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Home Downsizing

by Jon Smith, CRB, CRS, GRI

Each year, many homeowners decide to sell their home and downsize down to a smaller one. For some, their children are no longer living at home and they don't need all the space and some decide the responibility of a large home is too much. Recently, many homeowners are deciding to trade down to a smaller home with a more manageable mortgage. Whatever your reason for looking for a smaller home, below are some advantages and disadvantages for you to consider.

Advantages

•Increased Cash Flow. In a sluggish economy, a better cash flow is something everyone would like. It makes sense, if you're spending less on your mortgage payment, you are likely to have money leftover every month to allocate for other needs. .

•Lower Utility Bills. It costs a lot less to heat and cool a smaller space. Not only will this help save money but reducing energy is better for the environment and helps to keep your home green.

•More free time. A smaller home means less to clean, less responsibility, and less stress. A large home can be alot of maintenance bot inside and out. With a smaller house, there is more free time.

Disadvantages

•Less Space. Moving to a smaller home would probably result in selling, giving away or throwing out furniture, books, and other non essential items. If parting with personal items that you don't have the space for is not for you, you will need to consider some options for storage.

•Less room for guests and entertaining. Less space means it will be more difficult to host parties and have overnight guests.

•Lifestyle Changes. Trading down means changing a lifestyle, and for some homeowners may not like the changes from a large prestigious home to a smaller simpler one.

The decision to move into a smaller home can be a difficult one but it doesn't always mean that you have to move into a home that has less amenities. Some people find that although the space is less, they have the money to upgrade appliances, add spas and other luxury items.

Mortgage Renegotiation

by Jon Smith, CRB, CRS, GRI

Foreclosures are everywhere and with the economy being strained, many homeowners are struggling to make the monthly mortgage payment.  The good news is that many lenders are more willing than to negotiate terms to help homeowners avoid foreclosure. By renegotiating their mortgage, homeowners may be able to get a lower finance rate as well as change your rate from a high fixed-rate mortgages or adjustable-rate.

Most lenders require that you have at least 10 percent equity in your home. You can easily check the value of your home on sites such as Zillow.com and I can provide you with a free and quick estimate of your home’s worth. Today's lenders typically will require that you have a credit score of at least 720 to qualify for good rates.

Lenders are aware of the many fiscal difficulties borrowers have in making their mortgage payments when hardships arise. However, they typically won't volunteer or advertise their help. So if you are struggling to make your payments on time, it is vital that you take the initiative and contact your lender and give them a heads up on your current financial hardship before you miss payments.  Keep in mind that lenders have more incentive than ever to work with you. Plunging property values mean they’re recovering less now on foreclosures. Plus, many that received cash infusions from the U.S. Treasury are under pressure to show that they’re responding to the housing crisis.

HUD Announces New Policy For Quicker Foreclosure Re-sales

by Jon Smith, CRB, CRS, GRI

Recently the Department of Housing and Urban Development (HUD) annoucned that they will relax FHA rules that prohibit insuring mortgages on homes that are owned by the seller for less than 90 days. This new policy took effect February 1, 2010 and is a move that hopefully will help to expedite the rehabilitation and resale of foreclosure properties.

With recent tighter lending requirements,  FHA financing has been the only option for some buyers. The 90-day policy has kept some
homebuyers from being able to purchase affordable homes. In addition this has also prevented the quick resale of foreclosed properties
, which affects the ability of communities to stabilize and rebuild.

This temporary waiver will be in effect for a period of one year, unless extended or withdrawn by the FHA. "FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

To ensure FHA borrowers are protected from inflated prices, the policy has certain restrictions, including:

  • All transactions must be arms-length and there can be no identity of interest between the buyer and seller.
  • If the sales price of the property is 20 percent or more above the seller's acquisition cost, the lender must meet specific conditions for the waiver to apply.
  • The waiver is limited to forward mortgages, and cannot be used under the Home Equity Conversion Mortgage (HECM) purchase program.

Read more specifics on this waiver, visit the HUD.gov release.

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.

Selecting The Right Generator

by Jon Smith, CRB, CRS, GRI

The electricity can go out in any season whether due to storms or equipment failure. Having a backup emergency generator as part of your emergency plan can be a lifesaver. There are various types and sizes of generators on the market and depending on your needs, can range in cost and quality. If you are a homeowner considering investing in a generator, below are some helpful tips that can help you in your research..

Types of Generators

You can get generators in various sizes and types of power. The more items you plan to to provide power to, the bigger and more costly the generator.

Stationary Generators

A stationary generator is  outside-mounted and run on propane or natural gas and supply more power than a portable. They are typically equipped with a forced air or other type of cooling system that allows it to be enclosed typically outside mounted on a concrete pad similar to a central air conditioning unit.

  • Permanent generators are installed as part of the electrical system and provide power to the building wiring.
  • Electrical current from the generator may back-feed into the home's electrical system and cause damage or fire and ruin equipment if it is not properly installed. It is recommended a qualified electrician install a generator to a home electrical system.
  • Stationary generators are far more powerful than any portable unit, a stationary generator will allow you to weather any outage for an extended period of time.


Portable Generators

This type of generators are typicaly wheeled and are ususally the most popular, You will need to make sure you have an ample supply of fuel when using this type for extended use. This type is idea if you plan to use a few selected circuits such as  for lights in the general living area, heating or cooling systems, or refrigerator.

  • If deciding to use a portable generator, it is important to select one that is adequately sized. Some electrical motors in home appliances and equipment can be ruined or damaged if they do not receive enough electrical current.
  • Portable generators are least expensive and can be transported for camping, trips or other locations where temporary power is needed


Before you purchase a generator be sure to you have determined the total watts needed to power the items you need. This is important to help you determine what size generator is required. An electrician can help make this determination or you can check the manufacturer information for each appliance.

Whether you choose a portable or a stationary, all generators burns fuel and must be run outdoors. Always follow the manufacturers instructions and never run it in the garage or inside the home.

Avoiding Loan Scams

by Jon Smith, CRB, CRS, GRI

One of the major things you will need to do if you are purchasing a new home, is to obtain a home loan. Unfortunately with the difficult economy and the availablity of loans more difficult, loan scams are on the rise. People with bad credit and the elderly are the most vulenderable and often targeted. Below are some tips to help you from being a victim.


Avoid Being A Victim

  • Avoid Unsolicited phone calls. Be wary of any phone call offering remarkably low interest rates on loans, especially if you have registered your phone number with the Do Not Call Registry. Most major nationwide lenders do not solicit business over the phone. Never give out personal information over the phone unless you are absolutely sure who you are speaking with.
  • Don't agree to anything with a too-high interest rate
  • Don't buy insurance from a lender without shopping around first.
  • Watch the terms for reinforcing. They might end up worse than what you've got now.
  • Don't sign anything that's been given to you as a surprise! If the terms aren't what you'd agreed on, do not sign the document.
  • Avoid bad credit mortgage rates when looking for a loan.
  • Many loan scammers use high pressure sales tactics, so if you feel pressured or uncomfortable in anyway, never sign anything. It is a good idea to contact a real estate lawyer if in doubt to review the documents. If the company is legit, they should have no objection to a lawyer looking over the loan agreements before you will sign them.

Warning Signs

  • Do business with reputable companies, stay away from unsolicited calls, e-mails or letters offering you a loan.
  • Never do business with anyone who asks for money to be sent in advance to cover "processing", "application", "insurance", or the "first month's payment". Legitimate lenders never ask for these things to be paid before a loan is disbursed.
  • Requests that you "wire" or "send" money, as soon as possible to a large U.S. city or to another country, such as Canada, England, or Nigeria, by Western Union, Moneygram, or similar means.

What To Do If You Think You Have Been Scammed?

If you feel that you have been scammed or the company you have been in touch with is suspicious, contact the below agencies.

  • The FTC
  • The FBI
  • File fraud alerts with each of the three credit bureaus. This is important if you have provided the scammers with your sensitive information, such as your Social Security Number and information on your driver's license. They can use this to obtain credit in your name.

Reverse Mortgages

by Jon Smith, CRB, CRS, GRI

Reverse mortgages are becoming more popular as a alternative for senior citizens who are homeowners. A reverse mortgage provides a way for seniors to borrow against the equity in their home with no repayment due until the homeowner dies, moves or sells. Any remaining equity after repayment goes to the borrower or the estate.  

 If you are considering a reverse mortgage, it may be of benefit if:

•You need cash assets or income and have no other source available.
•You are unable or unwilling to sell your house.
•You do not care what the costs are to get the income or assets you need. (Recent law has helped limit the outrageous costs of reverse mortgages.)
•You have no concern about which assets are left to your heirs.
Make sure you thoroughly scrutinize all costs and provisions.

The amount of money you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You can use this online calculator on the AARP website to get an idea of what you may be able to borrow.

There are some cost involved, many of the same costs that someone pays to obtain a home purchase loan, or to refinance their existing mortgage, apply to reverse mortgages too. You can expect to be charged an origination fee, up-front mortgage insurance premium (for the FHA Home Equity Conversion Mortgage or HECM), an appraisal fee, and certain other standard closing costs.In most cases, these fees and costs are capped and may be financed as part of the reverse mortgage. If a reverse mortgage sounds like it might be a solution for your situation, visit this website to locate a lender in your area.

Displaying blog entries 21-30 of 76

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Contact Information

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