Buying A Home

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July
2

If you're searching for drama, don't limit yourself to Netflix. Instead, tune in to the real estate market, where the competition among buyers has never been fiercer. And with homes selling for record highs, the appraisal process is receiving more attention than ever. That's because, in a rapidly appreciating market, a property is more likely to appraise below the sales price—which can lead to major repercussions for both buyers and sellers.

It's never been more important to understand the appraisal process and the risks involved. It's also crucial to work with a skilled real estate agent who can guide you to a successful closing without overpaying (if you're a buyer) or overcompensating (if you're a seller). Find out how appraisals work—and in some cases, don't work—in today's unique real estate environment.

APPRAISAL REQUIREMENTS

An appraisal is an objective assessment of a property's market value performed by an independent authorized appraiser. Mortgage lenders require an appraisal to lower their risk of loss in the event a buyer defaults on their loan.

In most cases, a licensed appraiser will analyze the property's condition and review the value of comparable properties that have recently sold. Appraisal requirements can vary by lender and loan type, and in today's market, in-person appraisal waivers have become much more common. If you're applying for a mortgage, be sure to ask your lender about their specific terms.

APPRAISALS IN A RAPIDLY SHIFTING MARKET

An appraisal contingency is a standard inclusion in a home offer. It enables the buyer to make the closing of the transaction dependent on a satisfactory appraisal wherein the value of the property is at or near the purchase price. This helps to reassure the buyer (and their lender) that they are paying fair market value for the home and allows them to cancel the contract if the appraisal is lower than expected.

Low appraisals are not common, but they are more likely to happen in a rapidly appreciating market, like the one we're experiencing now. That's because appraisers must use comparable sales (commonly referred to as comps) to determine a property's value. This could include homes that went under contract weeks or even months ago. With home prices rising so quickly, today's comps may be lagging behind the market's current reality. Thus, the appraiser could be basing their assessment on stale data, resulting in a low valuation.

HOW ARE BUYERS AND SELLERS IMPACTED BY A LOW APPRAISAL?

When a property appraises for less than the contract price, you end up with an appraisal gap. In a more balanced market, that could be cause for a renegotiation. In today's market, however, sellers often hold the upper hand.

That's why some buyers are using the potential for an appraisal gap as a way to strengthen their bids. They're proposing to take on some or all of the risk of a low appraisal by adding gap coverage or a contingency waiver to their offer.

Appraisal Gap Coverage

Buyers with some extra cash on hand may opt to add an appraisal gap coverage clause to their offer. It provides an added level of reassurance to the sellers that, in the event of a low appraisal, the buyer is willing and able to cover the gap up to a certain amount.

For example, let's say a home is listed for $200,000 and the buyers offer $220,000 with $10,000 in appraisal gap coverage. Now, let's say the property appraises for $205,000. The new purchase price would be $215,000. The buyers would be responsible for paying $10,000 of that in cash directly to the seller because, in most cases, mortgage companies won't include appraisal gap coverage in a home loan.

Waiving The Appraisal Contingency

Some buyers with a higher risk tolerance—and the financial means—may be willing to waive the appraisal contingency altogether. However, this strategy isn't for everyone and must be considered on a case-by-case basis.

It's important to remember that waiving an appraisal contingency can leave a buyer vulnerable if the appraisal comes back much lower than the contract price. Without an appraisal contingency, a buyer will be obligated to cover the difference or be forced to walk away from the transaction and relinquish their earnest money deposit to the sellers.

It's vital that both buyers and sellers understand the benefits and risks involved with these and other competitive tactics that are becoming more commonplace in today's market. We can help you chart the best course of action given your individual circumstances.

DON'T WAIVE YOUR RIGHT TO THE BEST REPRESENTATION

You need a master negotiator on your side who has the skills, instincts, and experience to get the deal done...no matter what surprises may pop up along the way. If you're a buyer, we can help you compete in this unprecedented market—without getting steamrolled. And if you're a seller, we know how to get top dollar for your home while minimizing hassle and stress. Contact us today to schedule a complimentary consultation.

September
28

Buying a Home Spokane

After buying a home, you may feel as if you've completed a marathon and are due for a little downtime to settle in and rest. But don't sit too long; there's still plenty to do.

We recommend prioritizing the many must-dos that will ensure your safety and comfort in your new Spokane home. Here are five things to get started on.

Click Here to Read More...

September
21

In July, the average 30-year fixed-rate mortgage fell below 3% for the first time in history.1 And while many have rushed to take advantage of this unprecedented opportunity, others question the hype. Are today's rates truly a bargain?

While average mortgage rates have drifted between 4% and 5% in recent years, they haven't always been so low. Freddie Mac began tracking 30-year mortgage rates in 1971. At that time, the national average was 7.31%.2 As the rate of inflation started to rise in the mid-1970s, mortgage rates surged. It's hard to imagine now, but the average U.S. mortgage rate reached a high of 18.63% in 1981.3

Fortunately for home buyers, inflation normalized by October 1982, which sent mortgage rates on a downward trajectory that would bring them as low as 3.31% in 2012.3 Since 2012, 30-year fixed rates have risen modestly, with the daily average climbing as high as 4.94% in 2018.4

So what's causing today's rates to sink to unprecedented lows? Economic uncertainty.

Mortgage rates generally follow bond yields, because the majority of U.S. mortgages are packaged together and sold as bonds. As the coronavirus pandemic continues to dampen the economy and inject volatility into the stock market, a growing number of investors are shifting their money into low-risk bonds. Increased demand has driven bond yields—and mortgage rates—down.5

However, according to National Association of Realtors Chief Economist Lawrence Yun, "the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities." According to Yun, "we will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed's stance."6

How do low mortgage rates benefit current homeowners?

Low mortgage rates increase buyer demand, which is good news for sellers. But what if you don't have any plans to sell your home? Can current homeowners benefit from falling mortgage rates? Yes, they can!

A growing number of homeowners are capitalizing on today's rock-bottom rates by refinancing their existing mortgages. In fact, refinance applications have surged over the past few months—and for a good reason.7 Reduced interest rates can save homeowners a bundle on both monthly payments and total payments over the lifetime of a mortgage.

The chart below illustrates the potential savings when you decrease your mortgage rate by just one percentage point. When it comes to refinancing, the bigger the spread, the greater the savings.

Estimated Monthly Payment On a 30-Year Fixed-Rate Mortgage

Be sure to factor in any prepayment penalties on your current mortgage and closing costs for your new mortgage. For a refinance, expect to pay between 2% to 5% of your loan amount.8 You can divide your closing costs by your monthly savings to find out how long it will take to recoup your investment, or use an online refinance calculator. For a more precise calculation of your potential savings, we'd be happy to connect you with a mortgage professional in our network who can help you decide if refinancing is a good option for you.


How do low mortgage rates benefit home buyers?

We've already shown how low rates can save you money on your mortgage payments. But they can also give a boost to your budget by increasing your purchasing power. For example, imagine you have a budget of $1,500 to put toward your monthly mortgage payment. If you take out a 30-year mortgage at 5.0%, you can afford a loan of $279,000.

Now let's assume the mortgage rate falls to 4.0%. At that rate, you can afford to borrow $314,000 while still keeping the same $1,500 monthly payment. That's a budget increase of $35,000!

If the rate falls even further to 3.0%, you can afford to borrow $355,000 and still pay the same $1,500 each month. That's $76,000 over your original budget! All because the interest rate fell by two percentage points. If you've been priced out of the market before, today's low rates may put you in a better position to afford your dream home.

On the other hand, rising mortgages rates will erode your purchasing power. Wait to buy, and you may have to settle for a smaller home in a less-desirable neighborhood. So if you're planning to move, don't miss out on the phenomenal discount you can get with today's historically-low rates.


How low could mortgage rates go?

No one can say with certainty how low mortgage rates will fall or when they will rise again. A lot will depend on the trajectory of the pandemic and subsequent economic impact.

Forecasters at Freddie Mac and the Mortgage Bankers Association predict 30-year mortgage rates will average 3.2% and 3.5% respectively in 2021.9,10 However, economists at Fannie Mae expect them to dip even lower to an average of 2.8% next year.11

Still, many experts agree that those who wait to take advantage of these unprecedented rates could miss out on the deal of a lifetime. It's hard to imagine that rates may drop even lower. Positive news about a vaccine or a faster-than-expected economic recovery could send rates back up to pre-pandemic levels.


How can I secure the best available mortgage rate?

While the average 30-year mortgage rate is hovering around 3%, you can do a quick search online and find advertised rates that are even lower. But these ultra-low mortgages are typically reserved for only prime borrowers. So what steps can you take to secure the lowest possible rate?

1. Consider a 15-Year Mortgage Term

Lock in a low rate by opting for a 15-year mortgage. If you can afford the higher monthly payment, a shorter mortgage term can save you a bundle in interest, and you'll pay off your home in half the time.12

2. Give Your Credit Score a Boost

The economic downturn has made lenders more cautious. These days, you'll probably need a credit score of at least 740 to secure their lowest rates.13 While there's no fast fix for bad credit, you can take steps to help your score before you apply for a loan:14

● Dispute inaccuracies on your credit report.
● Pay your bills on time, and catch up on any missed payments.
● Hold off on applying for new credit.
● Pay off debt, and keep balances low on your credit cards.
● Don't close unused credit cards (unless they're charging you an annual fee).

3. Make a Large Down Payment

The more equity you have in a home, the less likely you are to default on your mortgage. That's why lenders offer better rates to borrowers who make a sizable down payment. Plus, if you put down at least 20%, you can avoid paying for private mortgage insurance.

4. Pay for Points

Discount points are fees paid to the mortgage company in exchange for a lower interest rate. At a cost of 1% of the loan amount, they aren't cheap. But the investment can pay off over the long-term in interest savings.

5. Shop Around

Rates, terms, and fees can vary widely amongst mortgage providers, so do your homework. Contact several lenders to find out which one is willing to offer you the best overall deal. But be sure to complete the process within 45 days—or else the credit inquiries by multiple mortgage companies could have a negative impact on your credit score.16


Ready to take advantage of the lowest mortgage rates in history?

Mortgage rates have never been this low. Don't miss out on your chance to lock in a great rate on a new home or refinance your existing mortgage. Either way, we can help.

We'd be happy to connect you with the most trusted mortgage professionals in our network. And if you're ready to start shopping for a new home, we'd love to assist you with your search—all at no cost to you! Contact us today to schedule a free consultation.

This article is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

 

April
20

Spokane Landscaping Trends

 

This is a guest post by Tony Jones, Sales Manager & Senior Mortgage Specialist with Directors Mortgage.  You can contact him at (509) 220-0259, or tony.jones@directorsmortgage.net. Please note, this information is accurate as of this article's posting time. The situation is very dynamic and is subject to change.

 

I hope you and your family are doing well during these times. Please be assured that Directors Mortgage has adapted to the the changes, and that my team and I are still here to help you.

Recently, several clients have asked about the news they are hearing - mortgage assistance may allow them to "skip" monthly payments if they are in a tough financial spot due to COVID-19. If you are wondering the same, in short, relief may be available. I strongly recommend you to consider all of your options, and you'll want to protect your credit and long term financial goals.

 

Forbearance

This is the main one the that the news media has been talking about with the CARES Act which pertains to Conventional, FHA, VA & USDA loan types. It is an agreement with your lender to reduce or delay regular payments for a set time. When the forbearance period ends, the postponed payments will be due all at once.  It is important to know that you will not be able to refinance until you are at least one year out of forbearance.

 

Deferment

This plan allow you to postpone your payments for a set time then pay them at the end of your regular loan term. "Deferment" and "forbearance" are often used interchangeably, but they are different. A deferment is more beneficial for many because it eliminates the need to make up multiple payments at the end of a short postponement period. Deferments are not available from all servicers.

 

Payment Assistance Program

This is an arrangement that allows you to make up your postponed payments at the end of a forbearance period by spreading the cost over a period of time. Payment Assistance Programs are not available from all servicers.

 

Loan Modification

This is a legal process that alters the terms of your loan. For instance, a modification could lower your monthly payments by lengthening your loan term.

 

To set up the options listed above, please reach out using the contact information on your monthly loan statement. Document all calls and agreements, then check your monthly statements and credit reports to assure that the changes are reported correctly.

 

Additional Options to Consider:

 

Cash Out Refi or Home Equity Line of Credit (HELOC)

If you still have enough income to qualify, accessing the equity in your home by refinancing or obtaining a secured credit line may be a good option for lowering your payments, consolidating other debts, and/or creating a cash cushion. A refi will be especially beneficial if current rates are lower than those on your existing financing. 

 

I hope this helps you understand the available options out there. If you have any questions, please reach out - I would be happy to help!

April
13

Home Improvement Projects

Need something to do this weekend? You could binge-watch another series, but why not take this time to help your house be one of the best Spokane homes for sale this season? A small home improvement project can be a rewarding way to spend your weekend, from the satisfaction of accomplishment to attracting more potential buyers. Here are some tasks that can easily be completed in one weekend. 

  1. Just Outside the Door
    For buyers, the front of your home creates a powerful first impression, so make it a good one. Wash the exterior of your home. Use a power washer if you have vinyl siding, but steer clear of all windows. Trim your hedges. Take a look at your front door. If the paint is peeling or the hardware outdated, it can make your home look dated. If you choose a new paint color for your door, use a primer so the old paint won't show through, and compare the new shade in the store with your new hardware or hardware that's similar to the color and style you have at home.
  2. Put Your Best Entrance Forward
    Consider what awaits on the other side of the door. If an overcrowded coat stand and a jumble of shoes and umbrellas greets visitors and buyers, switch that up with a coat rack with room for umbrellas and a shelf for hats. You can add an additional row of hooks near the coat rack for more storage room. A laser level will help you keep everything perfectly aligned. 
  3. Windows on the World
    Cleaning your windows is a simple way to make the whole house look newer. Gently wipe the window frames first. Depending on how your windows open, you may need special tools to access the outside of the windowpane. A window washer with a squeegee on a telescoping handle, however, it will reach most areas. Wash the window panes with a mix of water and vinegar for affordable and long-lasting shine. 
  4. Get on the Floor
    If your flooring is badly scuffed, peeling, or just outdated, it's easier than ever to install new flooring. Self-stick carpet tiles come in a wide variety of shades and textures, and click and lock plank flooring is available in finishes that would bring any bathroom or kitchen up to date. A belt sander will come in handy to smooth old subflooring, and a nail set will help you with wood subflooring when the nails are no longer flush. Some types of flooring may need to become acclimated to your home's humidity level, so ask at the hardware store before you make your purchase. 

Our REALTORS® get to see houses at all stages, and they appreciate when a home has received the care it needs to look its best. It shows that the seller is offering a true investment, and buyers will recognize when a home has been well-loved. We'd love to talk to you about helping you find a buyer who will love your house as much as you do. Contact us today.

December
16

Gifts for Homebuyers

Give a gift this holiday season that will help the newest homeowner on your list feel more at home in their new place. These fun, unique holiday gifts for homebuyers are sure to be a hit. Get gift inspiration with this list from our REALTORS®:

  1. Tool Kit
    A basic tool kit is indispensable for any homeowner. It doesn't have to be super pricey; a kit that includes a hammer, pliers, screwdrivers, hacksaw, and wrenches, tape measure, and drill is sufficient. Want to throw in a bonus gift? A pack of screws, nails, and a laser level will help your loved ones hang up artwork with ease.

    Click Here to Read More...

November
18

Spokane HOA Pros and Cons

Homeowner associations, or HOAs, may seem like a relatively recent concept, but the earliest ones were established by land developers back in the mid-19th century. With the growth of common-interest developments (CIDs) such as condominiums and planned single-family home communities, HOAs now govern more than 26 million homes.

Are you considering Spokane homes for sale that are part of an HOA? Make an informed decision using this list of pros and cons.

  • PRO: No Yard Work
    Tired of using your leisure time to mow the lawn or shovel snow? HOAs handle the maintenance of grounds and common areas. For many people, this is the most appealing factor.

  • PRO: Use of Amenities
    HOAs often provide swimming pools, tennis courts, playgrounds, and numerous other amenities for the use of residents. Instead of having to spend hundreds or thousands of dollars on construction or memberships, all costs are covered.

    Click Here to Read More...

October
21

Moving to Spokane

Buying a new home and moving to a new town is exciting — but sometimes it can be a little scary, and at first, your new house or town might not feel like home at all. Our REALTORS® want you to know that this is completely normal. Any time you relocate away from your familiar surroundings, you're going to have instances of uncertainty.

Get acquainted with your new town and have it start feeling like home with these helpful tips. 

  1. Don't Lose Touch With Your Old Home
    Moving is quite the transition, and you'll need the support of your family and friends to help. Just because you're geographically farther away doesn't mean you can't remain close. Keep in touch and openly communicate your feelings with those you trust. Even though they aren't down the street anymore, they can still offer you support.

    Click Here to Read More...

September
24

Spokane Neighborhood

Moving to a new city or relocating within your current community is exciting. But there are also many factors to consider to ensure that you land in the right neighborhood. When you're shopping for Spokane homes for sale, learning about neighborhoods will help you find a home that you'll love. Our REALTORS® are here to help you find the perfect neighborhood, with our guide for how to pick a Spokane neighborhood to buy your next home.

Click Here to Read More...

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