Buyers and Lenders...

Are you thinking of purchasing a home soon?  Do you need a loan?

Here are some interesting statistics, from the California Association of Realtors.

The Take-Away: buyers should have chosen their loan, and their lender before starting their home search, as it is an important part of the decisions they have to make relative to the whole process.  Their search will depend in part on what they find out with their lender.

Thank you for reading!  If you like my blog, share it! ;-)

Francis

Home Valuation tool

Detailed, local trends etc...

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Some advice to home buyers.

Some advice to home buyers:

 
There is plenty of advice around, available to new homebuyers, - no shortage of good words, must-do's, encouragements, explanations and training, etc...  I do not mean to be comprehensive in this blog, but I just wanted to say a few things coming to mind, in light of what is going on out there: the current local market, fast-going environment, competitive to the extreme, sometimes ruthless.


Taking a bit of perspective, I just wanted to throw some ideas out there and remind of some basic main ideas:

• Home buying doesn’t begin with home searching; it begins with a mortgage pre-approval.  Often, first-time home buyers fear getting pre-approved because they’re
  
  afraid the lender may tell them they do not qualify for a mortgage or they qualify for a loan smaller than expected.  However, by getting preapproved, buyers will make a financial decision rather than an emotion one.  Also, knowing that they can qualify for a certain loan (depending on the terms of the loan), they will feel more confident in their endeavor, as they will be sure of what they can really buy (in $), as they are looking at homes.
• Home buyers need to think of a house as a long-term commitment.  If a buyer may have to switch jobs in a year or two and may have to move for the job, they should think twice about buying a house.  Ideally, buyers should picture themselves living in the house for five to seven years.
• Should a buyer have to move after a few years, following the above train of thoughts, they may want to think in terms of an investment for the long term: a "retirement account" - they could rent out the property.  Just saying it is a possibility for people thinking "long term".  (see this article from the LA Times)
• Some first-time buyers make the mistake of spending all of their savings on the down
  
  payment and closing costs, and sometimes borrow on their 401K.  However, it is not good to be left with no savings at all for home repairs and other unexpected expenses.  It could make more sense to get in the market with a smaller property, i.e. a condominium/townhouse, and move up 3 to 5 years later.

 

• Should there be a lot of competition for the chosen house, give it your very best. 1/ there will be no regrets should it not pan out, 2/ chances are that in a year or two, you will not remember exactly the price you paid, 3/ there is a cost in searching for too long a time, both psychological and monetary; or I should say there is "savings" in just getting it done earlier rather than later: interest rates can go up, prices can go up, and moving into your new home is much better than looking for it week after week.

 

As always, thank you so much for reading, and if you like what you read, let your friends know!

 

Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates

Buyers: the advantages of preapproval...

The advantages of preapproval.

The housing market is warming up in many areas, with multiple offers becoming more commonplace. Buyers who want an advantage in the bidding process will need more than a mortgage prequalification – they will need a preapproval.

The differences between mortgage prequalification and preapproval are significant. Prequalifying for a mortgage is based solely on what a borrower discloses to the loan officer or broker about his/her earnings, credit score, and total assets, including what is available for a down payment. By contrast, a preapproval requires a borrower to provide documentation of his/her income and assets and everything else.

The lender typically pulls the borrower’s credit report and score, while the borrower gathers together almost everything else needed for the actual mortgage underwriting: W-2 wage statements; 1099s; recent pay stubs; bank statements; and statements from Individual Retirement Accounts and 401(k)s; and other assets that could show the borrower has the resources to buy and maintain a home. 
-- An important note here: depending on your qualification, the loan will have a different cost !  Shopping for a loan is therefore often elusive: one would have to apply to different lenders to truly know to compare their rates, at the same given time (rates change several times a day, within the same organization).

A preapproval means that the file has gone through the underwriter of the bank/lender.  If approved, it is nearly certain that the loan will be granted to the buyer, subject to the specificities of the property itself, and a few other standard necessary conditions (like proof of insurance, and such...).

With so many homes receiving multiple offers, a preapproval is essential in today’s marketplace.

The preapproval letter should include the amount a borrower is qualified to borrow, as well as the loan officer’s contact information, and mention that the downpayment has been verified.

I personally advise buyers to obtain a preapproval letter for the maximum amount allowed, under the reasoning that the more qualified you are, the better you can negotiate.  If you borrow a lot less than you can, you advertise that there won't be any problem with you getting a loan.  Case in point: a cash offer is going to be always more attractive for the seller, right off the bat: there won't be any problem with obtaining financing....  What the seller wishes is the best assurance that the buyer he/she chooses is going to close the transaction.  Otherwise, the penalty is: wasting precious marketing time, at the beginning of the marketing period, which is the most important period in the property's listing cycle. 

You can see all the details in this article of the New York Times.

Thank you for reading, and if you have any particular experience in this domain, good or bad, I'd love to hear it ;-)

Francis

Silicon Valley Real Estate

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A noteworthy cause:  Habitat for Humanity