I’ve got a good Realtor® lined up, what’s next?

I’ve got a good Realtor® lined up, what’s next?

Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 2

This is the second post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. This is a follow-on series to the posts for real estate sellers.

FAQ - I’ve got a good Realtor® lined up, what’s next?

It’s great that you’ve found a good Realtor to work with. Let’s flesh out the team that you need to have with you on this grand adventure.

If you don’t already have a mortgage person the Realtor should be able to provide you with recommendations to 2-3 good mortgage people, usually people that he/she has worked with in the past. That is really a preliminary step that you need to get out of the way before you take step one in MSHDA program in Michigan that may be available or suggest other approaches. They will probably also see if you qualify for any of the VA or USDA programs that still offer zero down programs for first time (or lower income) buyers. If nothing else works, they might suggest a gift from parents and help you understand the special documentation that will be required to make that work. Your mortgage person will take the lead on that program. You will probably find that your Realtor and your mortgage person work hand-in-hand through the whole process.

the buying process. If your Realtor has determined that you will need help with the down payment, he/she may direct you to some of the down payment assistance programs like the

So, you can see that your Realtor is doing quite a bit of work for you already and you haven’t even started to look at houses yet. Sometimes the result of all of this preliminary work is that you will find out that you are not really ready to buy a house yet. Your mortgage professional will get back to you, once they’ve pulled your credit report and let you know if there are issues in it that mean that you really don’t qualify for a mortgage. A good mortgage professional will also share with you a strategy that you can implement to get your credit in order. In the meantime, your Realtor will stay in touch and update you on the market from time to time, until you are in a position to get into the process.

Assuming that your mortgage person has pre-qualified you up to some limit and your Realtor has been able to determine a starting set of criteria for the search; you are almost ready to start. Almost ready! What now?

It is inevitable that you will see many houses in the listings that the Realtor will be sending you to consider and certainly you will be visiting more than one. Things can start to run together in your 

mind very quickly once you are into the process, so it is good to get organized before the deluge of new information hits. A good tool to have in hand before you start is some sort of comparison sheet for the houses that will allow you to record each address and list or check off the features of each, such as size in Sq Ft, number of bedrooms and baths, size of garage, size of property, exterior and interior amenities and anything else that you think will be helpful for comparison and evaluation purposes later. Here is a link to the HUD suggested home buyers' checklist. There are lots of other such checklists out there, so just Google Home Buyers Checklist to see others. Each time that you visit a home you should receive at a minimum the MLs Data Sheet for the house, so you can staple that together with your checklist to help you recall each house later.

Either before your first outing to look at houses, or right after that first outing, you should probably make yourself a list of the “must haves” and the “nice to have” features that you are really looking for in a new home. That list may evolve over time and you should share it with your Realtor, so that you and they are on the same page. Just like on some of the HGTV real estate shows, you Realtor may have to show you a house that has everything on your must have list, but which is way outside of your price ranger, in order to also show you that maybe you can’t afford everything on that list. As Dr. Phil might say. It’s time to get real!

Your Realtor will probably be sending you listings several times a week and may set up an automated search for you that could send you lists every day. It might be helpful to sit down with your Realtor and go over how to read and interpret those MLS listings. There’s usually a lot of good information in them, if you know how to read them. You should also give your Realtor feedback on any changes to the search criteria that he/she may need to make to better reflect what you are looking for in a new home. I also usually suggest that Buyers do a quick drive by of listings that they think they want to go

see. Sometimes just driving through the neighborhood to seeing the homes surrounding the house in the listing will eliminate to from the list to be visited. You should be able to tell from the MLS data sheet what school district the house is in, so you might want to do your school district evaluation before visiting, too. There are a number of good sites available to help you with that evaluation, including School Digger, Public School Review and Great Schools.

You can probably do a quick “desk audit” of the listing that your Realtor send you and eliminate a few just from reading the listing. Remember tell your Realtor why these didn’t fit for you, so that they can make adjustments to the search criteria. If you have the time, I always advise doing drive-byes on the ones that you may wish to visit. You will probably eliminate a few more that way, just because of how they look for the curb or how the neighborhood looks. It really throws the schedule off when you are out with your Realtor to visit multiple homes and you eliminate one or two without even going in. It’s also not very nice for the people who had to get out of the house and then you didn’t even visit.

In the next post we’ll cover the different types of homes that are out on the market, so that you understand the differences before you encounter them. The post after that will go over the etiquette for those visits and give you some tips on what you should be looking for as you walk through each house. 

Physicians Loans - Just the right prescription for a new doctor

Some time ago I wrote about a special program for newly minted doctors that allow them to get a

home loan right as they get out of med school. These special doctors’ loans are aimed at the interns who are completing their internships and about to launch into their careers. What makes them special is that they discount the huge student loan debt and start-up costs that doctors incur at the start of their career and focus instead on the fact that doctors have historically been good credit risks. So, these loans are extended to new doctors to allow them to buy their first home as they establish themselves in their new careers.

The doctors’ loan programs have been updated since I wrote that piece and there is a great update about the program at this site - https://www.doctorloanusa.com/14-things-to-know-about-physician-loans/

This is a great program for new doctors; and, remember that I can help you find that new home, if you are looking in the Southeastern Michigan areas of Oakland, Livingston and Macomb Counties. Give me a call or send a text or email and let’s find you a new home- doctor.

Norm Werner, Realtor

Cell: 248-763-2497

Email: normwerner@comcast.net

Web: www.movetomilford.com

First-time buyer – Can I change mortgage companies after I made the offer?

Question - I submitted an offer on a house and used a pre-approval from one mortgage company, but now that the offer has been accepted I want to change mortgage companies; can I still do that?

Answer – The short answer is yes, you can change mortgage companies; however, remember that the offer

that you made and which was accepted was based upon a pre-approval of some sort from a mortgage lender. The seller used that pre-approval as part of their decision to accept your offer. If you are going to change now, after the offer was accepted, you need get a new pre-approval letter and present that to the seller. If you not only changed mortgage companies but the mortgage type, you may get push back and even a cancellation of the deal by the seller.

On most Purchase Agreements there is a timetable for the buyer providing proof that they have initiated the mortgage application process – usually within the first 10-14 days in this area. There is also a timetable that you have put some committed date upon to get through that process – usually 30-45 days (longer if it is a short-sale or foreclosure). The reason that I mention those is that you have started those clocks running when you signed the PA and to start a search for a mortgage company now may throw those timetables off. So, if you must make a change, do it quickly.

There is also the commitment, if any that you made or feel that you made to the original mortgage rep. If you didn't do anything more than talk to him/her over the phone and answer a few questions for a pre-authorization that is one thing and you’re probably free and clear to change. If you sat in their office and filled out forms, or maybe even signed something (was that a mortgage application?) you may be on the hook for at least some charges. If the mortgage rep went beyond just the preliminary credit check, perhaps at your request, then they might have expenses that they need to recover from you. Usually there are no costs until they order the appraisal, which they will charge you to do. That normally comes after you've officially filled out and signed a mortgage application.

The changing of the mortgage type that you are now seeking can be a bigger deal to the seller and may even queer the deal. If you made the original offer with a 20% down conventional mortgage loan pre-approval and now you wish to switch to a different type- maybe a zero down VA loan or a 3.5% down FHA loan – the seller does not have to accept that change. He can walk away and may even try to keep your Earnest Money Deposit (EMD) because you reneged on the original deal. He probably won’t get to keep your EMD, but he certainly can nix the deal based upon this change. You need to understand that the requirements on the seller that accompany some mortgage type are onerous to many sellers.

The seller would have the same recourse if you suddenly decided to try to use a down payment assistance program like the MSHDA program in Michigan. While you may think that it should make no difference to the seller where you get the money that is not the issue. The issue is that use of those programs adds length and risk to the process. It takes extra time to get those down payment assistance programs approved and there is a risk that you’ll go all the way to the end of the process and not be approved. In the meantime the seller’s house is off the market and missing other opportunities. Yo can see why he/she might not wish to let you switch from the original offer.

So you can see that the message of today’s post is that you need to have the mortgage step worked out and firm before you make an offer. This is not a game, so don’t approach it like one. Would-be buyers who play the game of throwing low-ball bids to see if any stick or bidding and then trying to switch the mortgage type or company will soon develop a reputation that no good Realtor will want anything to do with and word will get around.  Do your mortgage shopping ahead of getting that far in the buying process and be honest with the mortgage person and the seller from the start. If the seller gets the idea that you were just stringing him along, he won’t trust you and may just back out of the deal, which is his right. If the Realtor feels that you are just playing games he will (or should) fire you as a client. Don’t go there.

It's not your father's mortgage anymore...

The times they are a changin', as the song goes. Just a couple of years back, in the days of the no-doc mortgage, if you could fog a mirror you could get a mortgage for almost whatever amount you needed. Well, here’s a warning for potential borrowers: Nervous lenders have tough new rules and are paperwork crazy.

"Borrowers are going to have to prove they are the borrower they say they are," says Keith Gumbinger, vice president of HSH Associates, a mortgage-industry publisher in Pompton Plains, N.J. Imagine that, having to actually prove that you can afford the loan - the nerve of these guys!

Gumbinger says home buyers should consider these things before they apply for a loan.

1. Down payments are critical. Borrowers should expect to put down at least 10 percent for a “conforming loan” – a mortgage that Fannie Mae and Freddie Mac will purchase. First time buyers will still get a break and only have to put 5% down with some lenders. FHA borrowers will see the down payment go up from 3% minimum to 3.5%.

2. Credit scores count. A 720 on the 850-point FICO rating scale will get a borrower access to the best rates. Rich Bira, branch manager of FCM Direct Lender in Chicago, says: "A score between 720 and 739 gets 0.125 percent added to the rate, a score between 700 and 719 gets 0.375 percent added to the rate, and a score between 680 and 699 gets 0.5 percent added to the rate.” FHA has raised its credit score minimum from 600 to 620 and even then you'll end up paying 1-2 points on the loan up front, just to get a loan. Conventional borrowers at the low end of the credit score scale can just about count on paying 3-4 points, too.

3. Consider VA and FHA. Borrowers without down payments or with less than stellar credit scores should consider these government-insured loans offered through the Federal Housing Administration of the Veterans Administration. Even these programs have tightened up and raised both down payment and credit score requirements. there is also the USDA Rural Development program, but that program is rumored to be low or out of funds right now.

4. Unearth the records. Before applying, borrowers should organize tax, banking and other records that prove income, savings and debts. They should also expect to be patient about what may seem to be endless requests for information. This is a good time of the year to go find records anyway, with tax season upon us. Be sure to save at least 2-3 months worth of pay stubs, credit card bills and other documentation. You should probably get a letter from your employer that states how long you have worked there, too.

5. Get rid of debts. Limiting debts, including what borrowers expect to pay for the mortgage, to less than 43 percent of gross income (called the back-end ratio by lenders) has historically been important. The new back-end ration for most lenders is now at 41% of the borrowers gross income. That means that your total current monthly debt payments for things like cars, credit cards and any other installment-payments-oriented debt should not exceed 41% of your gross (not net) monthly pay. You don't have to cancel all of your credit cards (in fact that would look bad on the credit report), just get them paid off.

Now if you're a regular Joe who has been consistently keeping your finances in order and have been making your payments on your home and everything else, you may wonder what all of the fuss is about. Well it was a combination of lenders willing to lend to unqualified borrowers and borrowers buying homes that were well above their means that got us into the current housing market meltdown and foreclosure mess. Had these rules been in affect and been actually followed for the last few years we likely would not have had at least the housing industry collapse that lead to the current economic downturn. We may have still seen credit issues leading to a crisis (many believe that a credit card debt meltdown is next on the recession agenda), but housing would have been in better shape and some of the banks that have failed because of bad mortgage debt might have survived.

Some of the content in this post first appeared in Chicago Tribune, in an article written by Mary Umberger, published 02/15/09.