Can a Seller Back Out after a Low Home Appraisal?

by Real Estate

Low appraisals have become the norm for the inflated real estate industry lately and for good
reason. Bidding wars have caused home prices to inflate significantly, but the prices aren’t
always warranted.

Many buyers covered the difference because they had faith the values would bounce back and
the home would be a good investment, but not all buyers are willing or able to do this.
So, what can a seller do if the appraisal comes in low?

It’s a tricky answer. Here’s why.

Purchase contracts are legally binding. Unless the seller has a contingency (which is rare), the
buyer commits fraud, or the buyer breaches the contract, sellers can’t break a contract without
consequences.

But there are options.


Sellers Don’t Have to Lower the Price
Just because the appraisal comes in low doesn’t mean you have to accept that price as your
sales price. If you and the buyer already entered a contract, that’s the price you agreed on. If
the buyer can’t make up the difference between the appraised value and sales price, the buyer
can back out, which then ends your contract.


You can Meet in the Middle
If the appraised value isn’t too different from the sales price, you might consider meeting in the
middle. For example, you signed a sales contract for $200,000 but the appraisal came in at
$180,000.
You can lower the price to $190,000. This means the buyer must bring an additional $10,000 to
the table and you ‘eat’ $10,000.
You aren’t obligated to do this, it’s just an option.

Have a Contract with a Kick-Out Clause
A sales contract with a kick-out clause allows you to continue marketing and showing the
property. If by the kick-out clause date you find another buyer willing to pay the sales price
despite the lower appraised value, you can ‘kick out’ the original buyer and accept the new
offer.
The original buyer gets a certain amount of time to remove their contingencies and buy the
home at the higher price or you can move on with the new buyer.

Appeal the Appraisal
It’s a long shot, but you can also appeal the appraisal. You can ask the appraiser for a
reconsideration of value based on the information you found or information from your
reputable real estate agent.
Appraisers rarely change their minds, but if it’s your only way to fix the situation, you could
consider it.


Final Thoughts
Before signing a sales contract, make sure you’re working with a reputable real estate agent
who understands local values. Signing a contract for a lot more than a home is worth might only
lead to upset buyers and canceled contracts.

Working with a reputable real estate agent, though, you’ll have a feel for the industry and the
area’s values, ensuring you get what you want for the property. If you find yourself in a contract
with a low appraisal, you have options, but you’ll need proper representation to help you use
them.

How Long Does It Take to Close on a Home?

by Real Estate

Buying a house is exciting and overwhelming all at the same time. Not only must you find your
dream home, but you must secure financing too unless you’re paying cash.

The financing part causes a lot of stress for most people because they don’t know what to
expect. One of the largest concerns I hear about is how long does it take to close on a home?

How Fast can you Close?
When you sign a purchase contract, it’s natural to want to close right away. But it takes time.
While it varies by lender, the national average is 48 days. With higher interest rates and a slow
in the industry overall, you might see faster turnaround times, though.

The Loan Closing Process
You might wonder what takes so long to close on a home. It helps to understand the steps
lenders go through.

  1. You get pre-approved before you look at homes. This allows the lender to review your
    credit score, income, assets, and liabilities. They use this information to make sure you
    qualify for any of their loan programs.
  2. You work with a reputable real estate agent to find your dream home and sign a
    purchase contract. Once signed, you give the lender the contract along with any other
    conditions you can satisfy according to your pre-approval letter.
  3. You open escrow. This is where you put money down in ‘good faith.’ This tells sellers
    you’re a serious and qualified buyer and are willing to risk your funds. A neutral third party
    escrow company holds the funds until you close.
  4. The lender orders an appraisal and title work on the property. This information tells the
    lender if the home is a good risk. Is it worth at least as much as you’re paying? Is the title
    clear? In other words, is the chain of ownership legal and are there any outstanding liens
    aside from the seller’s current mortgage? This process could take a couple of weeks.
  5. Clear any outstanding conditions. At this point, to get to a clear to close, you must
    provide any straggling documentation the lender needs. Sometimes other issues come
    up when they review your paystubs, verify your employment, or look at your asset
    statements. Stay in touch with your loan officer and provide documentation as quickly as
    possible.
  6. Close on your loan. Once you have the ‘clear to close,’ you’re free to close on the loan
    and take ownership of the home.

    Final thoughts It’s always worth asking a lender what their turnaround time is, especially in today’s market.
    Some lenders are moving much faster than others. If you have a closing date that’s sooner than
    30 – 45 days, make sure you find a lender that can work within that timeline.
    Some of how fast you close a loan depends on how well you cooperate with the lender. The
    faster you provide the documentation they require, the faster they can clear your loan to close.

Do you Know What that Interest Rate will Cost You? Mortgage Rates Matter!

by Real Estate

If you’re in the market for a house, you might think about the features the house has or the price, but how often do you think about the mortgage rate?

Many buyers I work with don’t realize the importance of the mortgage rate, so I’m here to clear the air so you make an informed decision.

What is a Mortgage Rate?

The mortgage rate is the fee the lender charges you to borrow money. You borrow principal, or the amount of the loan and the interest is the fee they charge you. Your monthly mortgage payment includes both the principal (loan amount) and interest (the bank’s fee).

How Much of a Difference Does the Mortgage Rate Make?

You might not think the mortgage rate makes that much of a difference. After all, if it’s just 1%, how much more could you pay?

The difference is tremendous, especially if you’re talking about a 30-year loan. When you borrow funds for 30 years, you keep the bank’s money for that time. This means they charge you interest over 30 years versus 10 or 15 years on a shorter term loan.

Here’s an example:

You borrow $230,000 at 4% for 30 years. Your principal and interest payment are $1,098 and over the life of the loan, you’d pay $165,299 in interest. That’s in addition to the $230,000 that you pay back (the money you borrowed).

Now, if you borrowed $230,000 at 5% for 30 years, your principal and interest payment would be $1,234 per month and over the life of the loan, you’d pay $214,488 in interest.

That’s a difference of $49,189! I’m sure there’s a lot you’d rather do with that amount of money instead of paying the bank, right?

How to Lower your Interest Rate

So how do you make sure you get the lowest interest rate? While every lender is different, here are some ways to ensure you get the best rate possible.

Pay your bills on time
Don’t overextend your credit lines, keep your credit balances at 30% or less of the total credit limit
Dispute any incorrect information on your credit report
Keep a stable job and income
Make sure your monthly debts including the new mortgage are 43% or less of your gross monthly income
Don’t have any collections on your credit report
Make a large down payment

Lenders like it when borrowers are a low risk of default. You can be this by providing great credit, a large down payment, and solid employment and income histories.

Final Thoughts

Your interest rate makes a big difference in your mortgage payment and even what house you can afford. Sometimes even an interest rate that ½ point higher can make you ineligible for a mortgage loan.

Don’t take a chance. Shop around and get the best interest rates possible all while ensuring that you present lenders with the least amount of risk as possible.

What is a First Time Buyer Program and How do you Qualify?

by Real Estate

First time homebuyers have one major obstacle – the down payment. When you already own a
home and sell it to buy another, usually you have equity to use for the down payment. You don’t
need much money out of your own wallet, making it easier to qualify for financing.

If you’ve never owned a home before, though, you don’t have equity to fall back on and you
might not have enough money for a down payment. Does this mean you can’t buy a new home?

Fortunately, there are federal first-time buyer programs to help.

Good Neighbor Next Door

The Good Neighbor Next Door program is a HUD program that is for anyone that works in public
service such as police, firefighters, teachers, nurses, or doctors. If you buy a HUD home in a
specified area of your state, you can buy the home for 50% less than its purchase price.
When you buy the home, you’ll sign a second mortgage note for the 50% discounted amount of
the purchase. If you stay in the home for 36 months, the 2nd mortgage is forgiven and you own a
home with over 50% equity in it.

HomePath Ready Buyer Program

The HomePath program is another way to revitalize certain areas of the state, only this program
focuses on foreclosed homes.
The program is only for first-time homebuyers and requires just 3% down. However, you can
apply to get 3% of your closing costs back to offset the down payment. You must be willing to
live in the home full-time and be able to accept a home as-is, which might mean that it needs
some repairs or renovations.

USDA Loans

Another option is the USDA loan. Many people avoid it because they assume they have to live in
the middle of nowhere to qualify.

You don’t.

USDA loans are for low to moderate-income families that don’t qualify for any other financing
options. It’s great for first-time homebuyers because you don’t need a down payment – you can
buy a house with no money down and less than perfect credit.

The only catch is your total household income must be less than 115% of the area’s average
income. If your household income exceeds this amount, you wouldn’t be eligible.

State and Local Grants

There are also opportunities for state and local grants for first-time homebuyers. The programs
vary by location. It’s always worth inquiring at your state and local level about options for firsttime
homebuyers because you never know when there’s an opportunity.

Final Thoughts


If you’re a first-time homebuyer hoping to buy your first home but need financial help, let me
help you. Together we can explore your options from financing for first-time buyers to grants or
other programs available.

There are many ways to make buying your first home possible, but it starts with taking that first
step and deciding you’re ready to be a homeowner.

The Best Mortgage Loans for First-Time Homebuyers

by Real Estate

Buying your first home can be exciting and overwhelming at the same time. You’re fulfilling the
American dream but at the same time, taking on the largest debt of your lifetime.

Fortunately, there are many great mortgage loans for first-time homebuyers. Here are our top
choices.

FHA Loans
FHA loans used to be known as a ‘first-time homebuyer’s loan.’ While today anyone can use the
program, it is a great program for anyone that hasn’t owned a home before because of its
flexible guidelines and low down payment requirements.
FHA loans require mortgage insurance for the life of the loan at a rate of 0.85% of the loan
amount. Your insurance payment decreases each year as you pay your balance down, but you
pay it for the life of the loan.


How to Qualify
• Minimum 580 credit score
• Maximum 43% – 50% debt-to-income ratio
• At least 3.5% of the purchase price as a down payment
• Stable income and employment for the last 2 years
• No recent bankruptcies
• Proof you’ll occupy the property as your primary residence

Conventional Loans
Conventional loans are reserved for borrowers with good credit, but it doesn’t have to be
perfect. We’ve seen borrowers get approved with a credit score of 660 which isn’t in the ‘good
credit’ range.
Conventional loans are different from FHA loans because you can cancel your Private Mortgage
Insurance once you owe less than 80% of the home’s value. This means your mortgage payment
will decrease once you eliminate PMI.

How to Qualify
• Minimum 660 credit score
• Maximum 36% – 43% debt-to-income ratio
• At least 3% down payment (5% if you owned a home before)
• Stable income and employment for the last 2 years
• No recent bankruptcies

VA Loans
VA loans are for veterans that served or are serving our country. This flexible mortgage program
doesn’t require a down payment and has the most flexible guidelines for veterans.
The program is only for owner-occupied properties and is a great option for veterans right out
of the military looking to buy their first house.

How to Qualify
• Minimum 620 credit score (this varies by lender since the VA doesn’t have a minimum
credit score requirement)
• Maximum 43% – 50% debt-to-income ratio
• No down payment required
• Adequate disposable income according to your location and family size according to VA
guidelines
• Stable income and employment or proof of future employment if you just got out of the
military
• Proof you’ll occupy the property as your primary residence
• Certificate of Eligibility to prove you are eligible for a VA loan

Final Thoughts
If you’re a first-time homebuyer, you have many mortgage options available to you. Compare
your options and get quotes from at least 3 lenders. Each lender has different requirements and
charges different rates and fees.
I’m happy to help you figure out which loan is right for you as well as help you find the house
that’s perfect for your needs. Together we’ll make your dream of homeownership come true.

How to Get a Mortgage with Bad Credit

by Real Estate

The first thing lenders look at when you apply for a mortgage is your credit. If you have a bad credit score, it could be harder to secure financing, but not impossible.

Many lenders offer loans for borrowers with bad credit. Here’s how to get the financing you need.

What do Lenders Consider Bad Credit?

Bad credit is subjective. There isn’t a specific credit score that you can say would stop you from getting a mortgage. However, most lenders draw the line at 620, while some allow lower scores.

If your score is around the 620 range, you’re likely at risk of not getting approved or if you do, you’ll pay higher rates and fees. Knowing how to get a mortgage with bad credit will help you get the best deal.

Steps to Get a Mortgage with Bad Credit

1.Know your credit
Pull your credit report here and/or find out your score by using the free credit scoring services from your credit card company or bank. See where you stand.

If you have a score much lower than 620, you have your work cut out for you. If it’s around 620, you can use traditional lenders but should shop around.

2. Think outside the box Big box banks will turn down your application if you have bad credit. Instead, work with a credit union, mortgage broker, or online lender. Each of these entities has more loan programs available, including niche products the lenders keep on their books, so they call the shots when it comes to underwriting.

3. Have explanations Lenders like explanations. Create a written statement about why your bad credit happened, what you’ve done to fix it, and how you’ll prevent it from happening in the future. If you prove it was a one-time deal or that you’ve picked up the pieces and are moving forward, you could have a higher chance of approval.

4. Shop around
No two lenders offer the same loan programs or have the same guidelines. Shop around to find the best deal including the lowest interest rate and fees given your circumstances.

Tips to Improve your Chances of Approval

To improve your chances of loan approval, use these tips.

  • Improve your credit
    See what you can do to bring your credit score up. Bring late payments current, pay high debt balances down, and don’t open new credit while you are trying to improve your credit score.
  • Save as much money as possible for a down payment
    The more money you invest in the home, the less risk the lender takes. If you have bad credit, showing that you’re willing to invest your own money in the home can help your chances of approval.
  • Try Experian Boost
    Experian Boost is a free program that helps increase your credit score by tracking your payments to services that don’t report to the credit bureaus. They report payments to your utility companies, streaming services, and phone services to help you build a better credit score.

Final Thoughts

Getting a mortgage with bad credit isn’t impossible, especially today. Work on your credit, save money, write a letter of explanation, and shop around to find the best deal. Even if you can’t get the most attractive terms today, you can always refinance when your credit improves so you can secure the attractive terms you desire.

Housing Market Predictions for 2022

by Real Estate

After a couple of years of short demand and crazy high sales prices, everyone wants to know, what will the 2022 housing market look like?

While they are just predictions, here’s what the experts believe we will see as we enter the New Year.

Housing Prices will Increase

As we’ve seen with prices on just about everything lately, housing prices will increase with inflation too. Experts believe we’ll see an estimated 3% increase in home prices throughout the year.

This could affect affordability especially for first-time buyers, so it’s important to save as much money as possible for your down payment if 2022 is the year you plan to buy a home.

First-Time Homebuyer Demand will Increase

Millennials are the prime market for buying homes this year. We’ll likely see the largest demand from those ages 26 to 35, most of which have had plenty of time to save money for a down payment because of the higher prices and crazy bidding wars we saw that pushed millennials from the housing market the last couple of years.

Suburbs will be the Fastest Growing Markets

As we continue with remote jobs and entrepreneurship, millions of people will still migrate from the cities to more suburban areas. Until now, there’s been a lower demand for homes in the suburbs, but expect 2022 to be the year it gets a little more competitive in those areas.

Homebuyers Want Bigger Homes

Because most people work from home at least part-time, most people want bigger homes with plenty of room for everyone to spread out and do their thing rather than being crammed in tight spaces, as is the case in more urban areas.

Mortgage Rates may Increase

Experts also believe mortgage rates will increase, making it harder to afford a mortgage. Since rates have been so rock bottom low, though, they won’t see the heights we’ve seen in years past, but it’s an important metric to keep in mind as you create your housing budget.

How to Make the Most of Buying a House in 2022

If 2022 is the year you want to buy a house, here’s how to best prepare:

  • Save money – Have a large down payment if possible. Even though many loan programs require just 3% down, you’ll have a much lower monthly payment with a larger down payment, making your loan more affordable.
  • Think long-term – Buy the house that will last you and your family many years, and account for any changes such as working from home, having more kids, or even starting your own business.
  • Get pre-approved – Always get pre-approved before shopping for a home. You’ll have a much better chance of winning the bid if there are multiple people interested in the property and you’ll know what you can afford.
  • Work with a licensed real estate agent – Don’t try to navigate the housing market yourself in 2022. Having a real estate professional by your side ensures you’ll get the home you want this year.

Final Thoughts

2022 can be a great year to buy a home. Make sure you plan for the down payment, monthly costs, and even for the higher demand that can cause higher prices or bidding wars. Working with the right real estate agent is the best way to make 2022 the year you buy a home.

Which Home Renovations Generate the Highest ROI?

by Real Estate

Which Home Renovations Generate the Highest ROI?
Did you know that not all home renovations affect your home’s value? In other words, your ROI could be next to nothing on some renovations. Even if you do see a return on your investment, it’s sometimes less than half of what you paid.


Was it worth it?


Fortunately, many home renovations provide an exceptional return on your investment. Knowing what they are and how much of a return you’ll get can help you decide.

Why Home Renovations Affect your Home Value
Before we get into the list of renovations you should consider, let’s look at why home renovations affect your value.

When you improve your home, you improve its features or its quality, both of which affect the home’s value. Buyers are more likely to pay more for a home that’s recently renovated than one that needs repairs and/or is outdated.

But which home renovations should you do?

The Top Home Renovations to Consider
Focus on the areas of your home that need major improvement, especially if safety or stability is an issue. Other than that, consider these renovations to improve your home’s value.

Garage Door
You may not think of the garage door when renovating your home, but it can provide almost a 95% ROI. With an average expense of $3,500, you can improve your home’s value by almost $3,300 with this change. Think of it as improving your home’s curb appeal.


Minor Kitchen Remodel
The kitchen is the heart of the home. Renovating it doesn’t have to mean tearing down walls and reinventing your kitchen. Painting the cabinets, switching out appliances, and updating the faucets or light fixtures may provide an ROI of 77% or more.


New Windows
Windows are another great way to improve your home’s curb appeal, but they also affect the home’s energy efficiency. They can be a hefty investment, but you’ll typically recoup almost 75% of your investment. As a bonus, you’ll likely reduce your energy usage in the home which may further increase the return on your investment.


New Siding
New siding is another exterior project that can increase your home’s value. This is especially true if your siding is damaged or you have vinyl siding and replace it with something more stable.
Most siding investments provide a 75% ROI, plus it increases the curb appeal of your home if you choose a color that’s trending right now.


Final Thoughts
Before you make any home renovations, talk to a professional (like myself) to see how much of an ROI you’ll receive from the renovations.


Some homeowners renovate their home just to make the home look how they want or to give it features they want. But, you should always have your ROI in mind so you get the most out of your investment. You probably won’t be in your home forever, so why not get the most out of it by improving its value with the renovations you choose?

How to Improve your Credit Score to Get a Mortgage?

by Real Estate

How to Improve your Credit Score to Get a Mortgage

If you’re in the market for a mortgage, it’s important to look at your credit score first. Many potential buyers don’t realize they can check their credit or improve it, but you can do both.

First, pull your credit report here. Everyone gets free weekly access to all three credit reports, so don’t hold back. Once you know your credit history, you can take the necessary steps to improve it.

Why your Credit Score is Important

You may wonder why your credit score is so important.

Here’s why.

It’s the first thing lenders look at when you apply for a mortgage. If your credit score isn’t high enough for the chosen loan program, they’ll decline your application without looking at it further.

Think of it as your first impression to a mortgage lender. You want it to be as good as possible or you risk not getting approved.

Here’s how.

How to Increase your Credit Score

Your credit score changes monthly. With these simple changes, you can increase your credit score and your chances of approval.

Bring your Accounts Current

If you have any late payments reported on your credit report, get them current fast. Late payments can hurt your credit score the most since your payment history makes up the largest portion of your credit score.

Pay your Debts Down

The next largest part of your credit score is your credit utilization. This refers to the amount of your credit lines you have outstanding. Any amount over 30% of your credit line or $300 for every $1,000 in credit line, hurts your credit score. Work on paying your debts down and watch your score increase.

Don’t Close Old Credit Card Accounts

It sounds odd, but keep your old credit card accounts open. They help your credit age. Your credit score improves when you have older credit accounts. New accounts don’t have a history and can make you a higher risk.

Don’t Apply for New Credit

If you’re in the market for a mortgage, avoid applying for any new credit. New accounts bring your credit score down and increase your credit utilization.

Wait until after you close on your mortgage to open up a new credit card to furnish your home or to buy that new car. New credit will only decrease your score and your chances of mortgage approval.

Final Thoughts

You don’t need a perfect credit score to get a mortgage, but the higher your score is, the more likely you are to get approved. Working on your credit score before you apply increases your chances of approval. It also helps you get better terms and interest rates.

It may take a few months to see a change in your credit score, though. Don’t expect changes overnight. If you want to apply for a mortgage, I suggest pulling your credit 6 to 12 months before you apply for a mortgage to give your score enough time to improve.

Is the Housing Market Going to Crash anytime Soon?

by Real Estate

What goes up must come down, right? At least that’s what everyone is saying about the real estate industry. It can’t possibly stay this hot forever, or can it?

If history repeats itself (and it usually does), the housing market will change. The housing industry goes through phases – meaning one phase won’t last forever and that’s a good thing. If housing prices kept increasing at the rate they are now, it would become near impossible for most people to afford a home.

Does that mean the housing market will ‘crash’ soon, though? We don’t think so, and here’s why.

Reasons the Market Won’t Crash

While no one can predict the future, here are the top reasons we feel the housing market won’t crash.

Prime Rate Remains Steady

The Fed has already announced that the prime rate will remain close to 0% throughout 2022. That’s reassurance right there that the housing market isn’t going anywhere anytime soon. With rock bottom rates, people will buy houses. This will keep up the demand and ensure that a housing crash doesn’t happen anytime soon.

High Lumber Prices Keep Building Rates Low

We all aren’t anywhere near the pre-pandemic building levels we were at a few years ago. It’s too expensive for builders to build like they were, so they’ve had to taper back. This means less. Inventory in the market. When there’s less inventory, but plenty of demand, it keeps pricing rising like they have been this year.

Demand is Still High

As long as the demand for housing is still high, the market won’t crash. It’s when the supply greatly exceeds the demand that prices start to fall and sometimes even plummet. Experts don’t see this happening for the rest of 2021 or even 2022. That’s good news for the economy as there’s no housing crisis looming in the background yet.

How Buyers can Compete

So how do you compete in such as competitive environment with low supply and high demand? You have to be prepared. Here’s how:

  • Work with a reputable real estate agent so you always know about new listings immediately. If you drag your feet at all, you’ll lose your chance.
  • Get pre-approved by a lender. Don’t look at houses until you are pre-approved. Sellers

want that letter stating you can afford a mortgage. They’ll accept your bid a lot faster if you have it.

  • Know your budget. Don’t get caught in a bidding war and outbid yourself. Know how

much you can afford and stick to that number.

  • Do your research. Know where you want to live before looking at homes. If you find a home and then research the area, you could lose it to another buyer.

Final Thoughts

Bottom line, the housing market isn’t going anywhere anytime soon. If you’re ready to take advantage of the low interest rates and to find the perfect home, contact me. I’ll help you find your dream home and win the bid in the competitive market we’re experiencing today!