Archive for June, 2012

The 5 Biggest Mistakes Made By Buyers

Posted on: June 28th, 2012 No Comments

What are the biggest mistakes home buyers make? Credit.com recently featured a list of their top five.

Trying to fix credit scores before buying a home

Homebuyers can do more harm than good if they don’t consult a financial expert first. “Even paying down credit card balances – which is a good thing as far as your credit scores and debt ratios are concerned – could be a problem if it leaves you short the cash you need to qualify to get the loan,” says Gerri Detweiler, Credit.com’s personal finance expert.

Not considering the future enough in their selection

Buyers should consider what they want out of a house five or 10 years down the road. Do they plan to expand their family? If so, they may need a bigger home and want a different location. Also, how long do they plan on staying at the home? That can help determine the most sensible mortgage.

Failing to research financing enough

First comes the home and then the financing? Not in today’s market. Home shoppers should get prequalified for a mortgage before they start shopping so they know what they can afford. “The time to make decisions about your mortgage needs is not during this 10-day window” after you sign a contract, says Keith Gumbinger, vice president of HSH.com. “At most, this is time to shop for rates and fees and such. He says a credit evaluation, selection of mortgage type and a preferred lender should be completed “well in advance of even wandering through the market looking at houses.”

Assuming that the Good Faith Estimate is the amount paid at closing

The form lenders provide that estimates closing costs is not set in stone. Closing costs may actually be more, so buyers need to be prepared. Closing costs generally are about 3 percent to 5 percent of the loan amount. “Shop around and compare the Good Faith Estimate provided by the lender with that of two or three other lenders,” suggests Ryan Himmel, a CPA and founder of BIDaWIZ, a tax advice resource. “If there is a significant disparity in estimates, then request an explanation from the lender to determine if you would like to move forward.”

Failing to budget for home expenses

Budgeting to purchase a home isn’t enough. Prospective homeowners would be wise to not forget to budget for maintaining the home too. New homeowners should budget for an increase in utility bills as well as for future maintenance and repair costs, such as repairing a furnace or roof.

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Tree Trouble

Posted on: June 12th, 2012 No Comments

One of the most iconic natural features in the southern U.S. is the live oak tree. Live oaks proliferate in the Florida panhandle and are almost everywhere you look. They can grow to as high as 80 feet with 150 foot canopies. If there’s a live oak on your property or you’re considering buying a home with live oaks, there are some things you should know.

The wood of a live oak is one of the heaviest native hardwoods, with a density of 55 pounds per cubic foot. As such, they can do serious damage if they fall on a structure or personal property. Many homes in Tallahassee have live oak branches hanging over them. Live oak limbs can be trimmed back without a permit by any of a number of tree services or arborists in Tallahassee as long as you’re not removing over 25% of the canopy.

When it comes to having a live oak removed, the situation becomes a little dicey. Any tree with a Diameter Breast Height (DBH, diameter of the tree trunk) of 36″ requires a permit from Leon County to be removed. If the tree is in declining health, a permit will likely be issued. If the tree is in good health, the permit application can and likely will be turned down. It’s always best to have a certified arborist look at the tree to determine the likelihood of a permit being granted. Trees with less than 36″ DBH can be cut down without a permit.

Tree limbs also pose a problem when trying to have a home insured. Most insurance companies will require that there be no branches within 5 feet of a home’s roof. If the tree looks to be in poor condition, an insurance company may require that it be removed before coverage is initiated. This is usually evaluated when the insurance company does a drive by inspection or has a four-point inspection done.

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Refinancing a Home

Posted on: June 10th, 2012 No Comments

With interest rates at an all time low, many homeowners have begun to refinance older, higher interest loans. Refinancing has the potential to save homeowners thousands of dollars a year in mortgage payments. Before you apply to refinance a home loan at your local bank, there are several things you should know first.

Equity

Since the housing recession began, banks have tightened their lending standards considerably. Most now require that a homeowner have at least 20% equity in their home before they will underwrite a new loan. For a home that appraises at $100,000, that would mean a homeowner could owe no more than $80,000. This is the single biggest impediment for homeowners since the housing recession has wiped away considerable value from most dwellings. Nevertheless, you should still apply for refinancing as there are some low equity FHA, Fannie Mae and Freddie Mac programs that may accept you.

Credit Score

Credit score is another important factor in qualifying for a new home loan. Loan rates operate on a sliding scale with the lowest rates going to borrowers with credit scores of 720 and higher. Those with scores of 620 and lower will have a hard time qualifying for a new loan.

Payback Period

How long you plan to stay in a home will determine if you SHOULD try to refinance. Most loans come with costs of 3-6% of the loan value. In our previous example, $80,000 x 3% = $2400. If by refinancing you’re able to save $100 per month, the payback period would be $2400/$100 = 24 months. That means you would need to stay in your current home two (2) years before you begin to realize savings on your refinanced mortgage.

So what kind of savings can you realize by refinancing now? Assuming you qualify for the best prevailing interest rates and you have sufficient equity in your home, the average national rate for a 30 year fixed loan is 3.92% (according to bankrate.com). In our previous example, an $80,000 loan would carry a principal and interest payment of $378/month. That same payment at a rate of 4.92% would be $426/month and $476/month at 5.92%. As a rule of thumb, for every $100,000 of loan value, a savings of 1% would be $60 per month. Over the life of a 30 year loan, that savings is a whopping $21,600 for every 1%!

 

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