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Make Good Offers Better

Monday, June 30, 2014
by The Mike Parker Team

Make Good Offers Better

 

It’s disappointing, frustrating and sometimes, discouraging when you lose a home you want to buy.

One of the hardest lessons for today’s buyers is that writing an offer doesn’t mean that you’ll get the home or even a counter-offer.  The low inventory affecting many of the housing markets requires a different strategy to give you the best chance to get the home you want.

  1. Make your best offer initially; you may not get a chance to accept a counter.
  2. Submit a written pre-approval letter from the lender.
  3. Increase earnest money above what is considered normal.
  4. Make a larger down payment.
  5. Eliminate unnecessary contingencies.
  6. Don’t ask for personal property not included in the listing agreement.
  7. Pay your own customary closing costs.
  8. Shorten the inspection period.
  9. Buy the home “as is” subject to inspections which still allows you to get your earnest money back if the inspections are unacceptable but doesn’t require the seller to make repairs.
  10. Write the seller a hand-written, personal letter telling them why you want their home; include a picture of your family.
  11. Offer to use the seller’s or listing agent’s preferred title company.
  12. If you can pay cash, do so and arrange financing after closing.  Be prepared to show proof of available funds.
  13. Schedule the closing as soon as possible but let the seller know you can be flexible.
  14. Once you decide on a home, act with expedience.
  15. Ask your real estate professional if they have any other suggestions. 

 Think of making an offer like applying for a job. You want to make your best impression and show why you are the best choice.  You won’t always know that there are multiple offers.  Approach the process like the competition is doing their best to get the home. 

An Unexpected Expense

Tuesday, June 24, 2014
by The Mike Parker Team

An Unexpected Expense

 

In a study released by TD Bank, 65% of buyers with mortgages that required mortgage insurance said the higher monthly payment was more than they originally expected.

Private mortgage insurance is required on loans that exceed 80% of the home’s value.  For conventional loans, the premiums range from 0.5% to 1% annually.  The PMI could add close to $100.00 a month to the payments on a $200,000 mortgage and over $200.00 a month on a FHA mortgage.

FHA has two components to its mortgage insurance which includes an up-front charge on closing of the loan and an annual charge.  The up-front premium is 1.75% of the mortgage which can be paid in cash at closing or added to the mortgage amount.  The annual premium ranges from 0.45% to 1.35% depending on the loan-to-value and term of the mortgage.

Most lenders are required to automatically cancel coverage when a 78% loan-to-value is reached which on a 30 year loan with normal amortization could be eight to eleven years depending on original loan amount and interest rate.   If the value of the home has increased as documented by an appraisal so that the current mortgage is below 80% loan-to-value, the lender can be petitioned to eliminate the PMI.

Beginning in April, 2013, FHA requires the mortgage insurance to be paid for the entire term of the mortgage.   Prior to this rule change, it was required to remain in effect for a minimum of five years but could be cancelled when the mortgage is reduced to 78% of the original purchase price.

A homeowner can greatly reduce their cost of housing by avoiding mortgage with a minimum 20% down payment.  If a higher loan-to-value mortgage is required to purchase the home, the objective should be to pay down the mortgage amount to relieve the need for the mortgage insurance.   Generally, loans with lower loan-to-value mortgages also have lower interest rates. 

What is a Seller's Market?

Monday, June 16, 2014
by The Mike Parker Team

 

It is generally considered a seller’s market when the conditions favor the seller.  This condition exists when demand is high and supply is low without any significant adverse economic conditions taking place.

Demand is determined by ready, willing and able buyers.  Low interest rates with indications that they will begin to rise fuels part of this demand. Rising prices also creates a sense of urgency to avoid higher housing costs.

Inventory is currently below what is considered balanced in most areas. In some areas and price ranges, homes are selling very quickly, with multiple offers and sometimes at above the listing price.  When too many buyers are chasing too few properties, things get competitive and the seller is the beneficiary.

Even when buyers and sellers come to an agreement on price and terms, a challenge can occur if the appraisal doesn’t meet the sales price.  Either the purchaser has to come up with the additional cash or the purchase price has to be renegotiated.

A typical seller wants the most money possible for their home in the shortest time frame with the fewest inconveniences.  A Seller’s Market provides the most likely environment for this to happen. 

Another Source for a Down Payment

Monday, June 2, 2014
by The Mike Parker Team

Another Source for a Down Payment

 

Most taxpayers know that they will pay a 10% penalty if they withdraw funds from their IRA before they turn 59.5 years old.  There is an exception for first-time home buyers that allows a penalty-free withdrawal of up to $10,000 per person if they haven’t owned a home in the previous two years.

This would allow a married couple who each have an IRA to withdraw a lifetime maximum of $10,000 each, penalty-free for a home purchase.

In many cases, the money would be used for a down payment or closing costs.   However, some buyers might consider this source to increase their down payment so they could qualify for a loan without mortgage insurance.

If the taxpayer qualifies for the penalty-free withdrawal, there may still be taxes due.  Contributions to traditional IRAs are made with before-tax dollars and the tax is paid when the funds are withdrawn.  Since Roth IRAs are made with after-tax dollars, there is no tax due when the funds are withdrawn.

Another interesting fact about this provision is that the taxpayer making the withdrawal can help a qualified relative which includes children, grandchildren, parents and grandparents.

Homebuyers who are considering using IRA funds for a home purchase should get expert advice from their tax professional concerning their individual situation. 

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Mike Parker - CRS
HUFF Realty
60 Cavalier Blvd.
Florence KY 41042
859-647-0700
859-486-3300
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