5 Critical Areas That Lenders Scrutinize When Qualifying a Home Buyer

Whether you are a buyer or a seller, knowing how a mortgage lender scrutinizes a home buyer to qualify them for a loan is important information. For a buyer, it obviously helps them make plans in their financial lives to be able to qualify and get the lowest rates possible. For a seller, it helps to know what hoops the party on the other side is going to have to jump through so that they can qualify to buy your home. A home is never closed till the fat lender sings. Sorry, that sounded way better in my head. Anyway, here are the five critical areas lenders scrutinize when qualifying a buyer…

1. The borrower’s assets
The lender wants to make sure that the borrower has enough cash (or liquid assets) for closing and back-up funds (think nest egg). They also look at your other assets…

  • retirement funds
  • savings
  • stocks and bonds
  • personal property
  • real estate
  • and anything else you own or have paid for

They use your total assets and subtract your total liabilities to get your ‘net worth’ which helps them determine certain ratios they use to decided whether or not to lend a buyer money.

2. The borrower’s liabilities
What revolving and installments accounts does the buyer have? Are there any late payments in the last two years?

Are there any child support or alimony payments to consider?

Does the buyer have pledged assets or unsecured loans?

3. The borrower’s ability to repay the loan
How able is the borrower to repay the loan? A lender will look first at income and employment stability to determine a borrower’s ability to pay.

4. History of repayment of debt
A lender will run a credit report to determine the borrower’s creditworthiness. If you are ’shopping lenders’ remember to have the first one you go to run your credit… then get a copy and give it to all the other lenders you get rates and terms from. That way, there will be no effect on your credit score.

Lenders also look at your mortgage history rating if you have a property you have previously made payments on.

5. Standard qualifying ratios
Generally speaking, the total housing payment PITI (principle, interest, taxes, and insurance) should not exceed 28% of your total gross monthly income.

Also, the total monthly debts, including housing, should not exceed 36% of the total gross monthly income.

I hope this helps you understand the challenges borrowers face in getting a loan. I’m a big believer that knowledge is power. If you know how late payments affect your credit… you’ll be diligent and make your payments on time. If you know that you need stable employment history to buy a home… maybe you’ll consider staying employed at your current job instead of looking for another one. I hope you enjoyed the article and find it helpful in purchasing your next home. Please let us know if my company or I may be of service to you.

9 Tips for Northwest Arkansas First Time Home Buyers

Congratulations! You’re buying your first home! It’s always exciting when you’re buying a home… especially your first one. It can also be filled with a bit of anxiety and uncertainty. Here are Nine Tips and Steps to take if you’re a Northwest Arkansas First Time Home Buyers…

1. Figure out what you can afford.
There are many reasons to know what you can afford and several ways to figure it. While a bank will base this purely off income, credit, and liabilities; you may want to consider your lifestyle as well.

Do you like to take lots trips and vacations?
Do you love to shop and spend money?
Do you like to save a large portion of your money?

These questions will help you define what the price point of your home should be. There are also the normal factors like… square footage, number of bedrooms, and location to consider as well.

2. Know your rights as a buyer and a home owner.
You have rights specifically laid out by state and federal governments regarding the purchase of a home. Here are some resources you should read and understand:

  • Fair Housing
  • RESPA (Real Estate Settlement Procedures Act)
  • FHA (Federal Housing Administration)
  • Predatory Lending

3. Shop for a loan, find the best rate and terms.
Not all lenders are created equal. While some would have you think that their rates differ very little, the fact is that rates for the same borrower can differ by a full percentage point or more. While the average is probably less than 0.5% it is still enough to put some effort into finding a lender that can save you some money and, most importantly, that you feel comfortable with. You can get our list of preferred lenders above.

4. Learn about home buying programs that are available.

  • FHA and VA loan programs
  • Rural Development (RD) loan programs
  • Indian Home Loan Guarantee Program

There are so many programs available and they change so often that contacting a Realtor® is your best option.

5. Shop for a home
This is the fun part! Pick a Realtor® early in the process to help you save time and money. They will help you…

  • Put together a wish list
  • Create a home-shopping checklist
  • Help you find homes for sale through the MLS, banks, or private sellers
  • Help you make a decision, weighing pros and cons of each home

6. Make an offer
Your Realtor will help you make an offer that is both attractive to the seller and with terms and conditions that are in your best interest. There may be negotiation, counter-offers, even rejection, but your Agent will help you through the process until both parties have agreed on a price and terms.

7. Get a home inspection
Make sure your offer is contingent on a home inspection. In Arkansas, you have 10 days to have a home inspected after the offer is accepted. It can help you avoid buying a home that is in need of major repairs or is unsafe in some fashion that is not readily apparent. Here’s 10 Questions to Ask a Home Inspector.

8. Shop for homeowner’s insurance
You’ll have to have insurance if you have a loan and would want it even if you are paying cash. Homeowners insurance is easy to get and very affordable. Consider insuring your home for it’s replacement value (higher) instead of the purchase price (usually lower)… the two may be very different in today’s market.

9. Close that house!
It’s time to sign the papers. You and your Agent have crossed every T and dotted every i. The moving truck is packed (or on it’s way). Remember to bring a cashier’s check to closing along with a good attitude. Signing the papers to close your house can take anywhere from ten minutes to two hours depending on the loan and title paperwork involved. Make sure you get the keys before you leave and congratulations… you’re a homeowner now!

If you are considering buying a home, we’d love to help guide you through the process. Contact us if you like, or continue reading hundreds more helpful articles on our blog and give us a call when you have a question. You can also search for homes by clicking on the search icon in the upper left of the site. Thanks for reading and good luck!

How Can We Help You?

Thank you for visiting our website. Simply put, how can we help you? Are you in the market for a new home, possibly interested in taking advantage of the just approved tax credit? Looking to sell a home? Commercial property or lease? Please give us a call. We will help you have an enjoyable experience no matter the direction you choose.

Can I get the 2010 Home Buyers Tax Credits?

OK, you have heard by now that congress has passed and the president has signed the bill that extends the tax-credits for home buyers. It is what it is, and it may help with the sale of homes in the marketplace, it may just be postponing the inevitable market correction. But, hey, it is here and we can use it, (maybe). There are still some qualifiers, and if you are considering the purchase of a home, anytime soon, it is great to have options!

The following is a summary of my understanding of the 2010 program. Listed are some major points that may help sort through the details.

$8,000 First-time Home Buyer Tax Credit Major Points:

  • The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
  • The tax credit does not have to be repaid.
  • The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
    The tax credit applies only to homes priced at $800,000 or less.
  • The tax credit now applies to sales occurring on or after January 1, 2009 and or before April 30, 2010.
  • However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
  • For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
  • For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit Major Points:

  • To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
  • The tax credit does not have to be repaid.
  • The tax credit is equal to 10 percent of the home’’s purchase price up to a maximum of $6,500.
  • The tax credit applies only to homes priced at $800,000 or less.
  • The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010.
  • However, in cases where a binding sales contract is signed by May 1, 2010, the home purchase qualifies provided it is completed prior to July 1, 2010.
  • Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

So there you go, hope this helps. Let me know if you need the help of a professional.

20 Questions You Gotta Answer Before You Go House Hunting

Searching for the perfect home can be time consuming. Very time consuming. Since we all have work, family, and a social calendar to keep while looking for homes, here’s 20 Questions You Gotta Answer Before You Go House Hunting. If you know the answer to all these questions, you will be able to easily eliminate homes that don’t meet your criteria… leaving only the cream of the crop for you to spend your time on. Check ‘em out.

20 Questions That will Save you Major Heartache and Time

  • If the perfect home presented itself, are you in the position to buy it. If not, what would need to happen before you were in the position to buy it?
  • What is the most money per month that you think a bank would qualify you to make a payment?
  • What do you think you’re current home would list and sell for?
  • What in your current home would you like to change?
  • What features in your current home or a friend/family member’s home would you like in your next home?
  • What style do you love? Not like, love.
  • Do you prefer single story, two-story, or multi-level living?
  • Do you want/need a yard?
  • Are you looking for a maintenance free lifestyle?
  • How many bedrooms?
  • How many baths?
  • What would be the most compelling reason for you to purchase a particular property?
  • Which of the amenities you’ve mentioned would be nice to have but not necessary?
  • Who helps you make real estate decisions?
  • Who else will play a role in making your final decision?
  • What are the most important appreciating characteristics to you?
  • What is the minimum square footage you can live with?
  • What features and benefits should a great real estate agent provide?
  • How easy or hard is it for you to put together money for a down payment? What is the maximum down payment you could afford for a home that meets all your needs?
  • How do you like to view/search for homes? Internet or in person? With an agent or drive by? Appointments or Open Houses?

If you can answer these twenty questions… (and you may want to write the answers down for reference) then the agent that you choose can direct you to a list of perfect homes for you to look at that are already qualified with these parameters in mind. It saves everyone valuable time and you’ll get much less frustrated with the process of home buying. Give us a call at (479) 631-9738 if you need help determining the answer to any of these questions or if you’d like to view some home you saw using our home search.

Great Foreclosure Ebook Plus 4 Terms to Know When Searching Out Foreclosures in Northwest Arkansas

Based on current trends in our client searches on our websites as well as the massive success of NWAforeclosurelist.com, it seems pretty obvious that one of the main things buyers are searching for is foreclosed or distressed properties. If you are one of those people (and if you found this article, you are) searching for foreclosed properties in Northwest Arkansas, here’s 4 Terms that will be invaluable in your quest to get a good deal…

Corporate Addendums…
You’ll often see these two words on a listing sheet somewhere. This means the property is owned by some form of corporate entity whether it be a bank, fannie mae, hud, or some other corporation. These two words should me a couple of things to you…

  • It’s probably a Good deal. Yes, most properties that are listed and owned by a corporation tend to be under market value. I said MOST. Be careful.
  • It’s probably going to be a hassle. Just prepare yourself for this eventuality and it won’t stress you out nearly as much. Corporations like to use their own documents, their own timetable, and their own way of doing things. This leads us to our next term…

Those three letters stand for Real Estate Owned and to a buyer, they basically mean the same thing as Corporate Addendums. REO’s are not foreclosures even though people use the terms interchangeably. An REO can only exist after a home has been foreclosed on and taken back by the bank. REO properties are generally priced at or below market value. If you have a good Realtor keeping an eye on new listings that pop up you can snag the great deals as soon as they hit the table.

A foreclosure, more specifically, a foreclosure sale, is when a bank attempts to sell a property to cover the outstanding balance on the mortgage plus expenses and attorney fees. Most properties that are foreclosed on are worth less than the note that is on the property (under water), so foreclosure sales are generally less successful than a typical REO sale. Investors tend toward foreclosure sales because they will usually allow the previous owners to become the new renters, thereby getting a good start in cash flow for the rental property.

This is the term used when someone owes more on the property than it could currently be sold for on the open market. This happens when people take out high loan/value ratio loans on properties, then values fall, resulting in more being owned on a property than it’s worth.

There was a recent study done that showed (as of the end of June 2009) that 24% of owner-occupied homes had mortgage debt that exceeded their value according to Economy.com.

There are many other terms and things to understand about Foreclosures, REOs, and other forms of distressed properties. This article barely scratches the surface.

If you are a serious buyer and want a great 60 page e-book all about buying foreclosures… Give us your email address below and we’ll give you a free copy. Thanks for reading.

Focus On The Exit Pro Real Estate Training and Coaching for Realtors

I’d like to apologize to my regular readers. I haven’t been posting new content to the site recently but I have a good reason! I have cast off my earthly bonds and have created a new national real estate training and coaching business, The Exit Pro Real Estate. You can learn all about it by visiting our spanking new website at Exitprorealestate.com. This site is mainly for Realtors in an attempt to give agents a source of Daily, motivational and educational training and support.

Next level Training and Coaching for Realtors

Exit Realty has a great system of international training. The Best in fact. We want to suplement that with daily, weekly, and monthly training and events that will create a community among our members unlike anything currently available in any real estate franchise.

17 Things Appraisers Consider When Determining Your Property Value

Ever wonder how an appraiser determines value? I mean, your ability to get a loan or get a home sold is based on the value an appraiser comes up with so why shouldn’t you know how they do it? It might even help you make smart decisions about finishing or remodeling your home. Here’s 17 Things Appraisers Consider When Determining Your Property Value…

Consider this…

  1. The market conditions on the date of sale.
  2. Location, Location, Location.
  3. The site/view both looking at the property and looking from the property
  4. The universal design and appeal of the dwelling
  5. The quality of construction
  6. What’s the age of the property?
  7. What’s it’s condition?
  8. Total number of rooms
  9. Number and type of rooms (numbers of beds and baths)
  10. Square footage (gross livable area)
  11. Is there a basement?
  12. Is the basement finished?
  13. How functional is the property?
  14. Is there central heat and air?
  15. What type of car storage is available (garage, carport, etc.)
  16. Are there any special features that your property offers?
  17. Were there any special financing or special sale considerations that might have impacted value for comparable properties?

How this list helps

  • What if you decide to build a home but not finish out the basement?
  • What about adding a study without a closet? Now it won’t count as an additional bedroom.
  • What if you are in a great financial situation when you are ready to sell but your neighborhood has ten bank-owned homes for sale?

All of these things affect value, either real or perceived. Use this list to your advantage and plan ahead.

If you’re a buyer…
Unless you are buying a home for life, consider how others will perceive the home when it’s time to sell.

  • Is the floor plan attractive or horrid?
  • Is it located in an area that will still be desirable when you plan to sell in 3 years, 5 years, or 10?
  • Is the home soundly constructed? Will it last the test of time?

Use some of these questions to help you make your purchase decision for the long-term.

If you’re a seller…
When you are getting ready to sell ask yourself this question:

  • Is there anything I can do to raise the real or perceived value of my property?

If the answer is yes, and you are likely to get a return for the investment of time, money and effort you put into the project(s) or you are able to make the home more salable…. do it.

I hope this article has helped you learn a little about what determines value in an appraisal and how you can be prepared to maximize your benefit in any situation. Contact us at Exit Pro Real Estate to learn more about property values, get home owner tips, or find some great properties. Thanks for reading.

Eleventh Annual EXIT International Convention Gala… What Do You Care?

Tuesday September 29th marks the beginning of Exit Pro Real Estate’s International Convention. If you search the Internet for this event you’d probably find Exit Pro Real Estate agents tweeting about it, your agent’s voicemail may say they are out of office attending convention… but what the heck does that mean? Are Exit Pro Real Estate agents going to DC to party? Network? See that sights? What? And why would you care as a home owner, buyer, or seller? I’ll tell you what they are doing… and why you’ll be glad.

Exit Pro Real Estate is growing…
You’ve probably seen that billboard somewhere. If you live in Northwest Arkansas you’ve seen it on Interstate 540 or 71B. Chances are you’ve seen it no matter where you live. It’s EXIT’s simple message that says… “We’re growing.” While other real estate companies are backpedaling, reeling, and downsizing… Exit Pro Real Estate is growing. I think that says something about a company.

How is Exit Pro Real Estate growing? Why? What good does it do you? These are the real questions right? EXIT is growing in number of agents, market share, innovation, training, and just about every other way that counts. What it translates into for you is a better option when you are ready to choose a real estate agent. In general, EXIT agents are well trained, and highly motivated to take care of their clients. The Exit Pro Real Estate system is certainly the best system of real estate devised so far. It helps train agents, brokerages, and provides the tools to succeed. I could get strung off on Exit Pro Real Estate but I really just wanted to talk about the convention.

Exit Pro Real Estate’s 11th Annual Convention

Exit Pro Real Estate’s convention is where brokers, agents, assistants, administrators, and vendors go to come together to:

  • Share ideas
  • Learn about new programs and technologies
  • Listen to nationally recognized speakers
  • and much, much more…

Attendees also have the chance to win $100,000 or more. Bonus.

Heading into winter with a sparkling attitude…

Everything that happens at convention is geared towards one main goal… getting the body of EXIT agents revitalized and eager to move forward and implement some of the new strategies and tools they learn about at the convention. This effect even spills over to the EXIT agents that don’t attend. You may notice it in the next few weeks as your EXIT agent has a spring in his or her step, a smile on their face, and a determination to sell your home that is unmatched in the local agent community.

You see… this convention thing is good for you. Here’s just a sample of what your agent may be learning this week…

  • Time management
  • New Listing Tools
  • Working with Distressed Properties
  • Technology for Real Estate Agents
  • Properly Exposing Properties Online
  • Using Social Media in Real Estate
  • Results Driven Marketing

Now, if your agent wins $100,000… you better tell them to spend some of that extra cash on marketing your property! Thanks for reading.

The Carnival of Real Estate Meat N Taters Edition

Welcome to the Carnival of Real Estate – Meat ‘n Taters Edition! EXIT Pro Realty is proud to host CoRE #156 this week with just over 20 quality submissions. So, without further adieu… on with the show!

Standard – 3rd Runner Up
While a bit negative, we thought this post was well written and had home owner interests at heart. Jim Wang over at Bargaineering has written a good post on Your Home is Not An Investment.

Select – 2nd Runner Up
John Coley over at Lake Martin Voice gives us a cool video and explanation of water depth in Lake Martin 101: How to Measure Winter and Summer Water Depth. In keeping with our theme, we think John’s done an excellent job by showing his knowledge of the area he specializes in as well as his friendly demeanor.

Choice – 1st Runner Up
This not-so-shabby article from Moolanomy Personal Finance, How to Sell Your Home Fast – 9 Tips to Get the Most From Your Home Sale is a great collection of general tips to help sellers make their home more salable; always a good thing.

Prime – CoRE Winner!
Joe Manausa over at Tallahassee Real Estate Blog rakes in the top award for his excellent article Consider Paying Home Mortgage Discount Points. It’s concise, informative advice from a real estate professional. We loved it.

Other Favorites…
The “Old 96er” Award
This one goes to Torrey Brothers over at HotWholeSaleRehabs.com for Top 50 Reasons to Invest in Real Estate Right Now! for shear heft. It’s a pretty informative article as well.

The “Yukon Gold” Award
This one goes to a good article that didn’t really follow along with the main pack. That said, Mark Menzella offered a great introduction to 7 Days to Better Your SEO Search Engine Optimization – Day 1, Title Tags.

That’s about it for the CoRE #156. Stick around and check out our new Brokerage Blogsite, EXITproRealty.com. We like it, we think you might too.

Congrats to all the winners. There were quite a few really solid articles this week, these just happened to be the ones that tickled our fancy. Make sure to submit your post to the Carnival Next week when it is hosted at MiOaklandCounty.com.