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How To Avoid Top Mistakes When Applying For A Mortgage

Home Buying For The Savvy

Mortgage lenders go through your credit report with a fine-toothed comb, and they’re going to make decisions based on how creditworthy you appear to be, including whether to offer you a loan at all … and at what rate. Taking the time to make a decision that can affect your personal finances for 30+ years, is reason alone to do your homework. Here are simple, savvy home buying tips to begin priming your research engine. Thank you to Sebastian Rivera at MVB Mortgage for contributing your advise on this post.

Tip #1: CLEAN YOUR CREDIT HISTORY

Do you know your creditworthiness? Guessing what your credit score is, or waiting to check your credit for when you are ready to put an offer in, is not savvy. Many buyers unknowingly have unpaid medical bills, speeding tickets, and numerous other issues they are unaware of. Even habitual late payments reflect negatively. Check your credit at least 6 months ahead of your purchase, in order to tackle any problems that arise. A lower FICO score equals higher interest rates. Even a small $25 collection can easily cost you $20k+ over the life of a loan.

Consulting as to your credit history, is also the best time to get pre-approved. First of all you want to know how much you can afford, which is different for how much will actually get approved for. You will want to ensure that your current income source, source for down payment and overall scenario is acceptable with current mortgage guidelines. Loan officers are there to educate you on what is needed to get the loan to work for you.

Tip#2: SHOP AROUND FOR A LENDER

Thinking that the banking institution who handles your checking and savings account will provide you the best offer, is not a savvy decision. What to do instead? Ask your agent for a referral, ask home-owning friends and co-workers for their mortgage lender referrals. Check  with at least two or three additional lenders so you have an overall idea of what’s out there. In addition to the interest rate and loan terms, have each one furnish you with a breakdown of your total costs so you can compare.

Online lenders are not all reputable. Most reputable lenders do have an online presence, however, there are numerous lenders than do not keep the same standards as others. Working with an online lender that you are not familiar with, or chosen simply based on their “best rate” can become a financial nightmare. The most common mistake we see when buyers work with unknown lenders are: late closings, delayed financing, loss of Earnest Money Deposit, identity theft, calls are only answered between 10am – 4pm, asking for the same documents multiple times, and of course an overall negative experience during the process. 

Finding a lender early, is helpful in establishing a relationship with them. By doing so, you’ll be able to get pre-approved, which can assist you in placing serious offers quickly. Because lenders are eager for your business, some will even offer a cash incentive for choosing them, such as $1,500 back to you at closing. In fact, if one lender is offering cash back but another one isn’t, ask the lender who’s holding out to match the offer—he may change his tune if it means earning your business.

Tip #3: LEAVING YOUR EARNEST MONEY DEPOSIT AT HOME

Is it okay to make a large cash deposit into your account before closing? Banks are required to source any large deposits into your account going 60 days back. On the spot cash is not an acceptable source for a down payment. If you have been saving a significant amount of cash at home, make sure to deposit it into your bank well ahead of time to avoid any delays. If you deposit $10,000 cash into your account 3 weeks before closing, you will not be able to use these funds.

Tip #4: DO NOT APPLY FOR NEW CREDIT SHORTLY BEFORE APPLYING FOR A MORTAGE

While applying for a mortgage, hold off on opening up a store card or applying for a car loan. When you’re applying for a mortgage, your credit is under serious scrutiny. Applying for a new credit card may cause your credit score to dip temporarily due to the application credit checks, which count as hard inquiries on your account for about 12 months. The same holds true for closing old accounts — this will reduce the amount of credit you have available, which will negatively affect your score. Just keep doing what you’ve been doing. And of course, continue making on-time payments and paying-off any debts.

Tip #5: HAVE YOUR FINANCIAL DOCUMENTS IN ORDER AHEAD OF TIME

A common mistake by those seeking loans, is to assume the lender will need your financial documents only a few days before closing.  If you have followed the tips 1 – 4 above, you will already have a lender, and know what documents they require to begin processing your application. The last thing you want to encounter is looking for a missing tax return, from 2 or 3 years ago, or confirmation documents of paying-off a disputed issue on your credit report. The longer you delay, the longer your approval takes. Time is literally money, when you are banking on getting locked-in for a low interest rate.  It is a mistake to give your Loan Officer everything he/she asks for 1 weeks before closing. There are typically 5 – 7 different people that have to work on every loan for it to be fully approved. Lenders need all the required documentation at least 21 days prior to your closing. Some loans require more time to process.

TIP #6: KNOW HOW CREDIT CARDS CAN HELP OR HARM

Most novice borrowers believe, that using a credit card often and making minimum balance payments will helps their credit score. While using credit cards may help your credit, the best ways to ensure your credit score remains high are:

a.      Pay everything on time or ahead of time, no late payments, EVER. 

b.      Make sure credit cards stay below 30% of the maximum allowed at all times (ex. If your credit card max is $500, don’t go over $150)

c.       Do not open new credit cards or close credit cards within 6 months of settlement; this will affect your FICO score.

d.      Credit cards with a longer history tend to help your score. Newly opened credit cards under 12 months tend to hurt it.

e.      Student loans and mortgages typically help your score as they are considered “investments.” Too many department store and consumer credit cards are actually detrimental to your score.

TIP #7: DO NOT SKIP THE PRE-APPROVAL PROCESS 

Pre-approval means basically going through a mortgage application process with a lender—filling out their paperwork, verifying your income— all with the end goal to be pre-approved for a loan of a specific size,  even before you’ve found a house to bid on. It’s a great way to find out how much house a lender thinks you can take on, and it will give you some real specifics to work with—including an interest rate—while you’re house hunting. Although a lender can suggest your maximum qualifying loan amount, keep in mind, it is always best to stay under that amount when shopping for your new property. Plus, getting pre-approved is the best way to tell a potential seller that you’re serious when putting in an offer.

Simply tell your mortgage lender you’d like to get pre-approved. You’ll have to provide paperwork, which can include pay stubs, W-2s, bank statements, tax returns, and other existing relevant loan documents. Once you’ve had an offer accepted on a house, you’ll merely have to give the lender the address and details of the offer to move forward with the mortgage process. This can literally save you weeks of time.

But choose your lender wisely, and know all the specifics of the loan they are offering. If  you decide you don’t like that lender and want to go with a different mortgage lender after the initial pre-approval. You’ll have to go through all the paperwork again and it will require another hard credit check. Which brings to mind  Savvy Tips #2 & #4 in this post. 

TIP #8: TAKING ON A LOAN THAT IS TOO BIG

It may seem like you’re comparing apples to apples when you trade rent for a mortgage payment. But there are different expenses to consider when you buy a home, and you have to make sure you can afford to pay for them all. The base loan payment is not all there is. If you have a car loan, you know the base loan is not the only expense to consider in your monthly car expense budget. Add to this, the interest on the loan, the full coverage premium the auto insurance company will require, the yearly property tax, registration, etc. Home mortages are similar. If you rented before, you will now have to have homeowners insurance. There is also interest on your loan, and taxes on the property. This is what is typically described as PITI = Principle, Interest, Taxes, Insurance. 

If you bite off more loan than you can chew, you may find yourself eventually facing the sale of your home (or foreclosure) when you cant make the payments. If you don’t have enough money for a good down payment, don’t leap into a house before you’re ready, just because interest rates are low.

TIP #9: SIGNING LOAN DOCUMENTS YOU DO NOT UNDERSTAND

Ask questions, and continue to ask them until you are certain you are clear on what you are committing to. Walking into a title office and signing-off on a 30 year mortgage  is not like buying a sofa at the furniture store.  A mortgage is about more than just the monthly payment. It’s about how much you’ll pay over the life of the loan and what your interest rate will be throughout.  For instance, the monthly payment will be lower on a 3/1 adjustable rate mortgage, a common loan in which the first three years of payments are fixed and for the remainder of the loan the interest rate adjusts annually. Annual changes to your interest rate can means your interest rate could go down or up in three years—and so could your monthly payment. If you are on a fixed budget, fluctuating interest can be detrimental to someone’s economy, if they had not planned for it. Is there a balloon payment in 20-30 years? Meaning a lump sum due at a certain time? Are their penalities for paying-off the mortgage too soon? Do you need mortgage insurance? Will you need flood insurance for the flood zone your new home is in? 

What to do instead?  Make sure you understand what kind of loan you’re getting, what the payments will be from beginning to end, how much interest you’re paying, and whether you’ll have a fixed interest rate, or whether it will be fixed for a limited time before becoming variable. Also, do you know how much money you’ll have to bring to the closing table with you? If you qualify for only 80% of the value of the house you want to buy, that means you are expected to have the other 20% at closing. Many lenders require you to pay property taxes and insurance up front, and it could mean a big check from you is expected. These are fees people don’t think about until they get to closing.  Leaving you with numbers on the closing statement document that look very different from what they looked a few weeks before. 

Thank you to Sebastian Rivera at MVB Mortgage for contributing your advise on this post.

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7 Reasons Why Your Home Isn’t Selling

Why do some homes fail to sell?

Here are seven main reasons:

1. Availability. Serious buyers often make decisions on a home on their first trip, so if there’s a tenant in the unit, animals present, or the showing goes poorly for any number of reasons, your home could get passed by.

2. Condition. If your home doesn’t outshine the competition from curb appeal to the closets being neat, from roof to floor, it’ll hurt your house’s chances to shine.

3. Photography. You only get one chance to make a first impression. These days, your first showing will be on the Internet. Both agents and buyers will judge whether they even want to see your home based on the initial online photos. These should be crisp and professional. All the best selling features should be described and shown. With smart phones having exceptional quality on photos, using poor quality images on a sale listing is a sign your agent may be cutting corners.

4. Price. Overpriced homes get passed by. The house doesn’t have to be the cheapest, but it does have to offer value. Competively priced homes, always sell quicker than those that are peaking right near the maximum appraised value.

5. Your agent. The agent you choose does pay off.  Their marketing skills and ability to create interest is crucial. They should be able to take a showing that results in an offer to a sale, if they have sharpened negotiation skills.

6. Commission. You get what you pay for. Reducing the commission will narrow the number of agents who will be interested in your home. Just because an agent agrees to a lower commission doesn’t mean the agents who have the buyers are willing to do the same.

7. Marketing. Some agents are passive and sit and wait. Some agents are proactive and have a targeted marketing plan for how to find the right buyers.Compare their online activity, look at their ads for current or past listings. Check to see how prolific they are with various media platforms, and always ask to see what their marketing budget will include for your property.

Although, these reasons listed here are not exclusive, but they are seven of the top common reasons that a property doesn’t sell. If your home isn’t selling or you have any questions about selling a home in the D.C., Maryland, Virginia Metro market, contact us at METRO HOMES DMV.  We have the experience, and are ready to help you sell your property.

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How To Prep Your House Before Selling

How To Prep Your House Before Selling

Selling a home in a recovering market can be complicated. Homeowners may have suffered financial losses or have emotional attachments they can’t easily brush off. They may lack the confidence to move up or move on. Most prefer tried-and-true methods to tilt the selling odds in their favor.
  To close a deal you really can’t go wrong if you begin with the following:

DISASSOCIATE FROM THE STRUCTURE

•    Keep in mind, a home is not a building. You will establish a new home again in your new property.
•    Remind yourself of this – This place is a house – an investment that may be sold.
•    Make the mental decision – To “let go” emotions, focus on the fact that this house will no longer be home.
•    Picture yourself handing over the keys to the new owners, who will start their journey enjoying the residence that hosted your family.
•    Say goodbye to every room. Take photos for posterity.
•    Don’t look backwards – but take your good memories with you.
•    De-Personalize –  by removing personal images, photographs and wall hangings from the walls and tables.

SIMPLIFY THE SPACE

Begin by removing personal items, trophies, photographs, portraits, nick-nacks, and even religious items from walls and table top surfaces. This includes diplomas, and momentos, and should be carried out in every room of the house, even the home office space. This is usually the hardest step, because it is tempting to get distracted as you start storing items you have collected through the years.  Each will have some endearing meaning, and it is difficult not to open that photo album as you box it up. It’s okay to reminisce, laugh and even cry, for a bit. But don’t lose site of your goal you are well on your way to a fast sale for a great price. Clear off everything from the front of the fridge.  All the photos, take out menus, and kid’s artwork.  Make sure the counters are completely clean and clear of clutter.

PREPARE THE SPACE

Be sure ALL important papers are stored securely  and out of sight. Make it a habit of not leaving out check books, purses, jewelry, reports, letters, bills, etc. In the bedroom, make sure the bed is made everyday (you don’t know when you will have a showing).  Keep clothes off the floor,  and keep the closets neat and organized. Home buyers, should not have to step over clothing, toys, and personal items in order to get a good look at the space. Some people cannot look beyond what is in front of them. And thus get lost in the chaos and the mess, and will miss appreciating the space for what it has to offer.

•    Make the House Sparkle!
•    Wash windows inside and out. If you don’t have time, hire someone, or pay a neighbor’s teenager to do it.
•    Rent a pressure washer and spray down sidewalks and exterior walls and walks
•    Clean out cobwebs
•    Re-caulk tub seams, showers and sinks, and open seams on walls
•    Polish chrome faucets and mirrors
•    Clean out the refrigerator! Buyers will look in the frig
•    Vacuum daily, either at night just before everyone gets to bed or first thing in the morning before you leave the house.
•    Wax floors
•    Dust furniture, ceiling fan blades and light fixtures
•    Bleach dingy grout
•    Replace worn rugs and floor mats
•    Freshen bathrooms with neutral scents like vanilla bean or cinnamon. No flowery fragrances
•    Hang up fresh towels
•    Organize the garage and basement if there is one. Bleach and clean off all moldy spaces, dead insects, etc.
•   Box-up excess personal items not being used daily. Store the boxes neatly against a wall in a room away from common areas

•    Access is essential. Homes that don’t get shown don’t get sold. Many foreclosures and short sale listings are vacant, so they can be shown anytime. They provide competition to the sale of your property. Don’t make it difficult for agents to get their clients into your home – if they have to make appointments way in advance, or can only show it during a very restrictive time frame, they will likely just cross your place off the list and go show the places that are easy to access and more available.

IMPROVE THE SPACE

•    Consider Neutral Colors and Tones

If you haven’t painted in a while, this is the time to put a fresh coat of paint on all the walls that need it.  It’s reccomended to de-accent walls, and paint over rooms with bright or bold colors.  Buyers gravitate to crisp, clean, warm, inviting, and neutral.  Nothing cleans up a room faster than a fresh coat of paint. Remember to also paint the trim work.  A fresh coat of white semi-gloss on all of the painted woodwork makes everything look crisp and new.  If the carpets are dirty, now is a the perfect time to professionally clean, or even replace them.  Changing the carpets is one of the few things that immediately yields a greater than 100% return on an investment.

•   Great Advice Comes From a Pre-sale Home Inspection

Home Inspections are notorious deal breakers if foresight is not employed in preparing a property properly for a sale. Why wait for a surprise? Instead get your own inspection. Find out what problems there are with your house BEFORE the prospective owners spring the bad news on you. Maybe you’ll be able to more accurately list your home or proactively fix problems, and negotiate for a sale, before the prospective buyers get involved.  Refer to your home inspection to and:

•    Take time to make minor repairs
•    Replace cracked floor or countertops, and wall and floor tiles.
•    Patch holes and cracks in walls and ceilings.
•    Fix leaky faucets, replace broken door knobs, replace burned out light bulbs
•    Fix doors that don’t close properly and kitchen drawers that jam.
•    Consider painting your walls neutral colors, especially if you have grown accustomed to purple or pink walls. 
To buyers that looks like $$$  needed to change
•    If you’ve considered replacing a worn bedspread, do so now and add fresh pillows!
•    De-clutter. Keep the pre-move preparations in motion. Pack up all your tchotchkes, anything that is sitting on top of a countertop, table or other flat surfaces. Personal items, hats, jackets, clothing, shoes, equipment, supplies, sporting goods, hobby and craft supplies, etc.,  that you haven’t used in at least 6 months to a year, should be packed away. Give away what you can, throw away what remains, and pack the rest. This will give you a head start on your move.

•   IMPROVE CURB APPEAL

Sellers often overlook the importance of their home’s curb appeal. The first thing a buyer sees is a home’s external appearance and the way it fits into the surrounding neighborhood. Try to make certain that the exterior has a fresh coat of paint, and the bushes and lawn are well manicured. Make sure bushes and hedges are trimmed, fallen branches are cleared. In real estate, appearances mean a lot. Remove all clutter, trash, stored construction materials, etc. from the visible areas of the main lawns and yards. What better way to set your home apart than to make it attractive at first glance? Are you selling a home improvement property? If not, and you would like to get the best price your property will yield, leave little room for the buyer to find plausible cause to whittle the price down. If it looks amazing, and they can easily move in with little improvements or repairs, that  attracts buyers.

•   PRICE IT TO SELL

Regardless of how well you renovate and stage your home, it is still important to price the home appropriately. Consult a Real Estate Professional, read the newspapers and go to online real estate sites to see what comparable homes are going for in your area. Properties priced right, sell fast. Those slightly below appraised values, sell faster.

It’s not always imperative to be the lowest priced home on the block, particularly when aesthetic and other significant improvements have been made. However, it is important that the listing price is not out of line with other comparable homes in the market. Try to put yourself in the buyer’s shoes and then determine what a fair price might be. Have friends, neighbors to tour the home and weigh in as well. So if you want to sell your house fast, you need to price it right. Your agent will help : visit the competition, foreclosures and all, to see what homes in your neighborhood are actually listing and selling for.
If you aren’t satisfied with the price your agent suggests and which your market justifies? This may be a sign for you not to sell right now.  It is a waste of your time to set a listing price based on what you paid, what you owe, what your home used to be worth or what you really wish it was worth. The only number that is relevant is what it’s actually worth to a buyer today.

•    REMEMBER THE BOTTOM LINE

Selling a home in a down market requires a little extra work. Do everything you can to get the home in excellent shape and be prepared to make some small concessions at closing. An agent adept in negotiations, like Metro Homes DMV, is prepared to maximize your profit, without losing the sale.

These tips, coupled with an attractive price, will increase the odds of getting your home sold quickly.