Why Borrowers Pay Different Rates

Lenders, like any business, have to make a profit.  The cost of acquiring the funds, the operating costs to service and the expected profit margin are easily identified.  The variable in pricing is the type of mortgage and the credit worthiness of the borrower. 

A loan with a 3.5% down payment is riskier than a loan with 20% down payment.  If the lender has to take the property back to recover their expense, the margin is greater between what is owed and what the property is worth on an 80% mortgage. 

Credit scoring is a risk-based pricing method that allows a lender to be competitive in the market for the best loans from different borrower groups.  Individual lenders set their own levels for what they consider “A” credit which is reserved for the best rates.  If good credit is approximately 710 to 740, scores below that are considered higher risk and will have higher rates.

Risk must be assessed for both the borrower and the property that collateralizes the loan.  The borrower’s credit history and income stability are strongly evaluated by the lender but if a default should occur, the property must secure the loan to avoid a loss to the lender. 

The challenge for some buyers is they are unaware of what their credit score is and how it will affect the interest rate offered by the lender.  It is to the buyer’s advantage to be pre-approved by a reputable lender prior to starting the process of looking for a home.  In some cases, the lender can actually improve the borrower’s credit score to help them qualify for a lower interest rate.

Contact me for a recommendation of a trusted mortgage professional - Lizbeth@lizbethuribe.com

Lower Anxieties/Improve Marketability

One of the anxiety highpoints during the sale of a home is waiting for the buyer’s home inspection report.  Most sellers willingly disclose what they know about their home to any potential buyers.  The concern stems from the inspector finding something that they’re totally unaware of and that it will either cost them a lot of money to correct or the buyer will simply use it to void the contract.

If the inspection does reveal some unknown problem with the home, it’s probably as big a surprise to the buyer who is not as emotionally or financially invested as the seller.  It is human nature to fear what you don’t understand and when a report identifies defects, they may simply opt-out of the home.

The solution to the situation may be for the seller to have the home inspected prior to putting it on the market.  There is still a risk of becoming surprised by an unknown defect which at that point, would have to be disclosed to potential buyers or repaired by the seller.  The advantage is that it creates a baseline to compare discrepancies that may arise when a future buyer has the home inspected.

If the seller’s inspection report is made available during the marketing process, it could give buyers a sense of confidence about the home even though they may still choose to have the home checked by their own inspector.

The cost of the inspection, possibly $500, keeps some sellers from taking this initiative when selling their home.  In an effort to minimize their expenses, they forego getting valuable, disinterested 3rd party advice that could help sell their home.  On a $175,000 home, the fee for the inspection will probably be less than 3/10 of one percent of the sales price.

Another option to the seller to increase marketability of the property and bolster buyer confidence in the home would be to offer a home protection plan.  Generally, the seller doesn’t incur cost for this coverage until the home is sold and there may even be some coverage for the seller during the listing period.  The benefit to the buyer is avoiding unanticipated expenses for specific items that are covered during their first year of ownership.

Contact me for recommendations of home inspectors or home protection plans.

Rating Your Best Friend

Man’s best friend enjoys many of the benefits of his master’s home besides food and shelter and a comfortable place to live and play.  In return, dog owners expect companionship and possibly, protection; after all, even a small dog can bark to signal intruders.

Few people doubt that most dog owners love their pets and treat them well.  The costs associated with having a dog can include medical and dental that rivals human expenses, premium food, toys, grooming and license fees.  However, one of the expenses not anticipated by pet owners is a higher homeowner’s insurance premium.

There are almost five million dog bites a year with children being the main victims.

“Dog bites accounted for more than one-third of all homeowner’s insurance liability claim dollars paid out in 2012, which amounted to more than $489 million,” said Peter Robertson, representing the Property Casualty Insurers Association of America, testifying against the bill at a hearing of the Committee on Financial Services.  He said, “The total cost of dog bite claims increased by more than 51 percent between 2003 and 2012.”  It is now estimated that dog bites cause losses of over one billion dollars a year.

Some insurance underwriters have denied or canceled coverage or increased the premium of the owner’s liability insurance based on the homeowners’ specific breed of dog such as Pit Bulls, Dobermans, Akitas, Mastiffs, Malamutes and even German Shepherds.  The aggressive nature of certain types of dogs combined with specific training or lack of training, abuse or neglect are identified by insurer’s refusal to provide liability coverage.

If you are considering what insurers identify as a high-risk pet, you might want to visit with your insurance agent prior to acquiring your new best friend to see if it affects your rates.

Don't Do It!

You’ve seen lists telling buyers what to do to find the right home but knowing what not to do can be just as important.  After finding the right home, negotiating a contract, making a loan application and inspections, buyers, understandably, start making plans to move and put their personal touches on the home.

In today’s tenuous lending environment, little things can derail the process which isn’t over until the papers are signed at settlement and funds distributed to the seller. Verifications are made by a lender at the beginning of the loan process to determine if the buyer qualifies for the mortgage. The verifications are usually done again just prior to the closing to determine if there have been any material changes to the borrower’s credit or income that might disqualify them.

Simply stated:

1. Don’t make any new major purchases that could affect your debt-to-income ratio
2. Don’t apply, co-sign or add any new credit
3. Don’t quit your job or change jobs
4. Don’t change banks
5. Don’t open new credit accounts
6. Don’t close or consolidate credit card accounts without advice from your lender
7. Don’t buy things for your new home until after you close
8. Don’t talk to the seller without your agent

Your real estate professional and lender are working together to get you into your new home. It’s understandable to be excited about one of the biggest decisions you’ll make and that you feel you need to be getting ready for the move.

Planning is smart but don’t do anything that would affect your credit or income while you’re waiting to sign the final papers at settlement.

Make sure you Drive by it at different times of the day and night!

  During one of my many showings this week, I was very surprised (mouth gaping open and all) at a very unusual site.  My clients, who are an adorable couple, took sometime to become aware of the situation.  Since I had been outside waiting for their arrival for a few minutes, I had plenty of time to scope out the neighborhood.
  The property we were previewing was lovely, great curb appeal in a well established neighborhood surrounded by homes of greater or equal value, somewhere in the low to mid $200,000.00
  As I sat down on the step to wait, I noticed the neighbor across the street was sitting in his driveway, open garage door and all, just relaxing. I thought to myself; "he's probably working on something and is resting in between breaks" until....I noticed his lovely wife drag a SECOND chair out unto the driveway to sit next to him, now I was intrigued.  See, they were both staring into the garage from the driveway, and from my limited view into their garage, I couldn't tell what it was they were looking at so intently.  I kept waiting for them to close the garage door (believe me it wasn't a pretty site), thinking "they'll be done soon, and they probably don't want me, and everyone else looking into their messy garage"...I was wrong.  Two minutes later, their son drags a THIRD chair out from the garage, unto the driveway...now I had to look.  So I got up and walked up to the side yard of the property we were going to preview, and that's when I saw it...a BIG flat screen TV  on the Garage Wall!!!!  I couldn't believe it!!  They were watching TV from their driveway! Apparently this must be everyday, they get home from work, pop open the garage door (with the cars in the driveway of course) and pull chairs out to watch the tele, while the whole neighborhood watches them.
Here's my point; When you find a property that works for you, and you think this is the one....DRIVE BY IT! drive by it at different times of the day and night, so you'll have a better feel for the activity in that neighborhood...you don't want any surprises on move in day.
  So go for a drive before you buy, you'll be glad you did.

It's been a long time

Haven't blogged in some time now, too long really.  I've been busy with life, work and family.
I must say that this year, the market has taken a turn for the better.  Homes are moving as always, but a very welcomed change has been the come back of our commercial clients ready to invest in our Market.  Leases are moving and major retailers are still flocking to our City trying to get their own piece of the pie. Home leases are still going strong, high demand and small supply keep prices up.  Homes are moving a little faster, they're not staying in the market as long as they used to, and are selling closer to their asking price.  Of course, location and condition of the home as well as price have a lot to do with this.  Overall, in my opinion, this has been a better year for Real Estate.  There's a lot of information when it comes to Real Estate, to be put into a few words, so if you ever have a question or comment that I can help with, let me know it's great to hear from you!

Want to help Sell your House?

What is the best thing you can do during showings of your House?

Make yourself scarce!

If you've ever shopped in a store where the employees are hovering and seem to lurk in the background, watching your every move.... then you know what I'm talking about.

It can be uncomfortable exploring a home when you feel you're being watched. Making buyers feel comfortable when looking for a home is absolutely essential. Buyers tend to have little interest in asking questions about your property because th answers you provide will certainly be biased in some way. This is why you have hired a Real Estate Agent to represent you and your home, who better than a qualified professional to be the spokespoerson for your home!

You've carefully selected and hired an Agent to sell your house, now is the time to step back and let them do just that!