[Image via Glasbergen]
Buying a home can be a whirlwind process, and with so many things happening at once, the last thing you’d want to do is make it more complicated than it needs to be. Since we’ve always advocated the importance of picking the the right real estate professionals to work with, we thought we’d share some hints to help you pick your lender, courtesy of the KCM blogging crew.
What type of company is it?
These days you can chose from a variety of institutions that offer lending services.
There are mortgage brokers, mortgage bankers and banks/credit unions. Mortgage brokers have been hamstrung by many of the recent regulatory changes and typically lack the actual ability to approve and/or lock a loan. Banks are usually limited in program choices and hamstrung by tighter underwriting. Mortgage bankers have the financial stability and direct lending capability of the bank coupled with the wide product menu and expertise of the mortgage broker. From a global perspective, I see mortgage bankers as a clear winner.
How does the company operate?
It’s important to work with a company that knows your area, is familiar with ins and outs of each neighborhood, and will employ affiliates (i.e. appraisers, loan processors, etc.) that are equally as knowledgeable about the local market. Save yourself from headaches down the road and ask the questions upfront.
What about the individual loan officer?
Having a good relationship with your loan officer can become the biggest factor to a successful transaction. How well do they education you about the process, the requirements, the factors that determine your approval or the interest rate you get? The last thing you want is to have someone you don’t communicate well with guiding you through an already foreign process. The KCM crew notes that, “This is difficult to determine on your own which is why the referral from another person who used them or your real estate agent has far more value than most people know (until it’s too late).”
Too many people stay focused on quoted rates and fees and neglect to see the whole picture of what is needed from a lender. KCM’s advice? “Look for great communication, superior information and education, understanding of the local market and someone who looks at your application as something more than a number. Be prepared to pay a little more to get a better experience (even though it might not cost you any more)….in the long run, lowering stress can be more important.”
For most people, your home is far more than just an investment. Your home is filled with memories and because of that, it’s PRICELESS. When it comes time to sell however, sentimental value doesn’t always match up with your home’s market value. Here’s a video from CNN Money, cautioning sellers against the pitfalls of relying on emotions in determining the asking price.
The environment may not be the only thing anymore to benefit from eco-friendly and energy-efficient home improvements, thanks to a new appraisal addendum which would credit these homeowners. The LA Times reports:
“The Appraisal Institute, the country’s largest and most influential association in its field, published the long-awaited addendum late last month. It’s designed to be attached to any standard appraisal report covering a property with significant green features. Owners, sellers, buyers, refinancers and realty agents don’t have to wait for an appraiser to use it. They can download it at no cost and ask that it be made part of the appraisal submitted to the lender.”
While this addendum probably won’t influence an appraiser to value your home tens of thousands of dollars higher, it will definitely greatly improve your odds that any eco-inspired upgrades in your home will get the fairer market value they deserve.
According to the LA Times, “The three-page form is a response to growing concerns that although the Obama administration and many state governments and utilities are pushing homeowners to invest in energy-conserving components, standard appraisal forms — including those used by financing giants Fannie Mae and Freddie Mac — are not set up to give adequate recognition to those often costly improvements.”
Until now, homeowners have been frustrated by these “low ball valuations,” which have block many from refinancing as they are unable to qualify for the loan amount because of an appraisal report that excludes the monthly utility savings they get from energy-saving improvements. To make matters worse, appraisers are often required to make their assessments based on vague or misleading information about these improvements that local real estate companies present to them.
For example, “Appraisers complain that some realty listings claim that the house is an ‘Energy Star Home’ when in fact there’s nothing more than a few Energy Star appliances installed in the kitchen. The Energy Star Home designation is a much higher standard: It requires qualifying under a comprehensive set of criteria for the lighting, windows, water heating and high-efficiency appliances, among others.”
Besides energy efficiency, the new addendum covers a wide spectrum of improvements and ratings. Sections that cover all of the following will be included in the new document:
- air conditioning
- water-saving or reclamation systems
- landscaping that lowers water or energy use
- home’s proximity to public transportation, which might help lower fuel usage
For any homes that have been audited or rated for green features and energy efficiency, the new addendum asks for detailed information regarding the rating or auditing authority, dates of such reporting, average local utility costs and estimated monthly savings. Generally higher utility charges in an area will translate to higher value gain from energy-saving installations.
If there are any relevant certifications, the new addendum requires that they be submitted with the report, along with details about any changes made to the property by the owners since the time of certification.
According to the LA Times, “Appraisers using the new addendum should now be better equipped to identify accurate, recent ‘comparable’ sales in the area — a key part of coming up with a valuation…In other words, if you have a highly efficient, audited house with extensive energy-saving features as demonstrated by the addendum, an appraiser should look for prices of houses that sold recently with and without energy-efficiency features for indications of your home’s true market value. Appraisers who have training in green valuations can also use one or more techniques that essentially capitalize the documented monthly savings on utility bills into a specific value adjustment appropriate for the local market.”
[Image via KCM Blog]
Buying your first home can be exciting, nerve-wrecking, and everything in between. Preparing and educating yourself before you get going into high gear can go a long way to alleviate any potential headaches now or 10 years down the road. Courtesy of CNN Money’s all-knowing housing market experts and real estate gurus, here’s a few helpful hints for you first time home buyers out there.
[Image via The KCM Blog]