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- Whether purchasing a new home or an existing one, most real estate experts recommend buyers get a home inspection.
- The inspector plays a critical role in the home-buying process, and to the extent you can, it is imperative that buyers verify that person’s credentials are up-to-date and that all of the important details are covered during the inspection.
- For most would-be home buyers, entering homeownership will mean getting approved for a home loan. It’s a process that can be stressful and confusing. Borrowers can be better prepared by taking steps to study their options and learn what to expect from a lender.
- One of the main factors that lenders look at to determine a borrower’s creditworthiness is their credit score.
- Borrowers who have late or missed credit card payments, have had a foreclosure or bankruptcy, or are carrying high balances will find that this poor behavior weighs heavily on their credit score.
- Consumers whose credit is less than stellar should give themselves plenty of time to improve their credit score prior to applying for a home loan.
- Bidding wars are back, and while not every local real estate market is experiencing bidding wars, some home buyers find themselves competing for houses because there aren’t many for sale in their neighborhood.
- To compete in a bidding war, buyers need to prepare financially for the home purchase. They have to familiarize themselves with property values in their target neighborhoods, and they must know what they want.
- While offering the most money might seem the best way to win a bidding war, sellers don’t always choose the highest offer. Instead, some sellers prefer offers that are the most likely to go through and that meet certain conditions.
- One way to be competitive in today’s real estate market is to select a lender and loan product, complete everything the lender requires, and have a pre-approval letter in-hand before beginning the house hunt.
- Some homeowners who are behind on their mortgage payments and other debt obligations may think that filing for bankruptcy will prevent their home from going into foreclosure; but they are mistaken.
- A Chapter 7 bankruptcy – the most typical bankruptcy protection filed by individuals – will at best delay, but not prevent, a foreclosure. Banks will typically wait out the bankruptcy case, then immediately proceed with the foreclosure upon discharge.
- Occasionally the banks will petition the court to release the property even during the bankruptcy if it has no equity so they can proceed with foreclosure. If the home has enough equity, it will be sold as part of the bankruptcy case, with the proceeds going to creditors.
- What a bankruptcy will do is convert all “recourse” loans – where a borrower has a personal responsibility for repayment – into “non-recourse” loans, where lenders cannot sue a borrower to get repayment. That’s because a Chapter 7 bankruptcy will discharge the borrower’s personal responsibility for the debt even though it will not release the liens on the property for the loans.
- So, while a bankruptcy does not eliminate secured home loans and a homeowner can still be foreclosed on, all home loans, including second mortgages and home equity lines of credit, will become non-recourse, and lenders cannot sue the homeowners for any balance owed.
Source: Orange County Register
- Some homeowners who are having problems making their mortgage payments may think that a deed-in-lieu of foreclosure – in which the lender agrees to take back the keys and let the homeowner walk away – is better than spending the time trying to do a short sale. This may seem even more appealing to homeowners because with a deed-in-lieu, the owners potentially can receive a few months of free rent.
- Although Fannie Mae and Freddie Mac recently updated their guidelines for deeds-in-lieu of foreclosures and now allow homeowners with hardships to live in their homes for up to three months without making mortgage payments, lenders rarely approve these transactions.
- A primary reason lenders are reluctant to approve deeds-in-lieu is that California allows non-judicial foreclosures, meaning the property is foreclosed through a trustee’s sale rather than the relatively lengthy judicial foreclosure process required in other states.
- Additionally, lenders only approve deed-in-lieu transactions if there is a single loan on the property or multiple loans with the same lender, which also greatly limits their usefulness, according to one broker. This makes doing a short sale a better option.
- With a deed-in-lieu, striking a deal with a first, purchase-money lien holder does not automatically get the homeowner off the hook when it comes to second or other junior loans.
- By contrast, in a short sale, all lenders must sign off, and California law requires them to forgive any remaining balance after the sale.
- Finally, in a deed-in-lieu agreement, a lender can request additional cash contributions be made by the homeowner, which are illegal in a short sale.
- One of the most-common misconceptions held by underwater homeowners is that the new California Homeowner Bill of Rights keeps a lender from foreclosing on a home regardless of whether the borrower is pursuing a loan modification or a short sale.
- However, the bill of rights is supposed to restrict lenders from “dual tracking” – repossessing a home while a homeowner is awaiting a decision on a home loan modification application.
- When a borrower sends in a complete loan modification application, the foreclosure process should instantly come to a halt. If the lender rejects the application, the borrower has a 30-day period to appeal the decision. The home cannot be foreclosed during that time either.
- In a short sale, however, the foreclosure process is halted only after all the lien holders on a home agree to the short sale and the prospective buyer gets financing. All of that can take months. The bottom line, according to one broker: “A foreclosure could easily occur during the attempt to bring about a short sale.”
- A survey by Fannie Mae found that the cost of heating, cooling, and hot water for a home is the highest cost of homeownership outside the mortgage loan. When home shopping, it is possible to compare the energy efficiency of homes by looking at its Home Energy Rating System (HERS) score.
- More than 1.1 million homes now carry a HERS score, which is gaining acceptance as a standard among government agencies, utilities, mortgage lenders, and home buyers. In 2012, 40 percent of all new homes sold in the U.S. were issued HERS scores.
- The CALIFORNIA ASSOCIATION OF REALTORS® offers the C.A.R. REALTOR® Energy Audit Program (R.E.A.P.), which provides up to a $250 rebate on a HERS home energy audit conducted by a certified HERS rater.
To qualify for R.E.A.P., applicants must: Purchase a home between Oct. 1, 2010, and Dec. 31, 2013; conduct a HERS home energy audit of the home before the close of escrow or no later than 60 days after the close of escrow; use a California REALTOR® in the transaction (referrals do not qualify); purchase a primary single family residence in California; and review and download the application (application must be submitted by an active California REALTOR®).
- Most housing experts are saying that the housing recovery is moving ahead full steam, while others are warning that we’re getting into another housing bubble, which could end disastrously. Check out these myths about the real estate market that some still buy into:
- People are giving up on the suburbs: Widely reported statistics from the U.S. Census Bureau last year had many people thinking that, for the first time in decades, cities were growing faster than the suburbs. However, The Washington Post found that “urban cores are still much, much smaller than the suburbs, which means they can show higher growth rates even if they’re adding far fewer people in absolute terms.”
- We’re seeing a permanent shift to renting: That’s not what recent studies show. A recent survey by Prudential Real Estate found that 96 percent of American consumers consider homeownership important. Additionally, a January survey by homebuilding company PulteGroup showed that six in 10 renters who want to own a home plan to buy in the next two years.
- Just about everyone loves the smell of fresh-baked cookies, but new research suggests that aromas do not help sell homes.
- A study by Washington State University found that although homeowners are often told to create pleasing aromas when potential buyers pay a visit, that complex smells, like baked goods and potpourri, are likely to dampen enthusiasm for a fast sale for top dollar.
- Complex scents, even if they’re pleasant, can be a distraction because some people subconsciously dedicate time and energy to figuring out what the aroma is, rather than processing whether the home is a place they could live.
- Instead, the author of the study recommends simple scents, such as lemon, basil, and pine, since they’re easier to process and less distracting and thus more conducive to spending.
- Scents also need to be congruent with the home. A cedar smell might work well with a mountain home, but it could seem out of place at a beach house.
- New federal regulations require mortgage lenders to verify that prospective borrowers can meet the repayment terms of their mortgage loans.
- Under the Dodd-Frank Act, the rules prohibit the “no-doc” loans commons during the housing bubble. Before making a loan, lenders must document the borrower’s job status, income and assets, debt, and credit history.
- Lenders must calculate a borrower’s ability to pay the principal and interest over the length of the loan, and they may not base their calculation solely on the payment due when an introductory “teaser rate” is in effect.
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