First Time Buyers

Condo financing near-impossible to get

A while back, I wrote a piece called Condo Re-Financing: Tricky to Impossible. Nowadays, that lending dilemma has grown -- it's next to impossible to get a new mortgage to purchase a condo, according to my favorite lenders Kevin Reiser and Jeannie Bolger. (need an ace loan officer? call me or text me and I'll forward their info. 602-999-8831). The exception may be luxury condos, think million dollar plus, but I'm not sure that mortgage market is healthy either.


The reason one can't get a mortgage to buy a condo these days has almost nothing whatsoever to do with the buyer and his/her credit profile. It has to do with the condo community and it's overall financial health/outlook. Many, many condo (and patio home and townhome) communities have experienced so many foreclosures that their Homeowners Associations are in severe financial distress. Other times, the owner-occupant to investor ratio is so out of whack - with investors owning 75% or more of the units in the community - that lenders won't lend to anyone who wants to buy there.


If you're really digging the idea of a condo right now.... check with several lenders first. Getting a mortgage for your new, hip pad might be tricky to impossible.


Want more in-depth explanation of the metro Phoenix condo market outlook? Try this article we wrote waaaay back in Spring 2010. http://thephoenixagents.com/newsletters/viewpoint-2010-0407/

Metro Phoenix: cheaper to buy than rent

[caption id="" align="alignright" width="242" caption="Image credit Shuttermon via StockExchange"]Image ID 1020195 by user Shuttermon[/caption]

Trulia regularly tracks the buy vs. rent equation and reports again that it’s cheaper to buy a home than to rent in metro Phoenix. See full story here: http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/


Meanwhile, mortgage rates are in free-fall, according to an Inman.com interpretation of Freddie Mac’s rate survey…




Rates on fixed-rate mortgages declined for a seventh week in a row to new lows for the year ... Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.



It’s not the ideal time for everybody to buy a home, and mortgages are still a bit difficult to obtain. But it could be a great time for you to buy:




  1. Home prices just double-dipped according to Case-Shiller numbers (they're down over 50% from their Summer 2006 peak)

  2. Sellers are frequently willing to pay the buyer's closing costs,

  3. There's talk in Washington about increasing the minimum cash down payment of the FHA mortgage program from 3.5% to 5% sometime soon, so buying now could save you a couple thousand dollars over waiting


A few questions can help you decide if you should consider buying a home now, or not...

  • Are you emotionally & financially ready to be a homeowner?

  • Do you have stable employment?

  • Do you plan to stay put in your home for 5 to 10 years into the future?

  • Do you have a couple months’ worth of salary in savings?

  • Have you planned your future budget to account for costs of home ownership like maintenance & property taxes?

  • Do you consistently pay your bills on time or even early?

  • Do you know what your credit score is? (studies show that people who know their score tend to have better credit ratings than people who don’t know their score)

  • Have you talked with a lender to find out how much home you’ll qualify for? (In Arizona, buyers *must* submit a loan approval with a purchase offer)


If you answered yes to all or most of these questions, you’re probably a great candidate to buy a home. Contact your Realtor. Don’t have a Realtor yet? You’re in luck, we’re Realtors. Winking smile Read what our clients say about us behind our backs, and then give us a shout by email, phone or even text or Facebook.

Ready to start browsing listings online? We provide you a direct link to the private, Realtors-and-appraisers-only Multiple Listing Service. That's the most up to the second, accurate information consumers can get their hands on. Use our map based home search, or use our Detailed home search to really dial in on your housing wants and needs.

Buy a home for 1% cash down

Stock Exchange Image ID 164990 by user daimon057

Although most of the low-down and no-down payment purchase programs are long gone with the financial crash of 2008, we do have 1 lender who has 1 loan program that’s a 1% cash down payment program.

Here’s an example of a recent client of mine who used this program.


  • Home purchase price – $85,500


  • Seller contribution to buyer’s closing costs – $2,700


  • 1% Down Program’s contribution to buyer’s down payment – $2,137


  • Buyer’s cash out of pocket for home inspections, appraisals, utility company deposits, etc., – $500


  • Buyer’s cash out of pocket on closing day, all-in – $1,033


The program is good in most of Metro Phoenix, AZ as of January, 2011. Among other things, buyers must meet a minimum credit score, and must have stable and verifiable employment income. Buyers must take a homeowners’ education class which takes about 1-2 hours of studying and about 15-20 minutes in exam time. The program can be used to buy a foreclosure (REO) home. The seller is not required to contribute to the buyer’s closing costs, but may.

Not all buyers qualify, and not all homes qualify. But it could be a viable option for you if you’re a little low on cash but want to be a homeowner.

Contact me for more details.

Heather Barr, Realtor
The Phoenix Agents at Thompson’s Realty
602-999-8831 or Heather@ThePhoenixAgents.com

photo credit: user daimon057 at the online photo sharing site StockExchange
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Home buyer tax credit extended


Legislation that extends until Sept. 30 the closing deadline for claiming the homebuyer tax credit -- HR 5623, the Homebuyer Assistance and Improvement Act of 2010 -- was passed by the Senate by unanimous voice vote Wednesday and could be signed into law by President Obama today.  (source, Inman.com)



Buyers still needed to be under contract on the home purchase by April 30, but now have an additional three months to close the purchase.

The Shiny

Real life observation: women who go to the gym in a full face of makeup with their hair done just so. . . . they crack me up.


This has nothing at all to do with real estate.


Or. . . does it?


Many of the buyers we've worked with in the past 2 years or so are shopping in the lower price ranges. Single family homes with 3 bedrooms and 1 or 2 baths. Price range is about $70,000 to $100,000.


Inevitably the selection of houses we see includes something just like the two homes below.



Home Number One


The Realtor’s description reads like this -

A/C replaced 2 years ago, new roof in 2009 with transferable warranty, water heater only 5 years old. Exterior painted last month. Seller will buy 2-year home warranty. This home has been well cared for by original owner. Price reduced to $105,000!



This house has pictures like these:

the shiny, old KIT

the shiny, old BA

. . . and it looks like this from the front:

the shiny, old ext, good curb appeal

.

Then there’s the other option. . .

Home Number Two


Inside, it looks like this:

the shiny, new KIT

the shiny, new BA

But it looks like this on the outside:

the shiny, shiny house bad EF

. . . and the Realtor description on this house says something like this:
Complete remodel! Travertine floors, maple cabinets, stainless steel appliances. New carpet, new paint. Seller will not issue Disclosure Statement about condition or provide CLUE insurance history. Ready to move in at $97,900.

Home number one has all the fundamentals dealt with. The big-ticket, expensive items to replace have all been replaced. The cosmetics are, well, to be kind: dated.


Home number two is an obvious investor fix and flip. The investor just completed a total overhaul of the house but refuses to provide a disclosure statement listing what he or she knows about it. Nice! Plus, that chain link fence in the front makes me reach for the eye bleach. I guess the seller’s message here is “we don’t really like our neighbors much” ?



It’s the curse of The Shiny


Guess which house the majority of buyers make an offer on? Home number 2.


Buyers get stars in their eyes over the fancy, shiny interior remodel and forget that they’re buying a home they know nothing about that could possibly need a roof, A/C unit and water heater in the first couple years of ownership. Plus miscellaneous plumbing &/or electrical problems as yet unknown, because even the best home inspection can’t possibly uncover everything.


Sure, the interior cosmetics of home number 1 are dated. It looks like the Brady Bunch just moved out. I get that. I do, I really do. I don’t want to live in the Brady house anymore than my buyers do.


I just can’t help feeling that I’m not really doing my job 100% when I can’t convince the average buyer to consider for more than a few fleeting moments the incalculable value of a house with the big-ticket stuff already paid for. Even if it’s an extra $7,000 in purchase price and has 15 year old cabinets and counters… The value of having a new roof, A/C and water heater are nearly priceless to cash-strapped first time homebuyers.


Too many home buyers act like the star-struck middle-aged men at the gym: so blinded by The Shiny of a middle-aged woman in Kabuki makeup and a fancy hairstyle they can’t focus on anything else. Not even their own good.


edited to add links below


What is a Seller's Disclosure Statement?


What is a CLUE insurance report? (scroll down a bit in the article linked here, to about 1/3 of the way through the article)

Buy for less than you pay in rent?

The conventional wisdom (and a lot of mortgage companies’ advertising) currently says that you can buy a house for cheaper than you can rent an apartment in the Greater Phoenix area.  Is it true? Mmmmm…  Yes and no.



Case in point:


historic

First time home buyer, starter home in the south end of the 85016 ZIP code. House is in good repair but cosmetically it’s stuck in the mid-1950s. Three bedrooms,  1 bathroom, 1 carport, average sized yard, 1100 square feet.


Current rent on 900 square foot, 2-bedroom apartment about 5 miles away from the home noted above = $615. Expected mortgage payment on the new house noted above = $505.


So, yes! You can buy for cheaper than you can rent! Except…



It’s a PITI


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When you’re a renter, you pay the rent and then you’re done. But home ownership means extras.







  • P = principle: repaying the mortgage money you borrowed


  • I = interest: the convenience fee for borrowing said money


  • T = taxes: specifically property taxes on the house you buy


  • I = insurance: the lender who lent you the mortgage money will require you to have homeowners' insurance on the property


Back to our Case in Point buyer from above paying $615 in rent and expecting to pay $505 for her new mortgage. The $505 is only PI, and doesn’t include TI or anything else involved in home ownership. Taxes & insurance add another $150 monthly. So rent, $615. PITI home ownership costs, $505+ $150 = $655.


But don’t forget the WUST and the MAINT, two acronyms I made up.



WUST:


Water, utilities, sewer, trash. Your new house is probably bigger than your old apartment, so you’ll spend more heating & cooling it. What about HOA fees (Home Owners Association)? Factor those in.



MAINT:


Homeowners also face maintenance costs that renters don’t.





  • what if the roof if it leaks? (smallish new roof, ballpark $6,000)


  • A/C and heater systems don’t last forever (ballpark cost $5,000)


  • the cost of keeping up the landscaping. Even Xeriscape yards require a bit of upkeep


  • replacing the faucets when they leak, the toilet flapper if it goes, the appliances when they go, the patio roof when it leaks… you get the idea


Home ownership is a lot more than paying rent. Yes, your new mortgage payment may be less than your old rent. But there are other costs it’s easy to forget about when dreaming about becoming a homeowner.


On the other hand, there’s a big fat tax advantage to being a homeowner: you can deduct mortgage interest paid from your federal taxes. And in your first few years, nearly your entire mortgage payment goes towards the interest you owe, so you can plan to deduct nearly all your mortgage payments from your taxes!


Thinking about becoming a homeowner? Call or email me. I’ve got the coolest little spreadsheet that lets you estimate all your home ownership expenses – PITI, WUST, MAINT and even your negotiables like cell phones, movies & entertainment and groceries -- so you can make a wise decision.



Heather Barr, Thompson’s Realty
602-999-8831 or Heather@ThePhoenixAgents.com

FHA.com is not the FHA

File this in the category of Stuff You Should Know.


The website at FHA.com is not run by the FHA (Federal Housing Administration) or by HUD (Housing and Urban Development) or by any other governmental agency.


It’s run by a (presumably for-profit) group that collects information from users including their social security number, credit information, income & debt information, employment, etc. FHA.com then “shares” that information with “third party affiliates”.


In other words, they’re not going to give you a loan and they’re not the FHA. It’s likely they’re going to sell your information to a loan originator, who will then pester you about mortgages.


FHA.com does disclose this information.. . . .



We are not the FHA. They insure the FHA loans that our lenders assist people in getting. If you need to contact the FHA directly, you can do so at:

US Department of Housing and Urban Development
451 7th Street, S.W.
Washington, DC 20410

. . . ..but this disclosure is buried pretty far down in their page structure. Nice how they don’t list a phone number or website link. I will. You can reach the FHA by telephone at (800) CALL-FHA or (800) 225-5342, or online at fha.GOV



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90 Day Fix and Flip Rule

You know how fix and flipping works in a cynical world, right? Basically. . . . investors buy a craptacular house at foreclosure auction or elsewhere and do no substantive repairs. They slap a thick coat of paint on everything and install cheap new carpet, then resell it as "Remodeled!" with a seriously  jacked up price.


Traditionally, the FHA had a rule in place stating they would not fund buyers who were purchasing a property the seller owned for less than 90 days. This was designed to protect buyers (and the government backed money they used to purchase) and discourage excess profiteering by fix and flip investors.


Some weeks back, the FHA reversed themselves in this area by announcing a new policy that's generally known in the industry as "The FHA Flipping Waiver."


FHA changed it's policy to help the market in clearing some of the excess foreclosure properties for sale which are often holding down pricing at artificially low levels. I don't know how it worked around the rest of the country, but my opinion is that Fix and Flippers are basically, usually helpful here in metro Phoenix Arizona.


Lenders reserve the right to have additional regulations, above and beyond what FHA guidelines say. It's taken some time for these lender 'overlays' to shake out into a coherent whole but it has finally happened.



What the Heck Does this Mean to Me, A Buyer?


The general rule of thumb if you're shopping for a home and you're looking at fix and flips is this:  you won't be allowed to use an FHA mortgage to buy if the seller of the home you love has




  • Owned it for less than 90 days AND

  • Has jacked up the price more than 20% over his/her purchase price

  • Also, don't have any sort of pre-existing relationship between yourself, the buyer, and the seller


If the investor has owned the home for less than 90 days and it's priced 20% or more over the investor's purchase price, you could potentially still buy the home, but you can't use an FHA mortgage to do it. That means a 'conventional' mortgage, which means a higher down payment than the FHA 3.50%. Plan on 10% to 25% cash down payment if you want that spruced up fixer flipper home.

Is That Condo FHA Approved?

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Buyers using an FHA mortgage who are shopping for condos (or patio homes, or townhomes) need to be aware there's a list of FHA-approved communities. If the community is not on the FHA-approved list, your FHA mortgage money might not be good there.


Bookmark this website and check for FHA-approved status before you fall in love with something you can't actually buy. And keep an ear to the ground for anticipated changes to the FHA mortgage program. Most watchers expect higher down payment minimums, decreases in allowed seller concesssions, costlier mortgage insurance, and tougher credit score requirements. Our blogging lender friend Justin McHood writes about expected FHA rule changes on his Arizona Mortgage Team blog.


Need help? Want advice? Call or email me anytime. I do lots and lots of condo shopping with my buyer clients, all over the Northeast and Northwest parts of the Valley. From downtown Phoenix & Old Town Scottsdale all the way up to Desert Ridge, Peoria and Cave Creek, if it's a condo, I've probably seen it.

$8,000 Tax Credit for Buying $10,000 Home?


Question: Could a qualified person get a $8,000 tax credit to buy a $10,000 house?



Answer: In short, no. You can’t get $8,000 for buying a $10,000 house. Why?


There’s no minimum purchase, but the tax credit is written as “10% of the purchase price, up to $8,000″. Thus, if you spent $10,000 on a home, you’d get 10% of that price - or $1,000 - as a tax credit.


One other important point: there’s no such thing as a $10,000 home in metro Phoenix that one would actually want to live in. If it’s priced at $10,000 it’s either uninhabitable or located in an area where even the criminals are afraid to walk the streets at night. Phoenix is no different from any other big city in the US: the really cheap real estate is really cheap for a reason.


See this post for an example of a Phoenix-area house listed for sale at $12,500 — http://thephoenixagents.com/the-highs-and-the-lows-3/


.


This was originally a comment I wrote in reply to a reader who emailed me about our post explaining one aspect of the $8,000 federal tax credit for new home buyers.



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FHA and Fix 'n Flip Do Not Mix

This is a phrase you're seeing a lot lately in the MLS listings on entry-level housing in metro Phoenix:



This is a property acquired at trustee sale in the past 30 days and will not qualify for FHA due to the cure period requirements. Will qualify for VA or conventional.

Well, actually what you typically see is something a lot more cryptic, like "This is an acquired property" which kills me because, well... aren't they all? Digressions aside...


These homes are called Fix and Flips.* And my point is that the fact they are Fix and Flips usually goes in the private, Realtors-only Remarks data field. Consumers can't see that data field. And many buyers need to know, because FHA mortgage rules do not allow buyers to purchase homes that the seller has not owned for at least 90 days.



If you're using an FHA mortgage, there's no point looking at a house the owner just bought 25 days ago, because he can't sell it to you. By the time he can sell it to you, it will likely be gone, sold to someone else.

As a buyer, how do you know if you're looking at a fix and flip? Usually you can't tell.**


The Internet is chock-full of information but you still need a professional to help filter the good from the useless. Contact a Realtor, begin creating a relationship now, so that when you're ready to actually buy you've got someone you know and trust who's already on board with your purchase plans.



*Sadly, what I often end up calling these homes is "an essentially crappy house with a thick coat of fresh paint and some new light fixtures."

**The tax records are publicly available and sometimes a good clue to how long the seller has owned the home. But the tax records are anywhere from a couple of weeks to a couple of months behind the pace of home sales.

The End is Near for the $8,000 tax credit

Most lenders are taking upwards of 40 days to close an FHA loan, which most first-time buyers are using.  Today we’re 39 days away from November 30th – the date by which a first-time buyer must CLOSE on his/her new home in order to receive their tax credit.  Adding in a couple extra days for the Thanksgiving holiday weekend, and figuring overworked & overwhelmed lenders (and title companies) will get a little backed up next month, and…

Well, let’s just say it’s very unlikely that potential buyers out there who aren’t under contract yet will be able to take advantage of the $8,000 tax credit.

The good news is the tax credit should not be your only reason, or even your primary reason, for buying a home.  You should be buying because of your specific circumstances, maybe coupled with today’s low prices and interest rates, with the tax credit just being gravy.

The bad news is missing the tax credit stinks.  There aren’t too many things better than getting an $8,000 check from the IRS!

Our advice remains the same as it’s been all year:  Don’t buy the wrong house because of the tax credit.  But if you find the right house & were going to buy it anyway, try like hell to get it done before November 30th!

Your looking forward to catching up with tax credit clients next spring Realtor,

Chris Butterworth

Wrong On So Many Levels

Another example of REO lunacy, about which I’ve written before.


Our first time home buyer is being required to sign a document containing the following clauses. She must sign before the bank that owns the house will even look at her offer, which is one among many offers they received. These are the most heinous of the terms they’re demanding:





  • Earnest money must be at least 1.50% of the purchase price or $2,500, whichever is greater.


  • Once Seller accepts Offer, Buyers’ earnest money is non-refundable for any reason.


  • Buyer has “twenty-one (14) days from the date of Seller’s acceptance of Offer to” obtain final loan approval. (my comment – Welcome to the Homer Simpson School of Contract Law, Doh! 21? 14?  Ah, who cares?)


  • Buyer “agrees that any & all home inspections shall be made prior to contract acceptance


  • By signing [the document] Buyer agrees that she has either (1) completed all inspections and removes any inspection contingency and/or (2) waives inspections and removes any inspection contingency.”


  • Any access to the Property is prohibited unless accompanied by the Seller or Seller’s Agent.


  • Seller will not pay any real estate transfer, stamp or recording taxes/fees.


  • Seller will not pay for a Home Warranty.


  • “Buyer must pay Seller a $325 title clearance and document processing fee at time of closing…”


  • “Financing is not a contingency to this contract.” (my comment – if it’s not a contingency, why do you care whether Buyer takes 14 or 21 days to obtain final written loan approval?!?! If Buyer doesn’t get the loan, they either pay cash or forfeit the earnest money.)


This? Ought to be illegal.


Huntington National Bank owns the home in question. Avoid them or hire an attorney to review their contracts before you sign them.


.

Needless to say, our client rescinded her offer in writing, immediately. I included my own little note:
Dear Sirs,

I suggest you may have better luck getting a signature on this document if you approach the village idiot. Many of them are in Washington, D.C. at this time. Best of luck,

Heather Barr

Builders Resurface

Builders are back!

New home builders in the metro Phoenix area can arguably be blamed for some of the mess we're all in. Many people do argue that, in fact: builders overbuilt, didn't stop building spec homes quickly enough when buyer demand flagged in 2006 and allowed investor owners whose tenants dragged down property values. Blame builders if you like but in today's New Normal, they're back.

We have been working with about a 1/2 dozen first time buyers lately. Two in the last 2 weeks have opted to buy from a new home builder. Our folks chose Pulte and Shea, two of the biggies with lots of gold stars on the national customer service satisfaction rankings. One buyer will be in Northwest Peoria, the other in Tartesso, waaaay out beyond the White Tank Mountains and beyond Verrado (about 12 miles east of the Palo Verde nucelar power plant).

Spoke recently with our broker, who's reporting the same is happening with her first time buyers in the far Southeast Valley, in Queen Creek and other SE bedroom communities like Florence and Casa Grande.

Builders are offering incentives of 3% to $8,000 or more to use lender and title people. They're throwing in upgrades for free, and some are eveing offering Rent-To-Own programs. Any readers heard of super enticing builder incentives? Anyone considering buying a new build? Or not? We'd love to hear your comments.

FHA Game Changer

Aug 5, 2009, 11:56 am. This just in, from one of our favorite lenders – mortgage broker Kevin Reiser of AmeriFirst Lending:


The FHA loan game is going to change completely. Mortgage giant Taylor, Bean & Whitaker just lost their FHA funding accreditation. They are:





  • the 3rd largest FHA lender in the US


  • the nation’s largest FHA 203k lender


  • the largest FHA funding source for mortgage brokers in the country


So what?  This is big setback for mortgage brokers and will change the game completely for buyers seeking FHA funding. Now those buyers must increasingly turn to bankers (rather than brokers) for their FHA mortgage funding. Brokers won’t be able to fund your FHA mortgage anymore, unless they get a different funding source than the biggest Big Boy out there.



Updated 7:05pm, Wed Aug 5:


How Big Is TBW? -- "Taylor Bean was the 12th largest U.S. mortgage lender in the first six months of this year, according to Inside Mortgage Finance, a trade publication. Among originators of FHA loans, Taylor Bean was the third largest in May, with a market share of 4%, according to the publication. Only Bank of America Corp. and Wells Fargo & Co. were larger." (quoted from Calculated Risk.com, link below)

Calculated Risk reports on TBW - (excerpt/quote) the suspension was put in place because "TBW failed to submit a required annual financial report and misrepresented that there were no unresolved issues with its independent auditor even though the auditor ceased its financial examination after discovering certain irregular transactions that raised concerns of fraud."


Mortgage News Daily reports on the TBW situation - The snippet that caught my eye was this, "Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline." Yikers! If you're a home buyer using an FHA loan to purchase, and you're in escrow right now, and you used a mortgage broker to get your loan, call him or her immediately to find out if TBW was the broker's funding source! Your escrow might get very wonky, very quickly.


NPR reports on TBW - (excerpt/quote) "HUD wants the executives barred from conducting business with the government for 18 months."


TBW is a Florida based company. Local paper The Orlando Sentinel's report on Taylor Bean Whitaker -  They named Bank of America and Wells Fargo as financing alternatives, as did several other sources.

Real Estate Glossary, Starter Home

This isn’t an official definition. I’m not sure there is one. It’s just what I use as shorthand for a certain type of property.





  • 3-4 bedrooms


  • 2 bathrooms


  • about 1200 to 1600 square feet


  • small yard




  • usually located about 20-30 miles from anything you can reasonably call ‘downtown’


  • almost always in a master planned community, i.e. there is a Homeowners’ Association which charges fees and makes rules for the community


Like I said, not an official definition, and you’ll see there are a lot of qualifiers in my list (sometimes, usually, often). Take it for what it’s worth.


What about pricing? This isn't a scientific survey, but lately we at The Phoenix Agents have been helping folks buy these houses for between $60,000 and $150,000 in various parts of the Northwest, North and Southwest Valley. The lower the price, the harder it is to find a house that's inhabitable which the investor buyers haven't already made multiple cash offers on.


Homes that fit this description often make great purchases for first time buyers, and often fit the bill for investors too.

How Interest Rates Affect Your Purchasing Power

Understandably, folks are focused on falling housing prices this year. What often gets lost in the shuffle is how changing interest rates affect a home buyer’s purchasing power.


Higher interest rates will often kill your buying power faster than falling prices, so it pays to pay attention.


Rates are currently at historic lows, but expected to rise in the near to mid-term future.


During the week ending May 29, 2009, the average 30-year fixed rate jumped more than 1/2 a point to 5.5 percent. (see original quote on Reuters.com, May 29).


Just what does a half-point do to your buying plans? If you’re trying to keep your payments at about $900 a month, a 1/2 point interest rate increase means you must start shopping housing priced nearly $10,000 less.


Check out this chart for more price points (click to enlarge, "back" to return)


 Rising Interest Rates Lowers Purchasing Power (click to enlarge, use browser’s back button to return)


Housing prices didn’t drop $10,000 last week – even in Phoenix. See how rates can affect your buying plans faster than prices?


You can drive yourself crazy by watching rates obsessively. Life is short, it’s not worth obsessing over rates. But it does pay to keep an eye on them. One of my favorite local lenders posts rates to his website daily.



More Info



How Much Does a Home Inspection Cost?

How much does a home inspection cost? Usually it depends on the size of the home. It also depends on the inspector – each is an independent businessperson.


I use two different certified home inspectors and the rates they’re recently charging are:





  • Small condos, about $250


  • Average sized home, about $300 to $500


  • Large and luxury homes, $400 to $700


Keep in mind these rates are in metro Phoenix, Arizona, where I live and work.


There are at least two organizations that train and certify home inspectors. Home buyers can learn a ton from visiting their websites.





  • The National Association of Certified Home Inspectors (NACHI) maintains a website at www.NACHI.org.


  • The American Society of Home Inspectors posts their online info at www.ASHI.org, including a helpful FAQ for homebuyers.


Bridge Loans Using $8,000 Homebuyer Tax Credit

Yesterday the FHA released new guidelines designed to further stimulate the struggling housing market.


The FHA (Federal Housing Administration, an arm of the federal Housing & Urban Development department) is now allowing ‘bridge loans.’



What’s A Bridge Loan?


Just like a physical bridge, bridge loan financing gets you from here to there.


Bridge loans are short term financing. In this case, the mortgage company loans the buyer additional money to cover the costs of home buying that are above and beyond the purchase price. In exchange, the buyer turns over his/her federal income tax credit money to the lender.



What Does the New Bridge Loan Cover?


The new FHA guidelines allow first time homebuyers to use bridge loans to cover the following costs:







  • additional cash down payment


  • mortgage interest rate buydown costs


Use Bridge Loan as Down Payment?


Most buyers can’t use bridge loan money as their required 3.50% cash down payment. However, buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their down payments.



Why Is This Good?


The second two bulleted items above can both be great for a buyer. The bigger your down payment, the smaller your monthly mortgage payment. It almost goes without saying that lower interest rates mean lower payments.



Could This Be Bad?


Could be. A bridge loan by another name is often called a Payday Loan and Arizonans learned just how unpopular those are in the past election. The interest rates on short term loans can be sky-high. In addition there is a lot of data that shows mortgage default rates increase as cash down payments decrease. Finally, I haven't seen anything that addresses this situation: buyer borrows $4,000 on a bridge loan to cover closing costs, but is eligible for an $8,000 tax credit. Is the lender required to return the extra, unused $4,000? Presumably lenders will create their own regulations, but I'd advise buyers to read the fine print extra carefully if considering a bridge loan under these circumstances.



More Info for First Time Homebuyers



The escrow process explained again

I'm re-posting an article I wrote last year due to the number of first-time homebuyers in the market right now.  I hope you find this useful.

You’re ready to buy a house.  You write up an offer with your Realtor.  What’s next?

You’re trying to sell your house.  Your Realtor brings you an offer from a buyer.  What’s next?

The escrow process always raises questions from both buyers and sellers.  It can be confusing, and even overwhelming, because there are a lot of variables and moving parts.  On the other hand, every detail is spelled out line by line in the purchase contract, so there shouldn’t be any surprises.

It’s a good idea to read your purchase contract carefully (or even a blank, sample contract) and to discuss it with your Realtor before you have an offer in place.  But just in case you didn’t get a chance to do that, I’ve listed some of the most common events and time frames below.

Loan Status Report (LSR).  The Buyer should have already met with a lender, and should be able to provide the Seller an LSR.  This will show the Seller that the Buyer is able to obtain financing to complete the purchase.

Earnest Deposit.  The Buyer should be prepared to write a check on the day she makes an offer.  The check is typically made payable to the title company, and is held in escrow until the conclusion of the contract.  If the contract closes successfully, the Earnest Deposit will be counted towards the Buyer’s cash to close.  If the contract is canceled, the Earnest Deposit will be awarded to either the Buyer or Seller, depending on the timing and reasons for the cancellation, along with the rules spelled out in the Contract.

Day 0.  Your contract may be accepted as offered, or it may have several Counter Offers and Addendums included.  The Counter Offers and any Addendums add, define, clarify, subtract, or otherwise modify the terms of the original Offer, and are included as part of the Contract.  Once all parties have signed these documents, and the documents have been delivered to the other party (in writing), you have a valid Contract.  This date will be Day 0 for counting purposes.

Seller’s Disclosures.  Typically the Seller has 5 days to provide the Buyer a copy of the Sellers Property Disclosure Statement (SPDS) and a copy of their Insurance Claims History.

*Update* - With regards to the Insurance Claims History, there's a difference between a CLUE Report, provided by a 3rd party, and a Claims Letter, provided by the seller's insurance agent.  (Thanks to Matt Fox over at Insurance Renegade for this reminder.)

*Update* - The reason you want to know the insurance history is to make sure the home is insurable.  Sometimes, when homes have experienced too many or certain types of claims, the insurance companies won't insure them or will charge an exorbitant premium.  Talk to your insurance agent to make sure you can get insurance at a reasonable price for the home you're buying.

Buyer Acknowledges SPDS.  The Buyer will need to sign the SPDS and return them to the Seller.  This is not to say she agrees with them; merely to say that she received a copy of them.

Buyer Inspection Period.  The Buyer has 10 days to inspect the home - any and ALL aspects of the home.  If the Buyer finds anything she doesn’t like, she may either A) Cancel the contract and receive her earnest deposit back.  B) Give the Seller the opportunity to fix the items she disapproved of.  or C) proceed with the purchase.  If the Buyer chooses A or B, she MUST notify the Seller in writing before the end of the 10th day.  (and, of course, we have a pre-written form just for this purpose, called the Buyer’s Inspection Notice and Seller’s Response form - BINSR for short).  Failure to give any notice to the Seller is the same as option C.

Seller Response.  If the Buyer chose to give the Seller an opportunity to fix the items she disapproved of, the Seller will have 5 days to respond.  The Seller also has 3 choices to consider:  A) he may agree to fix everything the Buyer requested.  B) he may agree to fix some, but not all, of the items the Buyer requested.  C) he may not agree to fix anything.  Much like the Buyer during her inspection period, the Seller needs to respond in writing within the given time frame (5 days), especially if he chooses A or B.  Failure to respond is the same as choosing option C.

Timing - if the Buyer took all 10 days to inspect the home, and the Seller took all 5 days to respond, we’re now at Day 15 of the transaction.

Buyer’s Decision.  Once the Buyer receives a response from the Seller, she will have to make another decision.  This decision is much more simple, and there are only 2 choices.  A) she may agree to the Seller’s response and proceed with the transaction, or B) she may decide to cancel the contract (and be entitled to receive her earnest deposit.)

Timing - if everybody took the maximum allowable amount of time (10 days, 5 days, 5 days), we would be at Day 20 of the transaction.  So it can take about 3 weeks to get through the inspection process.

Quiet Period.  Many times the inspection process is wrapped up weeks before the scheduled closing date.  This will cause a Quiet Period, especially compared with how much energy can be spent on the inspection process.  The Seller will be working to make any repairs he agreed to make, and the Buyer will be working with her lender to make sure the loan is in order.  Both parties will most likely be working on other logistical items, such as packing, movers, utilities, etc.  But don’t get too complacent, because things will get hectic again!

Final Walk Through.  Sometime about a week before the closing date, the Buyer will do a Final Walk Through of the home.  She wants to make sure the home is still in "materially" the same condition as when she made the offer, and she wants to make sure the Seller did all the repairs he agreed to do.

Seller Signing.  The Seller will go to the title company’s office to sign his portion of the papers, generally 2-3 days before the scheduled closing date.

Buyer Signing.  The contract calls for the Buyer’s Loan Documents to be delivered to the title company 3 days prior to the scheduled closing date.  The Buyer should be prepared to sign his portion of the papers at the title company’s office at this time.

Buyer’s Funds.  The Buyer should be prepared to bring certified funds to title, or send a wire transfer, preferably on the day he signs.

Closing.  The title company will handle everything for the closing, and will make sure that any & all requirements are satisfied.  They will make sure they have all funds from the Buyer - Earnest Deposit, Certified Funds for the Down Payment + Transaction Costs, Loan Funds from the mortgage company.  They will make sure they have accurate payoff information for the Seller - 1st mortgage, 2nd mortgage, any other liens.  They will make sure they have everybody’s signatures on the Deed and any other legal documents.  Once they have everything accounted for, they will record the Deed at the County Recorder’s Office to show the change of ownership, and they will make the Seller’s Proceeds available to him.

Delivery of Keys.  Once we have word from the title company that the deed has been recorded, we’ll want to get the keys into the Buyer’s hands as quickly as possible.

** Disclosure ** The numbers, dates, and terms used here represent a hypothetical transaction in Maricopa County, Arizona.  This article is intended to provide an overview into the general flow of a transaction, and should not be taken as gospel.  Your transaction may include terms and dates which are very different from the examples given here.  You are advised to read your contract carefully, and to consult with your professional representation.

And that’s it - easy as pie.  A stressful process, but an easy-to-understand process.  An understanding of the process, coupled with a good game plan and lots of open co

mmunication can go a long way toward relieving some of that stress!

Your ready to answer any other questions you might have Realtor,

Chris Butterworth