The government recently issued new guidelines for the Good Faith Estimates (GFE) issued by loan officers to home buyers. These guidelines are designed to protect the home buyer from shady lending practices, specifically bait and switch scenarios. As we know, with every positive action we get an equal negative action as a result… in this case, you get protection at the cost of a fair bit of confusion.

Lenders can no longer hand you a sheet that breaks down the fees they charge for processing your loan. For analytical people like myself, not being able to know exactly what I’m being charged drives me nuts. Since I’m not alone, you will find lenders creativity bending the rules by naming the sheet that breaks down their fees something like “Fee Disclosure Sheet”. These Fee Disclosure Sheets are nothing more than the old GFE, simply disguised and renamed. Just realize, if Lender A gives you the fee disclosure sheet Lender B might not give you that sheet which makes Lender A’s sheet useless because you can’t compare it to anything.

Here is a copy of the New Good Faith Estimate (GFE) if you’d like to check it out for reference as we continue on.

There are a ton of little details that go into the new GFE but for sanity reasons I’m going to skip the small stuff and focus on what’s most important for a buyer to know so they can quickly and confidently compare loans between lenders.

1st… Ignore 80% of the GFE

Over 80% of the information on the GFE will be the same no matter what lender you chose to work with. At this point in the home buying process, you are already under contract. Which means the title company has been chosen, the closing date has been chosen, the details regarding the HOA and who’s paying what fees has already been negotiated, etc. No matter who you use, these costs have already been determined.

2nd… the 80% Causes All The Chaos

For anyone that thinks putting together a GFE is simply a matter of tossing numbers into a simple three page document, you are WRONG. The loan officer has to call the title company to get their fees, which can take 1-3 days to get. What day you close changes countless figures due to prepaid items, taxes, etc. The HOA could have any number of unknown transfer fees, working capital fees, assessments, liens, etc. Most HOA figures and information don’t come in until after the title company has asked for it which can take from 3 days to 3 weeks depending on the situation. Don’t forget, you have to buy home owner’s insurance… even you don’t know what that will cost at this point, but it will be part of the 80%

All these fees will increase or decrease with the slightest change in circumstances. If one loan officer has a different set of information or is missing any piece of the information, they can’t be competitive nor can you fairly compare them to each other. Do everyone a favor (including yourself), ignore these fees and avoid the unnecessary chaos.

Focusing on the 20%

Here is what you REALLY want to know:

1. What is the lender charging me to process/underwrite the loan? (Box A + Line 3)
2. What is the interest rate?
3. What will the principal and interest payment be every month?
4. What will the monthly mortgage insurance be?
5. What will be the total monthly payment (add #3 and #4)

Here’s an excel spreadsheet for FHA loans to help you compare several loan options or lender’s GFE’s. Here is the PDF Version.

How to Properly Request Several GFE’s

Now that you know how to compare GFE’s you only have one last thing to learn…. how to properly ask for a GFE to get the best rates and minimize the headache.

1. Chose your lenders
2. Let them know you will be asking for GFE’s from several lenders
3. Pick a day 24-48 hours in advance and have all the lenders provide you GFE’s on the same day (this ensures changes in the market won’t unfairly effect someone)
4. Be ready to provide them with all the necessary documents they request immediately
5. Sit back, relax and get ready to fill in the worksheet provided.

Final Notes

If you are going with a conventional loan, there are a handful of additional factors to consider. Here is a spreadsheet for conventional loans.

Buying down rates can be expensive and I don’t normally recommend it unless you have extra concessions from the seller that need to be spent.

Lender’s can make money several different ways depending on the loan, many of which are too complex to explain or worry about. An origination fee should not be looked at as a bad thing, instead consider it a valuable and valid option. If there is an origination fee, the rate should be lower than the loan option without an origination fee.

Lastly, you might be able to save a few bucks by going with one lender over another. But realize the process is extremely complex and will require strong communication and trust between you and your lender in order for the deal to close. Deals that fall apart as a result of poor loan officers, typically fall apart a couple days before closing. Which means once everything starts falling apart, you won’t have enough time to shift gears, get a new lender and close on your home.

Feel free to contact me with any questions or for help comparing Good Faith Estimates and/or loan options.

Here are some of the best tips we’ve gathered over the years for home buyers to use when previewing homes.

Here are the topics we will cover:

1. How to do your homework
2. What to bring to your appointment
3. Previewing from the “Outside-In”
4. Tools to download and use

Doing your Homework

It is very common for home buyers to find a home online, fall in love with it and instantly pick up the phone to make an appointment to preview the home. This type of home searching leads to home buyers seeing hundreds of homes when in reality they could have saved themselves and their Realtor a lot of time by just doing a little bit of homework.

Step 1: Google It

Lets start with Google Maps. By dropping the home address into the search box you can quickly see satellite views and street views. The street view will allow you to move along the neighborhood as if you were driving up and down the streets. This will give you a great snapshot of what the neighborhood and surrounding shopping plazas look like. From time to time the information will be a little outdated, but we’ll get to that in the next step.

Step 2: Drive the Neighborhood

It only take a couple of minutes to check out the neighborhood with Google. If you are still interested in the neighborhood then its time to get in the car and drive the neighborhood. The best time to drive through the neighborhood is anytime during the day, in the evening and on the weekends. You are looking for anything that is important to you ranging from kids in the streets to cars parked on the the neighbors lawn.

If the house still fits your needs, then its time to setup an appointment with your Realtor.

What to Bring to The Appointment

Here’s a question, how much can you remember after seeing 5 to 10 different homes? The answer is, not a whole lot. Which means its important to come prepared with everything possible to help your remember the smallest details of every home. Of course, we are only referring to the homes you actually liked. And don’t forget your friends and family will be asking for pictures and lots of details!

Camera
A simple point and shoot camera will do. All you are really looking to do is capture exactly what you are seeing, there’s no need to go overkill with a telephoto lens.

Video Camera
If you are the type of person that enjoys taking video, then I would suggest you bring along a video camera. If you are in the market for one, the Flip Video  cameras are very popular and fairly inexpensive. I’d recommend the UltraHD, here’s the main website link.

Ruler
When you find a home that meets your needs, the next question is always “will the furniture fit?” A standard tape measure will always do the trick. If you’re feeling the need to venture on the techi side then look for a sonic laser tape. Its essentially a tape measure without the tape. It is a lot of fun, but it can have a few draw backs when you are measuring more than simple room dimensions.

Clipboard, Pen and Printouts
You’ll want to print out a copy of the homes you are going to see and attach them to your clipboard. The clipboard will make for an easier surface to take notes on.

Previewing from the Outside-In

As you drive into the neighborhood start taking notes (mental and written) about everything you see. When you pull up to the home take note of the home’s curb appeal. This is a great time to grab the camera and start taking pictures.

Walk around the outside of the home looking for anything of importance; good, bad or otherwise. This will give your Realtor some time to obtain the key and unlock the house.

Once you are inside the house put yourself in the shoes of a guest and in your shoes after coming home from work. Start by touring the home as a guest as you walk through the home and explore all of the home’s features.

Once you’ve completed that, go back to the garage and start the tour again. This time walk through the home as if you are just getting home from work or the grocery store. The main question is, “is the home functional?” Is the door from the garage to the kitchen too far or have too many turns? Are you alright with walking through the laundry room when you come home? Keep in mind, this is how you will see the home 90% of the time. Note: this is a great time to use the video camera.

If you haven’t already checked out the backyard, go ahead and see what it has in store for you. Be sure to walk all the way around the backside of the home. Look at everything from the roof to how the trash can gets pull in and out at night. If you’re like me, dragging trash cans over a bed of small rock is annoying and hard on bare feet… that is assuming you have the tendency to forget to put the trash cans out, resulting in a habit of showing the garbage man what you look like in your pajamas.

Lastly take notes on the home. What did you like and what didn’t you like are great starting points. Always ask yourself, “is this home the right home for me/us?”. If not write down what needs to change in the home to make it perfect, you might be surprised at what a little elbow grease can do to make it the perfect home.

Tools to Download and Use

Here is a template form for you to download and use. Simple enter the home’s street addresses and hit “print”. Bring the sheet along with you to your previewing appointment so you have any easy way to consolidate all your notes. This will make it easier for you to reference later and it will help you remember more of each home.

Home Previewing – Comparison Sheet

Google Maps

If you have any questions, suggestions or tips, feel free to contact us or leave us a comment!

Last weekend I decided to cook a ton of food and freeze it for future meals. I’ve found this to be a really good way to always have a tasty dinner on hand that doesn’t take hours to shop for, prepare and cook. Instead all I need to do is typically toss the meal in the oven for 30 mins and I’m good to go.

Some meals go on the grill and others are cooked on the stove, just depends on what sounds good for dinner. No matter how it’s cooked it always tastes homemade.

I’ve had a few friends ask for the list of recipes, so I’ve scanned them in and uploaded them. 11.14.09 Recipes and Grocery List

The first page of the document is a shopping list. I learned very quickly when you prepare this much food it can be easy to forget an item or two or three. And since nothing drives me more insane than making additional trips to the grocery store, I make sure I get everything the first time out. So call it OCD if you will, but it pays to be prepared!

Almost all the recipes come from a series of books titled “Don’t Panic – Dinner’s in the Freezer” I included a picture of the book in the PDF along with a table that shows you how long the meals will last in the freezer. You’ll find that pretty much everything lasts about 6 months.

I also bought a new camera recently so I had some fun taking pictures of the event. Most can be found on Facebook, but I’ve included some additional photos here.

If you have any questions, just let me know.

Cheers!

This afternoon I went to lunch with a good broker friend of mine Luetta. She ended up giving me an earful for being too serious with my blog posts.

As many know, I’m passionate about providing quality information and educating homebuyers, so I will admit I do spend too much time writing blog posts (somedays).

To help break me of my perfectionist habit, Luetta challenged me to “let go” and write a blog post in crayon. At this point I’m not sure what was harder, writing legibly with crayons, choosing between 120 different colors or scraping the crayon wax off the glass scanner bed (oops!).

Hopefully the crayon drawing says enough, if not leave a comment with your questions!

Will you be able to find a home and close in time to receive the $8,000 tax credit?

Let’s look at the home buying time line and discuss some of the pitfalls you’ll want to consider before spending any more time sitting on the fence or gambling on short-sales.

What We Know:

• Tax Credit “expires” on December 1st, 2009
• You must close on your home by November 30th
• The IRS says there will be NO exceptions
• Rumors of next year’s tax credit have gone silent

Time Factors for Each Party in the Transaction:

Depending on who owns the home and what process they are using to facility the sale, will vary greatly from home to home. Here’s a breakdown of how long each major phase of the sales process takes. Take note of the never ending list of reasons for a short sale to be delayed.

Bank Owned | Foreclosure Homes

• 1 to 14 days to get an accepted contract
• 30 and 60 days to close
• All time factors depend on the bank handling the sale

Owner Owned Homes

• 1 to 5 days to get an accepted contract
• 30 days to close
• All time factors are somewhat flexible due to the reduced number of parties

Short-Sales

• 1 to 14 days to get an accepted contract
• 30 to 120 days to close
• All time factors depend on:
  • Number of loans on the home
  • Number of banks involved
  • Who the banks are and their protocol
  • Where the home is in the short-sale process
  • The selling (listing) agent
  • The homeowner
  • The buying agent (yes, they can make a difference)
  • The number of original contracts
  • The number and value of subsequent contracts
  • Currently political pull by the government
  • The bank’s quarterly numbers

Lender Process (assuming you are prequalified)

• 30 to 60 days to underwrite and fund the loan after the contract is accepted
• All time factors depend on the bank’s volume of loans
• I personally know imortgage has dedicated a large amount of resources to guaranteeing a 30 days close. In this market, that is a powerful promise.

Realtor Process

• Currently there are no reasons why the Realtor’s paperwork process would slow down your closing.
• Working with a full time agent could reduce a day or more from the time it takes to get an acceptance

Summary of Time Factors

If you know what type of property you are considering, this breakdown will give you an idea of how soon you should submit your contract in order to have ample time to close and reach the deadline.

Buying a Bank Owned Home

• Bank: 31 – 74 days
• Lender: 30 – 60 days after contract acceptance
• Ideal Amount of Time to Close: 60 days
• Submit Contract No Later Than: Last Week of September

Buying an Owner Owned Home

• Owner: 31 – 35 days
• Lender: 30 – 60 days after contract acceptance
• Ideal Amount of Time to Close: 45 days
• Submit Contract No Later Than: First Week of October

Buying a Short-Sale Home

• Bank(s): 31 – 134 days
• Lender: 30 – 60 days after contract acceptance
• Ideal Amount of Time to Close: 90 days
• Submit Contract No Later Than: First Week of September
  • Exceptions: In some instances Short-Sales can close in 30days, the listing agent will let you know if this is an option

Consider This:

Here are a few additional things to consider to help ensure your home closes on time for the tax credit deadline.

November Will Be a Crazy Month
With everyone trying to close on their home by November 30th there will be a lot of closings happening in November. You can expect title companies and loan processors to be overworked and exhausted. Which means you could see an extra two week delay in closing just because of the overwhelming amount of paperwork.

Give Yourself a Few Extra Days to Close
With everyone being in a rush to close a large volume of homes and loans, it is a good idea to buy yourself sometime to make sure there aren’t any typos. A small error on the lender or the title rep’s part could cost you a few thousand dollars. Make sure your Realtor is looking over the HUD statement to make sure it all looks right.

Common Questions:

When Will We Know about The Next Tax Credit?

I predict we will hear about the next tax credit either during November or two days after the November 31st deadline passes.

Why? Because that is when it will be too late for anyone to change their mind and it will be perfect timing to keep the housing momentum going.

What Will the New Tax Credit Look Like?

4 main rumors are floating around about the next tax credit:

1. It will revert back to the original tax credit which was more like an interest free loan
2. It will be the same as this year’s
3. It will be increased to $15,000
4. There will be no tax credit, because the economy is already starting to recover

Out of the four options, only two of them are options worth holding out for. Which means, holding out for next year’s tax credit could be a gamble and essentially there is only a 50% chance there will be a program available.

3 Quick Tips to Reduce Your Risk of Not Closing on Time

Skip  the short-sales

• There are simply too many unknown factors that could prevent a short-sale from falling out of escrow last minute. That last minute fall out could cost you $8,000.

Play nice, kiss butt

• No one likes to be yelled and unfortunately closing a home in this market can be difficult and tempers tend to flair. Take the nice approach to whoever you are talking with you might be surprised how much further it gets you.
• Want to go a step further? Send your title representative a box of cookies with a note of appreciation. Just don’t forget to write your last name and future home address on box.

Communicate

• Help others avoid dropping the ball by staying in touch with everyone in the transaction to get a feel for what’s going on. You’d be surprised how many hiccups can be prevented with a little bit more communication.

Email us with any questions or comments!

This morning I came across an article listing the top 10 myths shared by first time homebuyers. While I don’t believe all of these are as common as they would have us believe, these are some excellent and very valuable myths to discuss.

Here are the Top 10 Myths:

1. All real estate agents are the same
2. The agent on the for sale sign will look out for my interest
3. I can find all properties for sale on my own
4. If i just wait long enough, I’ll find the perfect home
5. I’ll improve the odds of finding the house i want if I work with more than one agent
6. Buying a house is as simple as agreeing on a price and signing a few papers
7. Foreclosures are the best deal
8. Getting a mortgage should be quick and easy
9. All mortgages are essentially the same
10. If something appears on the inspection report the seller has to fix it

Myth #1: All Real Estate Agents Are the Same

I actually feel pretty bad for my friends and family, because they have certainly heard me beat this topic in the ground. I’m very passionate when it comes to changing the standards and expectations for Realtors. The problem is becoming a real estate agent is very easy in Arizona, the costs are low and the education is minimal.

When it comes to the minimal barrier to entry,  its just like buying a home. If you don’t have an investment in the home (down payment) you won’t be as concerned with caring for and maintaining the home. Same goes for Realtors that jump in and start selling homes with very little investment in themselves or the homebuyer’s needs.

On the education side, Realtors get 90 hrs of education and none of it is practical knowledge for when it comes to helping people buy and sell homes. Its really more a flaw in the system than the individual’s fault. However continued education does exist. For those interested in learning the ins and outs of this business they can look to obtaining the following designations: CRS, ABR, and GRI. Here’s another article of interest: Are Realtor’s an Educated Crowd?

Myth #2: The Agent on the For Sale Sign Will Look Out for My Interest

I think this is a simple misunderstanding of how the industry works. Simply put, the agent on the For Sale sign has been hired by the home owner and therefore has a duty and responsibility to sell the house for the highest dollar amount.

The agent selling the home does not represent the homebuyer. As a result they do not have the duties and responsibilities a Buyer’s Representative would have. What does that mean? It means no comps to determine the actual value of the property, no home inspection, no negotiations, no, no, no and no some more.

Homebuyers simply miss out on too much by not having a qualified real estate agent represent their needs and their needs alone.

Myth #3: I Can Find All Properties For Sale on My Own

As a matter of fact YOU CAN!!! This is a terrible notion that many Realtors hold on to. Back in the dinosaur age (when the internet wasn’t around), Realtors walked around with massive books containing all the homes for sale. The thought of it gives me chills thinking about how much paper was wasted on those books.

Anyways, back then the Realtor’s “value” was all about their magic book. Nobody could see what homes were for sale if they didn’t have a real estate agent. To say the least, the internet changed the game for Realtors and some of them just won’t let go of the old ways.

Here are my quick tips and thoughts for you buyers out there:

1. The important information about the home is RARELY correct. But the details are normally pretty accurate
2. Check out Dwellicious.com – If you would like some tips on using it, send me an email.
3. Realtors no longer find homes, they should be helping you select your home. The rest of our value comes in guiding you through the process and getting you to the finish line (which isn’t easy)

Myth #4: If i just wait long enough, I’ll find the perfect home

8 out 10… that’s the rule of thumb. This technique along with some wisdom will save homebuyers a lot of headache and stress.

The Technique: Start by writing down your top ten needs/wants (note: needs comes first). Really, take a minute, write them down. I’m waiting, patiently…

The Wisdom: You’ll only get 8 of the 10 on your list. I’m sorry, but its true. Start your home shopping with that in mind, and you’ll find more homes that fit your needs and you’ll have the opportunity to be more aggressive and get better results when it comes to the negotiations. Why? Because you won’t be too emotionally attached to the home.

Bit of Reality: When you find your home and move in, look back at your original list of needs/wants. You’ll often find many of them have changed a good deal.

Myth #5: I’ll Improve the Odds of Finding the House I Want if I Work with More Than One Agent

When you start the home search it is understandable and common to want to get out and see as many homes as quickly as possible. By using multiple agents, you might find your home sooner. But when it comes time to write the contract, will you be working with the best agent for your needs?

Good agents are hard to come by and you certainly don’t want to be stuck with a less than quality Realtor when the time comes to negotiate on the contract, do the inspection period, renegotiation along with all the troubleshooting that goes on to keep the contract together.

Myth #6: Buying a House is as Simple as Agreeing on a Price and Signing a Few Papers

Buying a home especially in today’s market is not an easy task. While I tell my buyers this an excellent time to buy and home prices are amazing, I also tell them it won’t be an easy journey.

In today’s market, it is very common to have multiple offers on every home you look at. Foreclosures are often a lot of work and won’t qualify for financing. While short sales can be a roll of the dice.

Here’s another post that might be of interest: The 8 Phases of Stress for Homebuyers

Myth #7: Foreclosures are the Best Deal

Foreclosure homes may be priced well below the market, but you get what you pay for. As you start looking at foreclosed homes, start adding up the amount of money it would take to repair the home to your standards. Factor in the cost of the time involved and you’ll most likely find the savings in the price is a wash.

Also, with the bidding wars that have been going on for months, it is very common to find a foreclosed home sell for a good deal above the list price. If the home is in decent condition it normally won’t last more than a couple days.

Myth #8: Getting a Mortgage Should be Quick and Easy

In today’s market the requirements involved with obtaining a loan continue to get more challenging everyday. Its not uncommon to have the FICO requirements change last minute and have a buyer loose his ability to obtain a mortgage. It is very important to work with a quality loan officer who knows their industry and their job.

The difference between a good loan officer and a poor loan officer could easily be the difference of loosing your ability to finance a home at the last minute. Not to mention it can be tricky to find the best mortgage product for every buyer. A good loan officer will be extremely comfortable with the mortgage product (loans) available on the market.

Myth #9: All Mortgages are Essentially the Same

Today I cringe when I hear someone say this, but I do understand where they are coming from, as I once thought the same thing.

Here’s some food for thought. If you get an amortized loan (common form) today for $250,000 at 5.5% interest and for a term of 30 years. At the end of the 30 years, you will have paid off your home/loan amount and you will have paid $261,010. in interest. That is a lot of money to be gambling with. Change the interest rate to 6% and you’ll pay an additional $28,00 in interest.  But that is not the only variable that will determine how much you pay over the life of your loan.

Some of the variables for a mortgage include: interest rate, the type of loan, the loan program, the term (length), pre-payment penalties, mortgage insurance and more. All these variable and the ones only a loan officer could ramble off are reasons to take your time when you select your mortage.

Myth #10: If Something Appears on the Inspection Report the Seller Has to Fix It

During a normal market sellers typically know they will receive some money at the time the home sells. As a result asking for repairs is normally not a big deal. Nevertheless, you still need to be reasonable.

In today’s market that situation no longer applies. Banks know they are already loosing money on a home and flat out refuse to do any repairs on the home. With short-sales, the homeowner are already upside down on the home and the bank won’t let them short-sale their home unless they are broke. So again, there is no money available to be spent on repairs.

In this market, what you see is what you get. And sometimes the house is in bad enough shape, the bank won’t loan you money to buy it.

Informed Buyers Make Informed Decisions

Some real estate agents wonder why I put so much information on my website for homebuyers to read and educate themselves. Simply put, I believe informed buyers make informed decisions. Informed decisions are ones they will be happy with for years to come.

I never want to hear a homebuyer tell me they regret their decision to buy a home. I believe that can only be done if they make informed decisions about the home buying process. There are no sales tactics here, just good solid information to help homebuyers with their home buying decisions.

If you have any questions or comments, don’t hesitate to send me an email or leave a comment below.

iMortgage has recently released a new loan program for homebuyers. It allows homebuyers to get 22% of their loan for free and do 1% down. FHA, Conventional, VA or USDA it doesn’t matter, this program will work. However, like most good deals the opportunity might not last long!

The program has one small catch, but if you can find a way around it this is an excellent way jump into a home with very little down!

Here’s a quick summary:

1. The buyer still needs to come up with 3% down, however 2% of that can be “gifted” from a family member (etc)
2. The 22% from ADOH never has to be paid back if the buyer stays in the home for 5-15 years! (depending on the amount) and if they pay it back, its a zero interest loan!
3. This applies to bank owned properties only
4. The home must sell for 1% below market appraised value (the catch)

Here is what i have so far. For more information contact Beth Wakeley: beth.wakeley@imortgage.com

The Arizona Department of Housing (ADOH) will be offering 22% in purchase assistance to qualified homebuyers purchasing a qualified foreclosed home in Arizona.

Borrower Qualifications:

• Primary residence, owner occupied
• Does NOT have to be a first time homebuyer
• Household income limits apply
• Minimum credit score of 620
• Maximum debt-to-income ratio of 31/43
• May have non-occupant co-borrowers
• Must be approved by AUS
• Must have 2 months of PITI reserves
• Must attend an approved homebuyer education course

Down Payment:

• 3% of Purchase Price
  • 2% can be a gifted
  • 1% must come from the homebuyer

Property Requirements:

• Foreclosed properties only (bank-owned)
• One-unit detached single family homes, condos or town-homes
• Must be vacant
• Purchase price must be 1% below current market appraised value

Loan and Grant Terms:

• First lien (loan) can be FHA, VA, USDA or Conventional
• 22% of purchase price for ADOH loan
• Grant is in the form of a silent second
• No monthly payment (0% interest)
• All ADOH loans are forgivable after required period
  • < $15,000 = 5 years
  • $15,000 – $40,000 = 10 years
  • > $40,00 = 15 years
• Seller may contribute 6% towards closing costs

Got questions? Send us an email – mail@FlinskRealEstate.com

Happy Home Hunting!