Home Buyer Information
Who decides the closing date?
February 8th, 2010 categories: Home Buyer Information, Home Seller Information
Who decides the closing date? Do the buyers? Do the sellers? Do the real estate agents? Does the loan officer?
In a residential real estate transaction there are many terms that will need to be negotiated between you and the sellers and the closing date is one of them.
As a buyer, you are probably ready to move-in to your new Spring Texas house tomorrow. As the sellers can’t seem to get their stuff, out of what you are already calling your house, soon enough.
As a seller, moving out tomorrow would be impossible because over the years you have lived in your home you have collected stuff. Not just a little stuff but a lot of stuff. All of it needing to be packed. Packing which certainly can not be done in just one day.
As a buyer, its impossible to try to predict what date the sellers would prefer to close on. Instead its just best to worry about what date fits your schedule. Later you can determine a date that will work for both yours and the sellers schedules.
Where to begin? To decide upon a date to close on, you need to ask yourself a series of questions:
- How long will it take your lender to process your loan? 30 days? 45 days?
- Do you have any upcoming trips that will have you out of town on certain days?
- Do you have to be out of your apartment or the place you are currently living by a certain date?
- Are you trying to bring the bare minimum amount of money to the closing table? If the answer is “Yes”, then you will want to close towards the end of the month to reduce the quantity of days you are charged interest on your home loan.
- In Spring Texas, closings take place at title companies. Closings only occur Monday – Friday. As the title companies are NOT open on Saturdays and Sundays nor on Holidays. So those days are out.
- When are you wanting to move in? If you are wanting to move in over the weekend, then ask for a closing date that falls on a Friday.
Review your answers to these questions and decide what date works best for your schedule then let the negotiations begin. Typically negotiating the closing date is fairly easy, especially if the sellers are truly wanting to sell their Spring Texas home. But there are other times when deciding upon a closing date turns out to be the most difficult term for buyers and sellers to reach an agreement on.
Read also:
- What is a sellers leaseback and should you get one?
- What stays and what goes with a Spring Texas house?
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New form, no e-file, and longer wait
February 3rd, 2010 categories: Home Buyer Information
If you purchased a home after November 6th, 2009 or are planning on purchasing a home this year and taking advantage of first time home buyers tax credit, there are a couple of changes you need to know.
New Form – form 5405 is the form you need to claim the first time home buyers tax credit. But if you purchased your Spring Texas home after November 6th, 2009, not just any form 5405 will do. You need to use the revised form 5405. You can download the revised form 5405 and its instructions.
No e-file- that’s right only snail mail will do. Due to six year old children claiming the first time home buyer tax credit, the IRS is requiring buyers to provide a copy of their HUD-1 settlement statement as proof that a house was actually purchased. Smart idea on our government’s part to require documentation. But not as convenient for you to claim the home buyers tax credit.
Longer wait- Due to the snail mail requirement and the IRS not being ready to process any first time home buyers tax credits until mid-February, your check will be showing up in your mailbox a couple of weeks later. The IRS typically processes refunds in 4 to 8 weeks but early filers should expect the processing time to be 7 to 11 weeks.
Read also:
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Making sense of the new GFE and HUD-1
January 26th, 2010 categories: Home Buyer Information
Loan officers, escrow officers, and Realtors® have all been scrambling over the last 60 days to either implement or simply to understand the revamped GFE and HUD-1 settlement statement that went into effect on Jan. 1, 2010.
The purpose of the new GFE (Good Faith Estimate ) is to help make shopping for a home mortgage easier for borrowers and the purpose of the new HUD-1 (Housing Urban Development -1 settlement statement) is to make comparing the GFE to the settlement statement easier. Both really good things for borrowers and changes that were long overdue.
The new GFE is a huge improvement over its predecessor and it should make it easier for borrowers to compare the loans terms amongst various lenders.
What was wrong with the OLD GFE that the NEW GFE fixes?
1. Standardization. Previously the GFEs provided by lenders did not look the same making it difficult … if not impossible to compare GFEs from different lenders.
2. Identification of fee originator. The old GFE did not identify whether a fee was charged by the lender, the title company, or the insurance company. If lender 1 estimated lower third party charges than lender 2, you were lead to believe that you would be spending less money by using lender 1. As a borrower you were left trying to make decisions based upon misleading information.
3. Lender charges reduced to two items. Its a whole lot easier to identify the bottom line or the bottom number when all of the lender’s charges are rolled up into just two line items. Previously you had a list of 8 to 10 separated out charges which would be okay if Lender A called his charges the same as Lender B but that was not case. Lender A would call it a processing charge and Lender B would call it an administrative charge.
The amount of the lenders charges on the GFE have to match exactly to the HUD-1 / closing statement. They can not change.
4. Terms of loan are front and center. The old GFE did not identify if the interest rate on a borrowers loan could increase, if the loan has a balloon payment, or if there was a prepayment payment. These are all identified now on page 1 of the GFE in the Summary of your loan section. Below is an example.
The GFE does freeze the origination charge but it does not commit the lender to the rates and points shown on the GFE. The rates and points on the GFE are not final until they are locked by the lender. If the loan has been locked when the borrower receives the GFE, the GFE will show the lock period of usually 30 to 60 days.
5. Limits placed on fees changes. The new GFE also changes the way in which third-party charges are disclosed. HUD has imposed strict limits on how much the GFE figure can change. Some charges like the origination fee can not change at all. Others like the title search fee can change but by no more than 10 percent. If the numbers on the HUD1 / closing statement are outside their allowable tolerance levels, the parties can still close but the lender has to fix the discrepancy within 30 days.
Below are the three pools that every fee on the GFE has to be placed into.
If certain charges increase between the GFE and the HUD1 settlement statement then a new GFE must be provided and the buyers must wait 3 days before closing. By restricting the quantity of fees that can change at closing and limiting the potential increase of fees, there will fewer unpleasant surprises at the closing table for home buyers.
6. ONLY identifies the borrowers monthly principal + interest and mortgage insurance premium. This is a MISTAKE. The old GFE provided an estimate to the borrower of his TOTAL monthly payment including homeowners insurance and real estate taxes plus principal + interest, and mortgage insurance premium. If you are going to buy a home in Spring Texas you need to know how much your monthly payment is going to be not just a portion of your monthly payment. This is the only beef I have with the new GFE.
Click on the links to view the new GFE and the new HUD-1. One more thing …. if you want to find out more about the GFE and the HUD, you can read the Shopping for your home loan booklet published by the Department of Housing and Urban Development.
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Sellers contribution to buyers closing costs slashed 50%
January 22nd, 2010 categories: Home Buyer Information
This week the FHA announced changes for FHA home loans. The good news is the changes were not as drastic nor potentially devastating to the housing industry as what they could have been.
In a nutshell, the changes which will become effective sometime this summer are:
1. Maximum seller contribution to buyers closing costs reduced from 6% to 3% of the sales price. Of the three changes to FHA home loans, the reduction in the amount sellers can contribute to a buyers closing costs has the biggest impact. But even the impact of this change is going to be small.
A few years ago, it was common practice for buyers to essentially roll their closing costs and prepaids into their loan but these were the good old days. With the extra scrutiny on appraisals, buyers are no longer able to add the 4% to 5% in closing costs and prepaids on top of the sales price and still have the house appraise.
2. Upfront Mortgage Insurance Premium raised from 1.75% to 2.25%. The 0.5% increase will be a small increase in a home buyer’s monthly payment. For example on a $150,000 loan the $0.5% increase would be $750. The Mortgage Insurance Premium can be added to the loan amount.
So at today’s interest of 5%, an increase of $750 in the loan amount would increase a home buyer’s monthly payment by $4.03. Less than the cost of a combo meal at the majority of fast food restaurants.
3. If a borrower’s FICO score is below 580, the borrower would be required to put 10% down instead of 3.5%. Requiring borrowers to have a higher credit score to qualify for a minimum down payment of 3.5% is going to be of moot impact. The majority of lenders already require borrowers to have a minimum credit score of 600 or 620 to qualify for a FHA home loan. Even if the borrower was willing to put 10% down there are very few lenders who are willing to give him a loan.
If you are going to be a first time home buyer and planning on getting an FHA loan what does all these changes mean to you?
If you are planning on buying before summer, these changes will not impact you. The changes would have been made after you purchased your home in Spring Texas.
If you are planning on buying a home after spring, then you better be ready to bring more money to the closing table. Because the sellers will only be able to contribute a maximum of 3% to your closing costs and prepaids which will leave you footing the tab for the remaining 1% to 1.5%.
Read also:
- How do damage points affect your FICO credit score?
- First time home buyers tax credit, what is it, how much is it, and when does it expire?
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How do damage points affect your FICO credit score?
January 13th, 2010 categories: Home Buyer Information
Over the years, the secret behind how your credit score is calculated and how different “what ifs?” affect it have been guarded better than the Bush’s baked beans recipe . That is until recently as FICO has shared how different “what if?” scenarios can affect your credit scores .
Did you max out your Macy’s card over Christmas? Expect a credit drop of 10 to 45 points. Did you get behind and had to make a 30 day late payment? That mis-step just cost you a whopping 60 to 110 points.
What I found most interesting about the damage points is how financial mis-steps are tougher on people with great credit scores. In a few years there will be less people with great credit scores and a lot more with only decent credit scores because the FICO credit rating system makes great credit scores tougher to keep.
I have been fielding more and more questions about credit and home loans lately. The questions are coming from both buyers and sellers. The two main questions are “Are buyers still able to get loans?” and “Are the lenders requiring higher credit scores?”. The answers to both these questions are “Yes”.
Lenders are still lending money and loans are still available. The documentation and verification process is more stringent than it was a couple of years ago. Credit scores have become more important too. A couple of years ago, a borrower could get a loan with a 580 or maybe a 560 credit score. That is not the situation today. If you need a loan in order to buy that house in Spring Texas you want, you are going to need a minimum of a 620 credit score.
Read also:
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Water costs on the rise …… AGAIN!!!
January 11th, 2010 categories: Home Buyer Information
That’s right again! Last summer, the cost of watering my Spring Texas yard increased and I wrote a post about it titled “Are the days of cheap water gone?”. The answer to the question was Yes. The portion of my water bill identified as Regional Water Authority had increased from $0.99 to $1.50 per 1,000 gallons. An increase of 51% . Now, $0.51 doesn’t sound like a lot but considering my average water usage during the summer months is 26,000 gallons that $0.51 increase meant my monthly water bill increased by $13.26.
But that was last summer’s rate. On January 1st, 2010, the Regional Water Authority groundwater pumpage fee increasedfrom $1.50 to $1.75 per 1,000 gallons. An increase of 16%. And when my MUD converts to surface water in the early part of 2010 the Regional Water Authority fee will increase to $2.20 per 1,000 gallons. An increase of $0.70 or 47% over last summer’s rate.
Thus I can anticipate the Regional Water Authority portion of my water bill to be $57.20 this summer instead of the $39.00 in the summer of 2009. In addition to the Regional Water Authority charge on my water bill, there is a charge for water, sewer, and Texas Comm Environ Quality.
Unfortunately there is absolutely nothing I can do about the rate increase. As the reason for the rate increase is to pay for the infrastructure constructed by the North Harris County Regional Water Authority (NHCRA). The NHCRA was created to comply with mandates to reduce our dependence on groundwater. Thus the NHCRA laid infrastructure to connect our MUDs with Lake Houston for a source of surface water.
We have just reached the first mandated deadline of January 1, 2010 that requires 30% of our water to come from surface water. In 2020, 70% of of water is mandated to come from surface water and by 2030 the surface water requirement increases to 80%.
Since the days of cheap water will soon become a distant memory, it’s time we all begin implementing ways to conserve water. Here’s a good list of 100 ways to conserve water to get you thinking.
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8 ways for homeowners to save money
January 8th, 2010 categories: Home Buyer Information, Home Seller Information
Did the holidays drain your bank account? If so, here are some tips to help you save money on the costs of homeownership this year.
1. Claim all your real estate tax exemptions - one of the easiest ways to reduce the taxes on your Spring Texas home is to claim the homestead exemption offered by the state. Go to the Harris County or Montgomery County appraisal district websites to see what exemptions are currently being applied to your account and to determine if you are eligible for any additional exemptions such as the over 65 or disability exemption.
2. Check the settings on your programmable thermostat - Adjust the heat settings to lower temperatures while you are at work and at night. Turning your thermostat down 10° – 15° for 8 hours will reduce your heating bill by 5% to 15% a year.
3. Shop your kilowatt hour rate – In Texas, electricity is deregulated giving you more than one choice of provider. Go to Powertochoose.org to compare the rates of the electrcity providers that service your area. Last summer I changed our electric provider and reduce our rate by 30%.
4. Install insulation or a radiant roof barrier - If your home is more than 5 years old there is a good chance it was not built with a radiant roof barrier. Installing a radiant barrier which can be done in existing homes will lower the temperatures in your attic and lower your cooling bill by 5% to 15%.
5. Eliminate unnecessary water usage - Last summer, the cost of water in Spring Texas increased and it increased again on January 1, 2010, and it is going to increase again by the end of March. Our days of cheap water are gone and its time to get serious about conserving water. By setting your sprinkler systems to water during the early morning hours or late evenings you will be increase the effectiveness of your watering and be able to reduce your watering times.
6. Review your homeowner’s insurance policy – Call your insurance agent and review your homeowners insurance coverage and deductibles. Next call 2 or 3 other insurance agents to get quotes for comparable levels of coverage. The rates for homeowners insurance varies greatly from company to company. You may be surprised how much you can save by changing the homeowner’s insurance companies.
7. Replace older inefficient appliances – If you have an old refrigerator or a washer and dryer that you have been meaning to replace this could be the year for you to do it. Due to the American Reinvestment and Recovery Program, you will get an additional incentive / rebate ranging from $45 to $1,600 for replacing old appliances with qualified energy efficient appliances. Not all of the details of the program have been released but the rebate is only available for purchases made from April 16 to April 25, 2010.
8. Unplug and turn off - When you leave a room turn off the lights and the television. My Dad instilled this money saving practice into us when we were very young. As I don’t think nothing made my Dad as mad as coming into an empty room and seeing the lights and television on. In addition to turning off the lights and television, you should turn off the home computers and printers when not in use.
Unplug the toaster oven, coffee maker, toaster, electric can opener, and clock in the spare bedroom. All of these still use electricity even when they are not in use.
If you have a great way to save money on the costs of homeownership, please share it with us by adding it in the comments section.
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Tax credits for move-up home buyers
January 6th, 2010 categories: Home Buyer Information
If you are looking to buy a house in Spring Texas this year, there is a good chance you are familiar with the first time home buyers tax credit. But did you know the expanded and extended homebuyers tax credit bill that was passed in November 2009 contained a tax credit for what is being called the “move-up” home buyer? This time around our government is not giving all the FREE money to just first time homebuyers. Move-up homebuyers will get some FREE money too. It’s just not as much money as first time homebuyers get.
Here are the details on the tax credit for move-up homebuyers:
- Amount of tax credit – $6,500 or $3,250 if married filing separately
- Eligibility -
- Must have lived in the home sold or being sold or being vacated as your primary residence for 5 consecutive years of the last 8 years.
- Adjusted Gross Income (AGI) of up to $125,000 for singles and up to $225,000 for married couples. Homebuyers with incomes of $125,000 to $145,000 for singles and $225,000 to $245,000 for married couples are eligible for a phase out of the tax credit.
- Termination date of tax credit – May 1, 2010. You have to be in contract on a new or resale home by April 30, 2010 and close on the home by June 30, 2010. You do not have to have your existing home sold by April 30, 2010 but you do need to be in contract on what will be your new place of residence by April 30, 2010 and close by June 30, 2010.
- Payment of funds - Homebuyers have to complete and file with their 2009 or 2010 tax return FORM 5405. You have to use the December 2009 revised FORM 5405 and not its earlier version. Click on the links to access the revised FORM 5405 and the instructions for FORM 5405. Due to the additional documentation requirements of the revised FORM 5405, you can not e-file. You have to go the snail mail route.
- Repayment – No, if you live in the house for the next 3 years. If you sell the house before the end of the 3 years the full amount of the tax credit will be recouped unless the house is sold at a lost.
If you are not comfortable with your financial position or your employment situation then the move-up tax credit is not going to be an incentive for you to buy a different home in Spring Texas. But ….. if you are comfortable financially and you are thinking about buying a different home this summer, then you seriously need to reconsider the timing of your plans to take advantage of the tax credit.
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New Year … New sellers disclosure
December 30th, 2009 categories: Home Buyer Information, Home Seller Information
A new year brings lots of things. New resolutions, new opportunities, new laws, and this year a new seller’s disclosure from the Texas Association of Realtors. Well …. maybe not quite new but changed.
Effective on the first day of 2010, changes to TAR-1406 (the Seller’s Disclosure Notice) will be made to ….
- Section 5 – Are you (Seller) aware of any of the following: Any lawsuits or other legal proceedings directly or indirectly affecting the Property – Additional clarifying language will be added to further define legal proceedings as divorce, bankruptcy, or foreclosure.
- Additional Notices to Buyer: (4) The following providers currently provide service to the property: Electric, Sewer, Water, Cable, Trash, Natural Gas, Local Phone, and Propane - Additional lines will be added for the sellers to provide the telephone number in addition to the name of the service providers.
Neither one of these changes are major but they should both help Spring Texas real estate transactions go a little smoother. I know buyers will be grateful to have the phone numbers of the utility providers. As sometimes setting up the utilities turns out to be the most frustrating and difficult part of the entire move.
Read also:
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Top 9 things home buyers have in common with Santa Claus
December 22nd, 2009 categories: Home Buyer Information
Since I am in a holiday mood, I was looking for a fun way to combine real estate and the holidays. My idea …. create a Top 9 list of things Spring Texas homebuyers have in common with Santa Claus. I was hoping to come up with a Top 10 list but try as I might I could only come up with a Top 9 list. Just like David Letterman’s Top 10 Lists some of the items on the list are funnier than others. So if you have to force a laugh on a couple of the items I understand.
Top 9 things Spring Texas home buyers have in common with Santa Claus:
9. In Dreams. Sellers dream about finding a buyer for their house. Girls and boys dream about Santa Claus and his sack of toys.
8. Tempted by Treats. Sellers tempt home buyers to purchase their house by offering to pay closing costs or including flat screen televisions. Girls and boys put out cookies and milk to tempt Santa into leaving them more toys.
7. Jolly. Home buyers are happy about purchasing a home and the big guy, well they don’t call him “Jolly Old St. Nick” for nothing.
6. Gift list. My home buyer clients and Santa Claus both have my name at the top of their gift list.
5. Helpers. Real Estate Agents, Loan Officers, Home Inspectors, Surveyors, Appraisers, and Escrow Officers work together to help buyers find, purchase, and close on a home. Santa has many many elves helping him.
4. Budgets. The monthly mortgage payment has to fit within the home buyers budget. Santa has a defined budget he has to stay within. Wait a minute … Santa doesn’t buy the toys because the elves make them. So there is no budget. Okay, maybe only home buyers have budgets.
3. Schedules. Home buyers have numerous tasks to complete by specified dates to meet their scheduled closing date. Santa has a schedule he needs to keep if he is going to get all those toys delivered in one night.
2. Lists. Home buyers make lists of the wants and needs they have for a home. Not as exciting as Santa’s list of the nice and naughty but they are lists just the same.
1. Changes. After further consideration, home buyers often change the needs and wants on their list. Santa changes his mind too. Its when Santa checked his list twice that he remembered Bobby had put gum in Suzie’s hair and Bobby was quickly moved from the nice to the naughty list.
If you didn’t get a chuckle out of at least one item on the list, then please accept my apologies. My husband does say I am not as funny as I think I am.
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