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Assumable Mortgages

by Jon Smith, CRB, CRS, GRI

Assumable mortgages are a unique lending instrument that allows someone else to take over the payments for you. The assumable mortgage is an alternative to the traditional financing most homeowners go with.

Assumable mortgages are very different and are also usually not very common today's market but depending on your situation, they may work for you. Below are the basics of assumable mortgages and what they can do for you.

How They Work

An assumable mortgage works in that another person can take over the loan that was originally issued to someone else. In order to assume the mortgage, the purchaser must qualify for the loan and pay closing fees, including the appraisal cost and title insurance. This can be beneficial for a piece of property that has been difficult to sell. A potential buyer can take over the current mortgage rather than obtaining their own financing. If you are in a situation where you need to sell a home quickly this can be an option.

Benefits of Assumable Loans

• The process of converting the original loan to an assumable mortgage, is relatively simple. Because the buyer will not need do go thru the closing process or obtain a property appraisal, the entire process can be completed quickly. 

•If the original loan was written during a time when interest rates were low, that is a big benefit to the buyer. The buyer is guaranteed the original interest rate, they do not have to take whatever rate the market is at currently. dictates to them.

•If you are the seller and need to sell the home quickly, offering an assumable mortgage is a big attraction to buyers. 

Disadvantages of Assumable Loans

• One risk for this type of mortgage can exist for the seller of the home. Some assumable mortgages can hold the seller liable for the loan itself even after the assumption takes place. Thus if the the buyer were to default on the loan, potentially the seller could be left responsible for whatever the lender is unable to recover. The homeseller can avoid this by indicating their release their liability in writing at the time of the assumption.

•Sometimes large down payments can be required and could be difficult for some buyers to obtain.

 

 

Cabinet Refacing

by Jon Smith, CRB, CRS, GRI

Whether you are planning to sell your home or want to give your kitchen a fresh look, cabinet refacing can be a less expensive alternative to a complete kitchen remodel.  The kitchen is one of the most important rooms in the house. Outdated cabinets are a big turn off to potential buyers. Replacing cabinets can be quite costly, but refacing them can provide a completely new look.

If your cabinets are still in good condition, refacing with a wood veneer could be the best way to give your kitchen a makeover. Prices vary between different types of veneer so the overall cost will depend on the wood you choose.

Refacing cabinets means adding new doors and the framework that holds them.  Existing structures are left standing, no cabinets are removed and the layout remains the same. A typical refacing job involves replacing the cabinet doors, the drawer fronts, and the hardware. Matching wood, paint, or laminate veneer is used to resurface any exposed cabinet framework.

The cost of a refacing job will depend on the size of the project, the materials, and options, but a typical refacing job generally costs between $1000-$5000 depending on if you plan to do it yourself or hire a contractor.  To determine the projected cost of a refacing project, some companies will give a price per unit. They count each cabinet door, drawer, end panel, and false front as a unit, and add up the kitchen's units for a total unit count. Price per unit can range from as low as $150 to as high as $250, depending on options and material selection. Using a high-end wood door will up the costs, while a less expensive RTF veneer might be a more budget-friendly option.

The Escrow Process Explained

by Jon Smith, CRB, CRS, GRI

During the process of purchasing a home you will need to enter into escrow. Many first time homebuyers have many questions about the escrow process. 

What exactly is an escrow?
An escrow is an arrangement in which a disinterested third party, called a escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. The escrow becomes the depository for all monies, instructions and documents pertaining to the purchase of your home.

How does the escrow process work?

The escrow is a depository for all monies, instructions and documents necessary for the purchase of the home, including  funds for the down payment, lender’s funds and documents for the new loan. The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with instructions; paying all bills as authorized;  closing the escrow only when all terms and conditions have been met; and, distributing the funds in accordance with instructions.

Do I need documentation?
Receipt of your deposit is generally included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your local bank.

What information will I have to provide?
Typically you will be asked to complete a statement of identity as part of the necessary paperwork. Because many people have the same name, the statement of identity is pucused to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.

How long is the escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. Typically an escrow often takes an average time of 30 to 45 days.

When does the escrow process end?

The escrow process ends when you actually close on the home, during the closing procedure. This is when all funds are transferred accordingly, when all documents are signed, and when you get the keys to your new home.

 

Common Mortgage Terms

by Jon Smith, CRB, CRS, GRI

If you are purchasing a new home, most likely you will be researching a mortgage as well. This can be a confusing process, especially if you are first time homebuyer. You will hear many different terms when dealing with lenders, agents and brokers. Below are some of the common terminology used so you can become familiar when going thru home buying process.

Annual Percentage Rate (APR): The APR for your home loan is an annual cost that includes the interest rate quoted by your mortgage company plus additional home loan costs such as origination fees and points.  Required by law, this amount is to be disclosed to the homeowner by the lender under the federal Truth in Lending Act. This amount includes up-front costs paid to obtain the loan but does not include the PMI,  title insurance, appraisal, and credit report.

Closing Costs: These are the expenses aside from the price of the property that are incurred by buyers and sellers when transferring ownership of a property.  These costs include origination fees, property taxes, charges for title insurance, escrow costs, appraisal fees etc.  Many times these costs are shared by the buyer and the seller.

Escrow: During the home loan process, a neutral third party known as Escrow holds documents and money (including earnest money deposits) for safekeeping until the real estate transaction is complete.

Points: The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount. This means that, to lower your interest rate by one point on a $300,000 mortgage, you’ll need to pay an additional $3,000 at closing.

Private Mortgage Insurance (PMI):  If you are purchasing a home and you do not have a the traditional 20 percent down payment,  lenders will require you to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on your loan’s structure.

Title Insurance: This type of insurance protects both the buyer and the seller against legal issues that may arise with a  home’s title. If a problem occurs, the title company pays the associated legal fees to correct the situation.   

There are  many different terms out there that will come up when you buy a home and apply for a loan. If you are ever confused or have any questions about a particular term or contract be sure to ask your realtor or real estate attorney for clarification before signing any legal documents.

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Photo of Jon Smith, CRB, CRS, SRES, SFR Real Estate
Jon Smith, CRB, CRS, SRES, SFR
Iowa Realty
3521 Beaver Ave.
Des Moines IA 50310
515-240-2692
Fax: 515-453-6404
 

 

 

Licensed in the State of Iowa