because analysts feel rental costs are about to explode. The demand for rentals has increased with the economic downturn, while the supply of rentals has quickly dropped. In this scenario, the only place for prices to go is UP!

Even though home prices could still soften in some markets, the cost of owning a home may increase. This is because mortgages may soon get more expensive. Researchers with the Mortgage Bankers Association expect mortgage rates to rise the last three months of 2011 and continue to increase gradually through 2012.

For many, it makes great sense to buy homes at discounted prices and secure a 30-year mortgage at historically low fixed interest rates. This lets you set your housing expense for the next 30 years while rents keep heading up.

Call me to find out how much your current rent payment will allow you to purchase in today’s market. In many cases, you’ll be very surprised to find out how much home you can purchase for the same amount you’re paying in rent now.

Qualifying for a mortgage is easier than you probably think. With 0-3.5% down home loans still very readily available and mortgage rates near record lows, the time to consider a home purchase is now. If buying does not make sense for your personal situation, I will let you know. It all starts with a phone call.

If you have any questions about your home purchase, financing, or refinancing situation, please feel free to call or email. I am always available to help you.

Melanie Thompson, Registered Mortgage Advisor

434-258-5626

Melanie@MortgageEquityTeam.com

NMLS 197075; MLO-224VA

How To Overcome Camera Shyness In Video Marketing

Much like public speaking, camera shyness can create a fear in even the most confident and charismatic people. But video marketing is also one of the most important tools in the marketing arsenal of real estate agents and mortgage brokers. If you are ready to start making videos to promote your business, you must begin by finding ways to become more comfortable in front of the camera. While practice is the most important part of overcoming your camera shyness, there are a few tricks that you can use to help improve your performance on camera.

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com

NMLS 197075; MLO-224VA

Bullet-proof Your Homeowners Insurance Coverage...

With the recent string of tornadoes, wildfires, and floods, revisiting your homeowner’s insurance policy and speaking with your agent is now more important than ever.

A cousin’s home was damaged in the April 8, 2011 tornado in Pulaski County, Virginia. After calling to ensure everyone was as well as one can be after a tornado, I called my homeowners insurance agent, asking if tornadoes were covered on my policy. “Yes, it’s covered under the wind damage section of your policy.” Whew! I’m covered. Sadly, 60% of those sustaining damage in Pulaski were not insured or underinsured. FEMA denied the state’s request for assistance.

A friend in California was burglarized and had volumes of items stolen: electronics, jewelry, clothing, and household items. She was not covered for her full jewelry loss because there are standard policy limits that her losses exceeded. Her agent did not ask about her personal property, just assumed her household contents fell under the standard limits. I am not an insurance agent, but I have asked enough questions and heard enough stories to know that anything more than $1,500 in jewelry, $1,500 in furs, and/or $1,500 in firearms needs to be mentioned to your agent so that the right coverage can be in place for your specific needs.

If your house burns to the ground, you need to not only replace the house and all your things, you’ll need to clean up the site so that new construction can begin. Did your house have any asbestos? If so, you’ll likely need greater policy limits to ensure the Hazmat team is covered in addition to the rest of the clean up and rebuilding that will take place.

Do you have a large garage, storage shed, fence, or barn? Normal policy limits have “accessory structures” covered at 10% of the dwelling coverage amount. If your home is insured for $350,000, then it’s likely that $35,000 will be the norm for covering the detached garage, shed, fence and/or barn. Is that enough to clean up and replace all of those accessory structures?

Do you have antiques, heirlooms or other unique items? Those may need an appraisal to ensure adequate coverage. My client with an antique watch collection is covered because I said something to his agent.

Keep receipts. Take a video of your home and its contents. Keep all of that in a safe deposit box or in secure off site computer back up. If you’re robbed, the electronics are likely gone. If you have a house fire, the computer files will not be retrievable. Get a back up for your back up. Please make sure you’re covered and can replace your things, including your computer files.

Please have a conversation with your insurance agent, even about the not so glamorous things (sewer backup and ordinance issues). No one likes to think about a possible homeowner’s insurance claim. Natural disasters, fires and thefts are major life disrupters. But it sure is easier to handle a claim when you’re properly prepared and know that you’re covered.

Please pass along this information to those you love.

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com

NMLS 197075; MLO-224VA

Lending guidelines too tight, costs too high?

- Thank you to Suzanna Ravin for this post.
 

Taking the "Scary" Out of Buying a Foreclosure

Foreclosures are almost always intriguing. Neighbors, real estate agents, investors, and potential buyers are all curious. Is the home a diamond in the rough, a bargain, a nightmare, or a combination of all of those? I've seen the full gamut in condition: from excellent and move-in ready, to needing paint, flooring, and appliances, to mold growing over two inches tall on the basement floor.

I always advocate being an informed buyer, and a foreclosure is certainly not an exception to this rule. Not only does the condition of the home matter, but so do title defects, possible insurability issues, and all the "consequences" that you cannot see from a visual inspection alone. It's a good idea to spend $300-$500 for a qualified home inspector with a good reputation, and also wise to speak with a licensed contractor to get an idea of any potential repair costs.

It's also best to know your financing options as you sort through the foreclosure options. You'll be looking at several homes, and some of them may need repairs. It's imperative, before proceeding with a purchase, to know the home is in good enough condition to be financed, as lenders will not give a loan on a home deemed unlivable.

With that in mind, be sure to work with a mortgage professional who understands foreclosures, and has a myriad of options available should your dream home need some work to bring it back to an acceptable condition. A home that needs renovations will probably need a different loan program than one that does not. Don't worry -- even if the home is deemed unlivable in its current condition, there are renovation loan programs available to "bring the home back to par".

Working with the listing agent is not always the best option. If ever there is a time for your own real estate agent representation, it is on a foreclosure purchase. Find a knowledgeable foreclosure buyer's agent who can help you understand the benefits, pitfalls, and interesting points.

Benefits:

There are some great benefits that can be had when purchasing a foreclosed home. The sales price can be less than fair market value (sometimes significantly less). The condition can be better than you expect. Sometimes, little to no work is needed. Other times, the work needed can be fairly minor and cosmetic in nature, where a little sweat equity and a trip to Lowes is about all that's needed to bring the shine back.

Pitfalls:

There can be some doozeys. On occasion, the pricing on a foreclosure is higher than similar properties that are not foreclosures, and this is usually due to the added costs the banks assume in legal fees, maintenance costs, and taxes. The title also needs to be clean (not just marketable), or you may have problems financing and/or selling the home in the future.

The condition of the property can be worse than you expect. Some former owners vandalize the home, stripping the home of its essentials: cabinetry, mechanical systems, copper pipes, bath fixtures, lighting, and even flooring. Foreclosures can also sit vacant for a good while, causing a minor problem to blossom into a major one because there's no one in the home to catch the issue before it turns into a big headache. The repairs needed can be extensive, even sometimes structural.

And, finally, hearing back from the seller on your offer/counteroffer can sometimes take a while, so be patient. There's no guarantee that buying a foreclosure will save money over buying a non-foreclosure, but patience and prudence can pay off in a big way.

Interesting Points:

As mentioned above, buying a foreclosure takes patience, homework, and sometimes a measure of luck; you should be twice as diligent with foreclosures. In regards to title, there is a distinct difference between "clear title" and "insurable title", as an insurable title is not necessarily a clear title. Please work with a title company independent of the seller so you know the complete picture on the home's title from a company with ties only to you. Foreclosure auctions, in particular, can be risky, as there is rarely a guarantee of insurable title and you must close within a certain time period. 

Your deadline isn't necessarily the bank's deadline; if you're on a tight deadline, be it a lease expiration or school schedule, the longer than usual process time line may not meet your needs. If you're under the gun to make a quick decision, a foreclosure may not be for you, unless you can make alternate arrangements for housing while the process plays out.

To provide yourself additional protection, ensure the contract gives you a way out if the property's condition is worse than expected, inspectors find damage that requires more than a certain dollar amount worth of work, or a title search uncovers additional liens above a certain dollar amount. It's better to walk away from a home that has major issues than to wind up owning a money pit.

Before you proceed, make sure the foreclosure you're looking at is the right purchase for you. If you do not get the contract on one, something else will come up. There are numerous foreclosures on the market today, and you can easily find them through free foreclosure search lists. On top of it all, working with the right team of seasoned foreclosure professionals (real estate agent, mortgage, title, home inspector), you will find a great fit for your needs.

Melanie Thompson, Registered Mortgage Advisor
434-258-5626
Melanie@MortgageEquityTeam.com

NMLS 197075; MLO-224VA