FHA


How to Win Over Buyers

No matter how well educated your buyers are, they still need information on how a real estate transaction works. Use consultation appointments to inform them and become a trusted resource in the process.

May 2011 | By Rich Levin
 
Buyers are more educated in today’s market. They have more access to information regarding properties and their value. Plus there are practically unlimited real estate resources online for practitioners.

These combined factors should make the real estate professional’s job easier, but for many, they don’t. Why? There are two problems:

  • The information may not be accurate or relevant to a specific market.
  • The information is almost certainly incomplete.

“An Educated Consumer Is Our Best Customer”

Two adages speak to today’s buyer:

Whether the real estate pro finds buyers easier or more difficult to work with depends on whether that practitioner respects and completes the buyers’ education.

Have the buyers obtained a copy of the contract and paperwork online? Probably not, and most paperwork has many pages plus addenda. Do the buyers know what real estate trends apply to their market? Do they know what to do when the inspection reveals a problem?

Contracts, inspections, financing, negotiation — there are far too many steps in the transaction process for most buyers to pick up on their own.

A Simple and Powerful Process

The most successful buyer’s agents learn to ask a few simple questions (adjust to the circumstances of you and your buyer accordingly):

“The purchase documents in our area are six pages, plus disclosures and addenda. Has anyone given you a copy of the latest documents and reviewed with you the parts that are going to be relevant for your purchase? I find it helps a lot to be familiar with the documents so you aren’t seeing them for the first time when you’re making that $200,000 decision. Would you like to get a copy and take a look at those together?”

“There are inspectors, appraisers, attorneys, title companies, lenders, and real estate agents involved in the transaction. Would it be helpful to go through the process step-by-step so you know what to expect and get some idea of what might come up? It often reduces some pressure and allows you to enjoy the process with greater confidence. Would that be helpful to you?”

These simple questions lead buyers to make a consultation appointment, which can establish enormous confidence and trust in you, the agent. Buyers subsequently go along more easily with your recommendations through the negotiations, which actually can reduce the number of homes they need to view. They find the experience so valuable that they begin to refer you to friends and relatives.

At the consultation appointment, review each step of the process, educating and preparing buyers. Do they understand the type of financing they’re trying to get? Do they have any questions about it? Even if you don’t have the answers, you can take the lead getting a clarification and making sure buyers are aware of what’s included in their closing costs and their payments, and in reducing cash needed with seller contributions.

You also should explain what buyers can expect: Describe problems that could arise and how you’ve solved them and protected buyers’ interests in the past.

As you conduct these presentations, you’ll quickly discover two things: how much buyers don’t know — even the educated ones — and how much they misunderstand. As you realize the value and power of these consultations, you’ll learn to go into deep detail, continuously confirming buyers’ understanding.

Changing laws and financing situations — such as explaining short sales and foreclosure procedures — are just a few reasons that the time you spend preparing buyers works to everyone’s benefit.

 

 

 

 

 

Contact:

 The Meredith Mortgage Team ~ We Always Have Your Best Interest In Mind ~

925.983.3048

meredithteam@comcast.net

NAR: Stabilizing Housing Is Key for Recovery

Daily Real Estate News | Tuesday, July 19, 2011
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Stability in the housing market will lead to a quicker and greater economic recovery, according to the National Association of REALTORS®. In a letter to Shaun Donovan, secretary of Housing and Urban Development;Timothy Geithner, secretary of the Treasury; and Gene Sperling, director of the National Economic Council, NAR offered its recommendations for helping stabilize and revitalize the housing industry and economy.

“As the nation’s leading advocate for homeownership and housing issues, NAR understands how integral homeownership is to the nation’s economy. A strong housing market recovery is essential to the nation’s economic strength,” NAR President Ron Phipps said. “The housing market is in a fragile recovery, and our goal is to ensure that regulatory or legislative changes help lead the way out of today’s economic struggles and not jeopardize the recovery.”

In its letter, NAR cautioned that recent proposals could make a near-term housing recovery almost impossible, not to mention making it harder for millions of hard-working families to own their own homes. Phipps said more regulations and legislation that tighten access to credit and affordable safe mortgages are not the solution to righting the housing market and economy.

“We want to make sure that any legislative and regulatory changes don’t jeopardize a housing and economic recovery, so that anyone who is able and willing to assume the responsibilities of owning a home has the opportunity to pursue that dream,” said Phipps.

NAR urged support for policies that ensure qualified borrowers can obtain safe and sound mortgage financing. NAR called on regulators to revise the unnecessarily high down payment requirements of the Qualified Residential Mortgage (QRM) exemption from risk retention requirements under the Dodd-Frank Act. A broad QRM definition will encourage sound lending and reduce future defaults without delaying or denying home ownership to millions of creditworthy borrowers.

NAR also asked regulators to reduce the overcorrection in underwriting standards for mortgages from the Federal Housing Administration and government-sponsored enterprises because the now-too-stringent standards are preventing qualified borrowers from getting loans.

“Mortgage availability remains a concern, and borrowers continue to find it increasingly difficult to find affordable mortgage options. Requiring a higher down payment does little to reduce default risk, and only strips home buyers of their savings and increases the number of borrowers who are unable to purchase a home,” said Phipps. “We cannot have a viable housing market and economic recovery until creditworthy borrowers are able to obtain mortgage financing.”

NAR also recommends extending the FHA and GSE mortgage loan limits, which are critical to providing liquidity in today’s housing market. Reverting to the statutory limits on October 1 would reduce limits in 669 counties and 42 states and territories – the average decline in loan limits will be more than $68,000.

NAR also firmly believes that National Flood Insurance Program is essential to a properly functioning real estate market, and urges Congress to pass a long-term reauthorization of the program before it is set to expire on September 30 for the tenth time in two years. The program ensures access to affordable flood insurance for millions of homeowners.

“We look forward to working with Congress and the administration to not only preserve, but also strengthen the American dream for future generations,” said Phipps

Bill Calls for Extending Jumbo Loan Limits

Daily Real Estate News | Monday, July 18, 2011

A bill introduced late last week calls for extending the current conforming loan limits on government-backed mortgages at Fannie Mae and Freddie Mac for another two years.

The bill, introduced by Rep. John Campbell, R-Calif., and Rep. Gary Ackerman, D-N.Y., would allow the government-sponsored enterprises and the Federal Housing Administration to guarantee or buy mortgages worth up to $729,750 in many neighborhoods.

The current loan limits are set to expire Oct. 1. If an extension isn’t granted, the maximum mortgage amount in high-cost areas will drop from $729,750 to $625,500 (however, that limit will vary throughout the country).

“With the economy remaining fragile and the housing sector still struggling to recover, now is not the time to make the cost of mortgages more expensive,” Ackerman said.

The National Association of Home Builders has said it fears more than 17 million homes nationwide will become ineligible for more affordable federal funding if the loan limit expires. However, last week, Federal Reserve Chairman Ben Bernanke saidhe was confident that the private market, including investors and insurers, would fill the void if the conforming loan limits expired — although likely at a higher cost to borrowers.

Source:“Lawmakers Introduce Bipartisan Bill to Extend Conforming Loan Limits,” HousingWire (July 15, 2011)

What Does the Future Hold for Jumbo Loans?

The private market is ready to fill the void when conforming limits on government-backed mortgages at Fannie Mae, Freddie Mac, and the Federal Housing Administration expire at the end of September 2011, Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee on Wednesday.

On Oct. 1, the maximum mortgage amount in high-cost areas is set to drop from $729,750 to $625,500.

“As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher-priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis,” Bernanke told the House committee. “I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost.”

The National Association of Home Builders has said that it fears more than 17 million homes nationwide will become ineligible for more affordable federal funding when the loan limit expires.

While Bernanke acknowledges that jumbo loans will likely come “at a higher cost,” he said that needs to be kept in perspective.

“Mortgage rates on conforming loans are already near historic lows, hovering around 4.5 percent on the 30-year fixed,” he said.

Source: “Bernanke: Private Sector Ready for Conforming Loan Limit Drop,”

How to Strengthen the Mortgage Origination Process

The National Association of REALTORS® offered recommendations to Congress about a number of issues affecting the mortgage origination process and the real estate and housing finance industry’s ability to facilitate home sales.

Testifying yesterday before the House Financial Service Committee’s Subcommittee on Insurance, Housing and Community Opportunity, NAR spokesperson Steve Brown identified several proposed regulations and existing rules that have exacerbated problems within the fragile real estate market and urged Congress and the administration to consider modifying the rules to help consumers purchase homes and the economy recover.

“As the leading advocate for home ownership, NAR believes that the pendulum has swung too far and now fewer qualified people are able to get a loan,” said Brown. “Congress and the administration need to reexamine the impact of many well-meaning laws and regulations that have come out of the financial and mortgage crisis to ensure that the still-fragile housing recovery stays on track and the long-term value of home ownership in America is protected.”

Brown said the treatment of home warranties under the Real Estate Settlement Procedures Act (RESPA), which prevents kickbacks for referrals among settlement service providers, is one of the issues facing real estate firms, home warranty companies and consumers. Since home warranties are not a requirement for a mortgage origination or home sale, NAR believes that including the optional insurance product as a settlement service stretches the meaning of RESPA. Brown urged the subcommittee to pass H.R. 2446, the RESPA Home Warranty Clarification Act of 2011 introduced by Reps. Judy Biggert (R-Ill.) and Lacy Clay (D-Mo.), that would clarify that home warranties are not subject to RESPA and would provide for appropriate consumer disclosure.

Another area of concern to the industry is the definition of points and fees in the Qualified Mortgage provision of the Dodd-Frank Act, which limits the total points and fees collected by lenders and their affiliates — such as title companies — to 3 percent of the loan amount. This limits many affiliated companies from offering full services to their clients to avoid violating the cap. NAR recommends that Congress restore an exemption for affiliates duly constituted under RESPA, so that consumers can fully benefit from greater competition between affiliated and unaffiliated mortgage lenders.

Brown also reiterated the importance of the Federal Housing Administration to the nation’s real estate recovery and called upon the panel to make permanent the current loan limits that are set to expire Sept. 30, 2011. Allowing the loan limits to revert to previous limits would result in a significant decline in loan limits in 669 counties and 42 states and would dramatically impact liquidity across the country.

NAR has expressed strong support for H.R. 1754, the “Preserving Equal Access to Mortgage Finance Programs Act,” introduced by Reps. Gary Miller (R-Calif.) and Brad Sherman (D-Calif.), that would make the current loan limits for FHA and the government-sponsored enterprises permanent. NAR also advocates keeping the FHA down payment at 3.5 percent and loosening restrictions on condominium purchases.

“With housing markets struggling to recover, the last thing we need to do is to put an avoidable stumbling block in the path of a much needed housing recovery,” said Brown. “Without a housing recovery, the nation’s economy as a whole will struggle to recover its balance.”

A common question home buyers have today is: How long must I wait before obtaining financing after bankruptcy, foreclosure or short sale?

Below is an overview by loan type of this important information.

Matrix

 

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NAR Pushes for Comprehensive GSE Strategy

The National Association of
REALTORS
® supports a secondary mortgage market model with some level of
government participation that would protect taxpayers and ensure that
creditworthy consumers have access to affordable mortgage capital in all markets
at all times.

That was the message
delivered Thursday morning by 2011 NAR President Ron Phipps during a Senate
Banking, Housing and Urban Affairs Committee hearing.

“As the leading advocate for home ownership,
REALTORS
® agree that the existing housing finance system failed and that
reforms are needed; however, those reforms must be done in a methodical,
measured and comprehensive effort based on practical market experience,” said
Phipps. “We applaud the committee’s caution as you continue to discuss this very
important and complex issue.”

In his
testimony, Phipps urged support for comprehensive reform of the
government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which remain
critical to ensuring mortgage liquidity, and expressed concern over recently
proposed legislation that takes a piecemeal approach and could increase
uncertainty in the housing market, which is still struggling to recover.

To ensure a viable secondary mortgage
market going forward, Phipps said that private capital must return to the
housing finance market and the government’s involvement needs to be reduced;
however, full privatization is not a viable option.

“There are strong negative repercussions for relying solely on
private capital to form the foundation of the housing finance system. After the
housing downturn, private mortgage capital became nearly nonexistent, and
without the GSEs, qualified borrowers would not have had access to the funds
required to purchase a home. A government backstop is critical to ensure a
continual flow of mortgage liquidity and the long-term viability of the housing
market,” Phipps said.

He added that in a
fully private market, financial institutions with FDIC-backed deposits would
focus more on optimizing their profits in a noncompetitive banking industry, and
potentially fostering new, risky mortgage products that place taxpayers at risk,
rather than products that would be in the best interests of consumers and the
nation’s economy. That could lead to the end of long-term fixed rate loan
products, like the 30-year fixed rate mortgage, and drastically raise the cost
of mortgage capital for millions of American consumers.

Phipps also testified about another important issue that will
dramatically impact the future of housing finance – the proposed risk retention
regulation under the Dodd-Frank Act, which requires lenders that securitize
mortgage loans to retain 5 percent of the credit risk unless the mortgage is a
qualified residential mortgage (QRM).

“A
poor QRM policy that focuses on high downpayment requirements rather than a
variety of traditional safe, well underwritten products will exclude hundreds of
thousands of buyers from home ownership, slowing economic recovery and hampering
job creation,” said Phipps. “REALTORS
® support a reasonable and
affordable cash investment coupled with quality credit standards, strong
documentation and sound underwriting; but higher down payments do not have a
meaningful impact on default rates.”

He
also expressed strong support for making permanent the GSE and FHA mortgage loan
limits that are currently in place and set to expire later this year. Phipps
said that in today’s real estate market, lowering the loan limits will restrict
liquidity and make mortgages more expensive for households nationwide. More than
612 counties in 40 states and the District of Columbia will see an average
decline of $50,000 in loan limits in their area.

“REALTORS® look forward to working with Congress and our industry
partners to design a secondary mortgage model that will best serve our nation
today and into the future,” Phipps said.

Source: NAR

Proposal to Raise FHA Loan Down Payment

Republicans on the House Financial Services
Committee have drafted a bill to raise the minimum down payment for Federal
Housing Administration-backed loans to 5 percent as well as cut FHA loan limits
in many markets. FHA-backed loans are a main source of mortgages for first-time
home buyers.

Currently, home owners who
take out FHA-backed loans are required to have a minimum down payment of 3.5
percent; the GOP bill seeks to raise that to 5 percent. The GOP says it wants to
protect home owners against default and improve FHA’s finances.

The bill has not yet been introduced but
remains in draft form. However, the draft legislation is expected to be
discussed on Wednesday by the subcommittee.

The draft legislation also calls for lowering FHA loan limits in
several areas.

As of now, the maximum
size of FHA-backed loans in expensive areas of the country is set to drop to
$625,500 from $729,750 as of Oct. 1. In less expensive areas, the limit may drop
to $271,050. The GOP draft bill wants to drop the limits even more to 125
percent of a county’s median home price, Dow Jones reports.

“While we support reforms to strengthen the program, changes
should not be made at consumers’ expense by drastically impacting the
affordability and availability of mortgage capital,” Ron Phipps, the National
Association of REALTORS®’ president, said in a statement.

Source: “House Republicans Aim to Raise Money
Down for FHA Loans,”
Dow Jones
International News (May 23, 2011)

Avoid Home Flaws Being Uncovered Too Late

Home inspections don’t always turn up everything
wrong with a home, but unknowing buyers can quickly turn unsatisfied when they
move into their new home if they find a bunch of problems.

“The purpose of a home inspection is to look for material
defects of a property: things that are unsafe, not working, or that create a
hazard,” Kurt Salomon, president of the American Society of Home Inspectors,
told the Chicago Tribune. However, most buyers “think we can see through walls
and predict the future.”

Home inspections,
for example, don’t specifically test for environmental safety hazards like lead,
asbestos, or radon–which can be costly to remove. Inspectors also may overlook
mold or vermin when its hidden behind floorboards.

As such, buyers also should be on the lookout for common hazards
because pinpointing these before closing at least allows them the opportunity to
ask sellers to help pay for removal costs.

Experts warn that buyers should take note of homes built prior to
1978, which usually contain lead and possibly asbestos in 9-by-9 floor tiles in
basements.

To help avoid post-move-in
surprises, buyers also might consider bringing in additional safety inspectors
to evaluate the home, such as chimney inspectors, electricians, or experts for
leading or radon testing.

Source:
“Above and Beyond the Home Inspection:
Buyers Face Big Expenses When They Don’t Discover These Common
Problems,”
The Chicago Tribune (May 6,
2011)

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