Saturday, February 8, 2014
Mortgage Loan Originator- I started here for obvious reasons of course but also because there is no reason to begin looking at homes if you don't know what you can afford. As with the following three professionals it's always a good idea to ask friends and family for their input. Chances are good that most will have someone they trust to guide through the financial portion of the transaction. Another great place to start is your own bank, most have a mortgage professional on staff. But don't let a family referral or the introduction to your banks Mortgage Specialist be the last step. Take the time to call or go by and visit with these professionals. Ask the same questions to each so you can compare answers. DON'T let "What's your best rate" be one of those questions. Rates change daily, sometimes numerous times during the day. This shouldn't factor into your decision at this point. Ask them questions that pertain to your situation. How many first time homebuyers do they deal with on a yearly basis? What areas do they tend to lend in? What are they seeing in a particular neighborhood (if you have narrowed your search down) market as it pertains to seller concessions or appraisal values.
But most of all see who is interested in building a relationship with you. Are they engaged with you? Do you feel like they have your best interest in mind? Are they rushing you through the process or taking time to talk you through it?
In the end rates are very similar day to day between lenders. Closing cost vary very little also. You need to know that you are dealing with a professional that takes the time to build a long lasting relationship with you that will last beyond the closing table.
Realtor- Once you are approved and happy with your selection for your Mortgage Specialist its time to find the perfect house. Sure, you can go at it on your own and might even have some success. However, studies show that using a Realtor actually saves you money in the end. Not only are they able to easily access and filter through the thousands of listings, they are also trained professionals whose number one priority when representing a buyer is to protect your investment. They are well versed in negotiations, real estate law, and have their hands on the pulse of the local communities which helps you make solid decisions as you.
When asked why it's important to make a well informed decision for your Realtor Susannah Fielder with Keller Williams New Beginnings said "Buyers need an agent who can negotiate for the buyer getting them the best house, for the least amount of money possible, keeping their needs and wants aligned".
To find that perfect representative, it starts as most searches. Friends, family, and co-workers can always give input as to who they have used. Listen not only to who they approve of but also listen for the ones who maybe didn't work out. Let other's mistakes lead you. From there take the time to ride the neighborhoods you are interested in. Is there a particular agent or office that has more listings than anyone else? Maybe they are well versed in that particular area. Some agents focus solely on certain areas and their knowledge can be invaluable.
Search the Internet for reviews. With sites such as Yelp! becoming more popular it becomes easier to get a feel for who the top agents are. There is always a reason they are at the top of the field and normally customer service is one of those reasons.
Talk to your Mortgage Specialist. At this point they know you well enough to know what agent's personalities should mesh well with yours. They know what agents are tops in a certain development. They also know they ones who might be difficult to work with or hard to contact.
Again, this one comes down to relationship also. They can be the best Realtor in the area but if you don't get along with them or trust them to find you that perfect property there is always going to be a wall there that is hard to get past. Work with someone you like, someone you trust, someone you feel has your best interest in mind. Take you time with this one, interview several if you need to.
Inspector- You've been prequalified, you've found the perfect spot and have a written contract. Now the rubber meets the road and the process begins. One of the things that most transactions will hinge on is the Home Inspection. This inspection covers all facets of a home from the foundation to the roof and all points in between. The intent is to better inform the buyer of the quality of the product before the investment is made. It's a relatively inexpensive investment made initially to avoid larger cost after the fact.
In most cases your Realtor is going to have two to three local inspectors that they trust and readily refer to you. While this referral is valuable take your time to use the Internet and other means to search out a competent professional and peruse the names given to you to check their credentials, reviews, etc. James Brantley with Magnolia Home Inspections responded to me when I asked him about things to look for in a home inspector "Ask to see what other home owners have to say about an inspector. Quality Professional Home Inspectors ask their client’s to complete customer satisfaction surveys upon completion of the inspection. Professional Inspectors want to know what they are doing right, as well as what might need improvement. If the inspector can’t or won’t provide client referrals, choose another inspector! "
Again, take time for brief interviews. Compare the technology each employs, how thorough is their process. Ask for a sample report and testimonials.
Homeowner's Insurance Agent- Within a coupe of weeks of your closing you will have been asked by your Mortgage Specialist for contact info for your Homeowner's Insurance (HOI). This is Insurance that is put in place to protect you against loss such as fire, wind, or flood. Sometimes taken for granted and not given much thought, HOI is as much of an integral part of owning a home as your mortgage is. Not only does it protect you in the event of a loss but it also can save you money by reducing your overall insurance cost. Your initial search should start with whomever you currently have your vehicle insurance with, but shouldn't stop there. I always suggest my clients spend time getting quotes similar in coverage from three to four different companies. So many things influence price such as multi line discounts when you have your car and home together to age or home, area, proximity to fire stations, etc. The key actor is to make sure you are getting sufficient coverage for all your needs.
Again, this is one of those things that is relationship driven. As Brandon Meeks with Shelter Insurance added "Make sure the company you choose is local with a local claims department. How quickly you get a quote is an indicator of what type of service you will receive in the future. Get to know the staff. These are the people you will work with for years. as well as the people who will be along side you in the event of a claim. These things become more important than premium when they are really needed"
Seems as though the reoccurring thread is relationship building. Most of these industries have become so competitive that prices are similar. Service sets them apart. Get to know your providers. You shouldn't have to hold them to a standard, they should already hold themselves to one.
Monday, January 27, 2014
It's closing day. The moving van is rented, everyone's excited, nothing left to do but sign on the dotted line. As the attorney goes through the massive stack of documents, explaining each thoroughly, they pause on a particular one. As they explain the Owners Title policy, it's purpose, and it's cost you can tell most are out of their element. While attorneys are great at explaining legal documents most aren't comfortable being salesmen hence the awkwardness. The reason? Owners Title Insurance is optional and probably one of the most misunderstoodelements of a Real Estate transaction. So what is Title Insurance and why is it important?
During the initial process of your transaction soon after your contract was agreed upon by both parties, an attorney or tile company, depending on your state, was enlisted to perform a title search. The purpose of this search was to ensure the property you are purchasing was free of any liens or disputes. These might range from an unpaid contractor placing a lien on the property which prohibits it from being sold until they are paid to a previous heir's claim that during a previous sale they weren't made whole. Encroachments or mis-surveyed land lines also constitute a "cloudy" title and can present a problem. In most cases these imperfections are discovered during the tile search process but from time to time they surface after the sale and Title Insurance becomes a lenders or borrowers best friend.
First it's important to realize there are actually two "title policies". The Lenders Title Insurance policy and the Owner's Title Policy. Both designed to protect the policyholder for a title dispute.
Lender's Title Policy- this is a policy that is required by lenders to be purchased at the time of closing to protect their interest in the property. Basically the lender wants to ensure that should there ever be a claim against the property through some sort of title issue they have an instrument in place that allows them to recoup their investment.
Owner's Title Policy- in most instances this policy is optional and offered to the borrower through the closing attorney or escrow agent. I asked one of our local closing attorneys, Sharon Plunkett of Young, Wells, Williams, to expand on this policy and she responded with the following.
"Owner's Title Insurance, called an Owner's Policy, is usually issued in the amount of the real estate purchase. It is purchased for a one‐time fee at closing and lasts for as long as you or your heirs have an interest in the property. An Owner's Policy provides assurance that your title company will stand behind you — monetarily and with legal defense if needed — if a covered title problem arises after you buy your home. Only an Owner's Policy protects the buyer should a covered title problem arise with the title that was not found during the title search. Possible hidden title problems can include:
• Errors or omissions in deeds
• Mistakes in examining records
• Undisclosed heirs
• Incorrect legal description
• Improper recording/indexing of deeds
There are many different scenarios where a Buyer needs protection from an Owner’s Policy. For instance, a previous owner may have had minor construction or repairs done on the property, but never fully paid the contractor, causing a contractor you did not hire to place a lien against your property. The previous owner may have failed to pay local or state taxes.Also, title problems occur that could not be found in the public records or are inadvertently missed in the title search process, such as spouses in the prior chain of title who are not on any of the deeds, but still have rights at common law in the property you just purchased.
Some common examples we see in our day to day practice that cause closings to be delayed or even cancelled:
1. Individual notary used instead of corporatenotary, and other defects in theacknowledgments in the chain of title.
2. Signature dates and notary dates are not the same, or the effective date is not properly stated.
3. Breaks in the chain of title because of prior heirship issues caused by failure to properly administer or probate estate of decedent; and death of joint tenant but thedeath certificate has not filed.
4. Judgments against someone with a similar name in the prior chain of title. In Mississippi judgments are filed against a name in the county where that person resides (it affects ANY property owned by that person). If someone in the prior chain had a common name such as “John Smith” there can be dozens of judgments that the attorney has to rule out. The attorney has to pull every judgment, determine the prior owner in the chains’ social security number, and then call every person who filed the judgment and individually rule out each judgment to determine if it was the same “John Smith” who once had title to this property. This is VERY difficult to rule out after severalyears/transfers have occurred.
5. Deeds of trust/liens which were paid off in a prior closing for this Property but were not properly released. If banks close or change hands, this can be extremely difficult to have removed.
All of these scenarios can take weeks to resolve, and if you as the Owner are trying to sell or refinance your property, you may lose your interest rate lock and/or lose a buyer who doesn’t want to wait until these problems are resolved. If you have an Owner’s Policy that covers the title issue, then you can produce your Policy and proceed to close a lot faster and without the expense of paying the attorney handling your closing a fee for fixing the title issues.
An Owner's Policy provides assurance that your title company will stand behind you — monetarily and with legal defense if needed — if a covered title problem arises after you buy your home. The bottom line is that your title company will be there to help pay valid covered claims and cover the costs of defending an attack on your title. The Owner's Policy fee is a one‐time fee paid at closing, and the Owner's Policy protects you for as long as you or your heirs have an interest in the property.
Common questions: How much does it cost? Like any insurance, the premium is based upon the amount of coverage, and coverage is based upon the price of the property. However, at the closing, you will receive a discount for the amount you are already paying for the Lender’s title policy, so usually it is a minor one-time fee of less than $1,000.00 and often only a few hundred.
Other questions: Doesn’t the attorney doing the closing check the title? Yes, but the attorney is only responsible for checking for certain title issues, and there are many title problems that are not revealed by checking the land records. In addition, attorneysare not responsible for errors by the recording clerks. In addition, title insurance is backed by national companies, so you don’t have to worry if the attorney doing your closing is retired,deceased or cannot be located when you discover the problem years from now upon selling or refinancing your home."
What it all boils down to? Protecting the consumer. Buying a home is the largest investment most of us will ever make. The thought that a single claim could force a homeowner into drastic situations is a scary thought. Considering the monetary investment is a one time occurrence and in most cases discounted when purchased at the time of closing it seems to be a sound investment. However, it is optional and each potential homeowner should spent time researching and making an educated decision.
Tuesday, January 21, 2014
We've all seen the ads whether on TV or the web. Some large well known, slick marketing national lender advertises a super low rate and zero closing cost. It's enticing, the thoughts of an ultra low rate, less money out of pocket, it's a no brainier, right? Not always.
On almost a weekly basis I get that dreaded call from a Realtor that normally goes something like this " my client decided to go with "Slicken" loans. The file has been in underwriting for 4 weeks and we can't get our Loan Officer on the phone." Or "our Loan Officer just called us after 5 weeks of underwriting and they can't close our transaction. Oh, by the way, we're supposed to close tomorrow!" Needless to say at that point anxiety is high and everyone involved is at their wits end.
Today I want to look at the top 5 reasons you should always use a local lender. While these aren't always the case they do tend to ring true in most instances.
Same or Better Service at Less Cost- Most local banks offer the same services with more personalized service as their larger corporate competition and do so with a lower overhead. Smaller banks aren't paying for large call centers, over-staffed underwriting departments, etc. That savings is normally passed along to the client in cost savings whether it be through the interest rate or the closing cost, sometimes both.
Your Money Helps Grow The Local Economy- Local banks employ local staff that in turn spends their income locally. Although small and mid sized banks control less than one-quarter of all bank assets, they account for more than half of all small business lending. Big banks on the other hand lend very little to local businesses. One study showed that the largest 20 banks, which now control 57 percent of all bank assets, devote only 18 percent of their commercial loan portfolios to small business. Keep your money local. Support the people you know.
Keep Decision- Making Local- While it's true that most banks, large or small, sell their loan servicing, most smaller banks sell their mortgages to larger regional mid size banks. This means in most cases instead of an underwriter located in a large regional corporate setting in Dallas or Atlanta they are in-town and available. For example at Metropolitan our largest investor is about 15 minutes from our office. This makes it easy to get a "face-to-face" with an underwriter to discuss an issue with a file or plead for that much needed rush at the end of the month.
Support Those That Support The Community- Local bank profits are tied to the success of the community. When the entire community prospers so do the local businesses. This is why local banks support local events, charities, etc. Larger banks may well spread their earnings through philanthropy but it's almost always in target markets in an effort to grow or maintain market share.
Local banks invest safely and leave the gambling to the big boys- Local banks are community driven, with a primary activity being to turn deposits into loans and other production minded investments. Larger banks on the other hand devote a sizable share of their resources to speculative trading and other Wall Street bets. While this speculative maneuvering may provide big profits for the banks and their shareholders it does very little to improve the overall local economic or social value.
So, what it all boils down to is better service, better pricing, commitment to community, and sound business practices. Doesn't sound like there is a lot to weigh. Spend your money locally and help support those who support you.
Adam Black is a Residential Mortgage Specialist with The Metropolitan Bank in Ridgeland MS. His passion is helping his clients achieve financial security using their home as a wealth building tool. He works closely with Realtors, CPAs, Financial Planners and other industry professionals giving their clients the level of professionally service they deserve.
Wednesday, January 15, 2014
Homestead Exemption- What, Why, Where?
It's that time of the year, the kids Christmas toys are broken, we've all probably floundered on our New Years resolution, and tax time looms. Are you depressed yet? No worry, it's also time to save some money. If you bought a new home last year it's time to file for your Homestead Exemption. You probably remember this phrase being used at your closing as your attorney waded through the mountain of paperwork. Maybe your Realtor has sent you a postcard reminder or your Loan Officer has sent you an email. Either way there is a chance you've heard the phrase but what is it?Homestead Exemption, while it might have several definitions, in this case is a privilege offered to home owners who claim their home as a primary residence. Think of it as an incentive to invest in real estate property as a primary home vs. renting. This privilege is offered through a reduction in your yearly tax bill. In other words, it saves you money! Got your attention?
Without going into all the exciting details of tax law and accounting I'll briefly explain how it works. Your home is given an "accessed" value by your municipality's county tax assessor's office. This value will normally be somewhat close to the value of your homes Appraised Value that was determined by a professional appraiser during the purchase phase. Each county has a predetermined tax rate that in conjunction with your assessed value determines your yearly tax amount. By giving you an exemption, either by percentage or flat rate, off of your assessed value your tax amount is reduced. Simple enough?
So how do you qualify? You already have. By purchasing a home in the previous year you automatically qualify. You just have to "claim your prize". Taking a few of your loan closing documents, visiting your local tax assessors office, and filling a few short forms ensures you receive the tax break your first full year in the home. This is a one time process that last as long as you live in the home so you only have to make this visit once.
What do you need? Each county's system is different but most require you bring your Settlement Statement and Warranty Deed, and proof of identification. In addition to this you will complete a form that ask questions concerning your personal info, vehicle tag numbers, etc. If any of the counties in our area offer online forms I will include links below.
When do You go? This is very important! You are allowed to file from January 2 to April 1 of each year. Failure to do so will result in either a reduction in the amount you qualify for or none offered at all.
Where do you go? Your local county tax assessors office. Some offices now offer downloadable forms online that can be prepared prior to your visit and printed. I've took the time to add links to each of the tri counties offices adn their online forms. Visit them for more info to better prepare yourself for your visit.
I hope this has been useful in helping you, feel free to pass it along to friends, family, and co-workers. This is a great savings that can help anyone. If you need more information please feel free to contact me.
Click on these links to access more info
Madison County Tax Assessor
Rankin County Tax Assessor
Hinds County Tax Assessor
Thursday, January 2, 2014
I often speak to groups of Realtors and relate the mortgage industry and the guidelines as a pendulum. In the early 2000s we swung way left and became to liberal with our lending. Lenders under pressure from government officials and greedy investors began to relax their guidelines. Couple that with greed at all levels from the Corporate office down to the small brokerages we extended credit to those who more than likely couldn't afford the obligations they signed up for and thus was born the "credit crisis".
As quickly as the pendulum swung to the left with the crisis came the tightening of credit and the extreme swing back to the right occurred. All of a sudden even the deals that looked good on paper became increasingly harder to get to the closing table. Had we gone to far, were good buyers being left out? Suddenly our concerns went from too much financing to not enough. What to do, what to do?
The past few years have seen increased communication between mortgage associations, government entities such as the CFPB (Consumer Financial Protection Bureau), and lenders in efforts to find that happy medium. To ask 10 people involved in our industry would give you 10 opinions as to whether proper headway has been made to achieve that target. Of those 10, probably all would have valid points one way or another.
Now we face new territory with the latest legislation being implemented in January 2014, a section of the Frank Dodd act commonly called Ability to Repay and Qualified Mortgage. These two terms mean a lot to anyone trying to buy a new home or refinance their existing home. Simply put...
Ability to Repay- requires lenders, before making a mortgage loan, to look at a consumer’s financial information and be sure that the consumer can afford to repay the loan.
This rule applies to most mortgage loans. However, it excludes certain types of loans, like home equity lines of credit, timeshare plans, reverse mortgages, and temporary loans.
Sounds pretty simple, right? Take a loan application, run credit, verify income, verify Principal, Interest, Taxes, and Insurance, compare the Debt to the Income and move forward, right? Guess what? Legitimate lenders have been following this path of approval for years. So there isn't a lot to worry about with this one for capable borrowers. Self employed buyers might experience some bumps in the road but nothing they aren't already used to. Quality mortgage professionals will know how to navigate these waters and guide them through.
Qualified Mortgage- The rule presumes a lender has met the Ability-to-Repay requirements if the lender makes a Qualified Mortgage, or QM. A QM must meet certain requirements. For example, the loan cannot have certain risky features that harmed consumers during the mortgage crisis.
Here's where things begin to change and the learning curve starts. Loans can't have "Toxic Features" Negative Amortization, Interest Only periods, Balloon Notes, and terms longer than 30 years become dis-qualifiers. QM will generally require that the borrowers debt load including the new monthly mortgage obligation not exceed 43% of their grow monthly income. In the past, we've seen that number approved as high as 65%.
Limits will be placed on Upfront Fees and Points that the lender can charge to avoid excessive compensation.
What's it all mean? Basically as we continue to revamp an industry with a black eye it becomes increasingly important to protect both sides of the closing table. As lenders lend money to more qualified borrowers they reduce their exposure to liability and reduce foreclosure rates. As foreclosure rates decrease neighborhoods stabilize, home ownership increases, and everyone's happy. As progress is made, we find what works best for everyone, consumer and lender.
So as a realtor, how does it impact you? Not a lot if you are using a reputable lender who pays attention the front end of the qualification process. It becomes increasingly more important for lenders to gather as much information pertaining to income as they can before issuing the all important "pre-qualification letter". Don't take the canned response from your Loan Originator "they're solid gold, go find them a house". Ask if they have reviewed last two years tax returns, most recent pay stubs, W2s, etc? Do they meet the Debt To Income guidelines? Hold your lender accountable.
Reiterate to your client how important it is that they do not do anything during the process that might change their current credit profile The main thing being DO NOT TAKE ON NEW OBLIGATIONS! The 52 months same as cash, no interest, free cooler with every purchase that the local furniture place is running this week will be on again soon. Wait until you've closed before buying anything new.
For more information on the CFPB and these new rules visit http://files.consumerfinance.gov/f/201301_cfpb_ability-to-repay-rule_what-it-means-for-consumers.pdf
Thanks for spending a few minutes with me. I hope you gathered some useful information that will help you be the best you cna be in 2014.
Monday, April 8, 2013
Rare is the person today who isn't watching expenses. Here's how to get more bang for your buck:
1. Plan Your Meals. Take a moment to make menus and a shopping list for the week. Take advantage of coupons, sales, and bargains. This also helps you avoid those costly impulse purchases.
2. Plant a Garden. Growing your own fresh herbs and vegetables saves you money, plus your food tastes better and you don't have to worry about pesticides. Even city dwellers can do this with patio planters and window boxes.
3. Shop Yard Sales and Thrift Stores. Why pay mall prices for children's clothes they'll soon outgrow or for a table, lamp, or bookcase for the family room. These things–and more–can be bought at bargain prices at yard sales, second-hand stores, and thrift shops. Have your own yard sale and turn basement, attic, and garage clutter into cash.
4. Bargain Hunt Constantly. Get into the habit of looking for the best deals on cosmetics, vitamins, clothes and new household items. Check newspaper ads, circulars, and online discounters. Opt into email programs to get special offers.
5. Buy Off-Season. From luggage to snow-blowers to homes, there are periods when far fewer people are looking to buy. These off-season and end-of-season times are when you can purchase at the best prices, although your selection may be limited.
6. Do It Yourself! There are lots of maintenance, repairs and upgrade jobs around the house you can do yourself and save money. Check online for directions to make your own cleaning solutions from nontoxic household products.
7. Get Help. Keep your home neat by giving every family member a daily responsibility. Bring friends in for home improvement projects–putting up a deck can be done in a weekend with the help of a few friends. Use the internet to check prices and to see what bloggers are saying about where to find bargains.
Adam Black is a Mortgage Loan Officer for PrimeLending and enjoys impacting people's lives by helping them achieve home ownership. He specializes in all residential lending, FHA, Conventional, VA and USDA Rural. He is also a leader in Renovation Lending such as FHA 203k, HomePath and HomeStyle.
Thursday, April 4, 2013
Are you feeling a little overwhelmed? As a small business owner, it's not uncommon...but, keeping your business organized and the paperwork duties to a minimum will help reduce those feelings.
So, here are 4 quick tips for keeping your business organized and any overwhelming feeling in check:
Tip #1: Don't put off your paperwork! Create a simple accounting system system (a basic spreadsheet will do) to keep track of your incoming and outgoing funds so that you can easily balance your books at the end of each month.
Tip #2: Create a simple filing system of folders on your desk or workspace so you can easily organize hard copy receipts and documents.
Tip #3: Set a goal to complete your paperwork duties at the start of your day so it doesn't pile up...and, try to keep it under 30 minutes so you'll have the rest of the day completely for creativity!
Tip #4: If your business is growing beyond spreadsheets, then try using free online services like the online accounting tools at Outright. You can easily do your bookkeeping online saving you time and headaches of managing spreadsheets.
Do you have any tips for keeping your business organized?
Adam Black is a Mortgage Loan Officer for PrimeLending and enjoys impacting people's lives by helping them achieve home ownership. He specializes in all residential lending, FHA, Conventional, VA and USDA Rural. He is also a leader in Renovation Lending such as FHA 203k, HomePath and HomeStyle.