Why didn’t my house appraise for more?

I hear this often, especially on refinance applications.  Sometimes it happens on a purchase when the sellers have the price of the home higher than the market will bear.  Other times, it happens when a home buyer is asking the seller to pay closing costs on the purchase and they agree to increase the price to offset the closing costs so the seller will net the same after paying off their mortgage and sales costs.  This is a common event in a hot real estate market such as the Treasure Valley.

The purpose of the appraisal is to establish the value of the property being secured by a mortgage.  The lender needs to know the current value of the property so in the event of foreclosure, the property is worth more than the amount owed by a borrower.  For a refinance application, it usually means a lower loan amount to reflect the lower than estimated home value.  For a purchase transaction, the following options apply:

If the value is lower than the purchase price, the buyer has the option of either bringing the difference to closing (not the best choice, IMO) or negotiating a lower purchase price with the seller.  Sometimes a compromise such as lowering seller  concessions like closing costs while lowering the purchase price will spread the difference between both parties.  It comes down to how much does the buyer want THAT property or how motivated the seller is to sell their property.  Other times, I have seen both parties walk away from the transaction.  In the case of FHA loans, the seller signs a document letting the buyer out of the contract and return earnest money if the property doesn’t appraise for the purchase price on the contract.

For a home seller accepting an FHA offer, be aware that FHA will log the appraised value in their system, and even if you turn down a counter offer lowering the sales price, FHA will recognize this value for the next 180 days.  Another appraisal or lender cannot get a higher value regardless of the result of a new appraisal.  If you or your agent feel you are at the top of the market price for homes like yours, you should not try to increase the price to pay a buyers closing costs.  There are options for buyers who need closing costs or down payment assistance.

For more information about home appraisals, check out my other site.

Its spring time, how is your credit?

With the spring finally coming to the Treasure Valley, many will be going out to look for a home this year.  The first nice weekend of February is what I typically see as the start of the main sales season for real estate in the Treasure Valley.

Like those preparing for a marathon, preparing to buy a home will pay massive benefits when you get out and start making offers on houses.  The single most important aspect of that preparation, is to check your credit report.

Checking ahead of time will allow you to correct any errors on the report before you apply for a mortgage pre-approval.  This could qualify you for better loan programs or options not available for those with lower scores caused by erroneous credit reporting.

Here is an article from my other site that discuses the habits of those with great credit scores.

Weather you are in the market for your first home, or are buying that retirement home, it pays to stay abreast of your credit report.

Not so fast….FHA Mortgage changes rescinded!

Within hours of President Donald J. Trump being sworn in as President, HUD has rescinded the proposed reduction of Mortgage Insurance Premiums on new FHA loans.  The reduction of Mortgage Insurance Premiums, called MIP on an FHA Loan, was supposed to be reduced by 25 bps per month on new loans at the end of this month.  This would have saved the FHA home loan borrower about $50 per month on a loan of $250,000.

While this is not great news for new FHA home loan seekers, I prefer to look at the re examination of FHA Mortgage Insurance Premium funds and see what can be done to reduce the monthly mortgage payments for FHA home loan seekers.

Possible changes include the life of the loan provision currently on FHA Mortgage Insurance Premiums.  It would be less costly for home owners with a FHA Mortgage if the FHA MIP would drop off automatically in later years.  Currently, for the life of the loan, FHA will collect Mortgage Insurance Premiums.  On a conventional loan with Private Mortgage Insurance, the PMI can be dropped when your equity reaches 20%, or when by normal amortization schedules, you reach the 78% of the original loan to value.

Right now, the only way to drop the FHA Mortgage Insurance Premium is to pay off the loan, most likely with a refinance or sale.

If you are in the Treasure Valley, we have seen massive home appreciation. Someone with a home loan from 2013 or 2014 might have enough equity in 2017 to refinance into a conventional loan without PMI or MIP, and save that money every month.

To see what you can save, contact me here.

 

 

 

Tom Selleck is promoting Reverse Mortgages now….

If Magnum PI is on board, why wouldn’t you get a Reverse Mortgage?

Just kidding, its a really great commercial from one of our investors. We write Reverse Mortgages and sometimes transfer them to AAG.

I think it was a wise choice to bring Tom Selleck on as the new spokesperson, replacing Senator Fred Thompson who recently passed away.  Like Thompson, Selleck is a trusted TV figure whom many seniors have watched and listened to for decades.

The “it sounds too good to be true” line is something I hear all the time.  It does seem too good to be true that you could:

          Get money or eliminate a monthly mortgage payment

          Its Tax Free

          You never have to make a monthly mortgage payment

          Your heirs will never be liable for its repayment

Its a simple math equation, and I run the numbers every day for people who don’t understand how it can do this.  Rest assured, it does.

For the official word from HUD/FHA, click here.

If you still don’t understand, that is normal.  The FHA HECM loan is the most complex residential mortgage I have ever written in my 15+ years of originating residential home loans.  Because of that, Fairway Independent Mortgage requires that any Mortgage Banker take additional training over 3 days to fully understand how to originate this loan to the best possible benefit of the client. Furthermore, Fairway Independent Mortgage puts a dedicated Reverse Mortgage Planner in each branch so the client has a local Mortgage Banker to help them.  Its way to important and complex to trust to a phone room operation.

Still have questions?  No worries, I am available to Idaho residents to answer any questions or run Reverse Mortgage calculations or scenarios for them.  Contact me here.  http://www.loansbyrogerhowell.com/

 

 

Mortgage improvements and updates in 2017, My predictions…

 

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2017 will bring many new and exciting changes to the mortgage industry and those seeking a home loan.  Some are new programs and new sources for those programs, others are updates and changes to existing residential home loan programs.

These include:

FHA lower Mortgage Insurance premiums                                                              

Increased loan limits on Fannie Mae and Freddie Mac loans

New, affordable home buying programs for first time home buyers

Higher, maximum loan limits on Home Equity Conversion Loans (Reverse Mortgages)

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Some, others are more predictions, like:

Higher interest rates

An improving economy, or even the expectation of a better economy and consumer confidence will cause higher interest rates as investors demand a higher return for their money.  The rates we have seen the last few years were below market in an attempt to keep the economy from slipping back into a recession.

Continued home sellers market

This contributes to higher prices, although higher rates will eventually slow this down.

Housing shortages in some markets

Home buyers continue to move out of state for work or other reasons.  Our market in Boise, Idaho continues to benefit from the influx of out of state buyers moving here.

Tightening of the zero down payment options.

last year, Idaho Housing and Finance Association made several changes to their down payment assistance programs.  Still there are several zero down payment options available and ways to make it very little out of pocket.

With all the changes that happen in the market, it’s really important to get a local expert team working on your behalf.  That being said, I feel optimistic for home buyers and home owners seeking a home loan in 2017.

For more information or answers, contact me here at www.loansbyrogerhowell.com and I will be delighted to help you.

 

 

Tips to Make Your Roof Last as Long as Possible

If you pay for something for 15 ,20, or 30 years, the typical loan term, you want to make sure it lasts.

Good roof

The article give several, easy tips to maintain your home’s roof so it stays the valuable asset you purchased.

Here.

Don't let your roof get like this....

Don’t let your roof get like this….

If you are buying a home and getting a home mortgage, the roof is examined as part of the appraisal.  The appraiser has to look at the home’s roof and make a statement if they think the roof has a remaining life of at least two years.  The appraiser is not a roof inspector, and will state that and the buyer should get a certified roof inspection if they are concerned about the remaining life of the roof.

If you are selling a home, consider this and make any necessary repairs before you list the home so your buyers loan doesn’t have problems that come up in the appraisal stage.

                               For more information about the appraisal process , go here.

Some loan programs allow for roof replacement and repairs, the FHA 203k and Fannie Mae Home style renovation.

Still, most people won’t have roof issues when they buy a home if they take a good look at the roof for sagging, missing shingles or other signs.  When in doubt, get an inspection it’s very inexpensive assurance in the long run.

After all, if you get a home loan and make mortgage payments for 15,20, or 30 years, you want to enjoy it after you have paid off your home.

 

 

 

 

 

 

Electronic and smart locks for your home, they are here!

Here is a new article, on my other site:

http://loansbyrogerhowell.com/electronic-and-smart-locks-for-your-home/

smart locks for your home

Electronic locks

The days of leaving a spare key under a rock in your yard may be over.  Thanks to the amazing power we now hold in our hands, the smart phone, we can lock, unlock and monitor our homes without having to carry a key.

Already, my newest car has a fob instead of a key and its a natural step to put the electronic lock into your home.

Electronic locks are not new, I have a couple older ones sitting in my shed. They were quite useful for rental homes, new construction, or homes we would fix and flip.  You would set the code and give it out to whoever needed it.  After the project was done, or the home was rented, you changed the combination.  This is much less expensive than a locksmith and the lock could be taken to a new property if needed.

Some people might be concerned about the electronic nature of securing our homes, but is your home really secure with a manual lock and key when anyone could probably enter by way of a window and rock?  If your phone is dead or power goes out, there would be a back up using a traditional manual key.

If you want a new home with all the latest features like electronic locks, we can get you pre-approved quickly and before you know it, you will be moving into the new home.

How can older Americans dig themselves out of debt?

“Don’t be paying a mortgage with social security” is a quote from my father years ago.

After reading this, I have a few thoughts:

http://reversemortgagedaily.com/2015/08/20/few-older-americans-relying-on-home-equity-for-retirement/

 

Going into retirement with debt and mortgage payments is a really bad idea.  Its unfortunate that  too many Americans find themselves in this position.

Sometimes it due to a job loss, divorce, or healthcare event that causes this.  Other times its simply not saving enough or making an effort to pay down debt and save more.  Fortunately, this can be fixed, even if you are in your 40s, 50s or even early 60’s.

Recently, I was with a refinance client  in their 40’s/early 50’s and after the closing and they were lamenting they would never be able to retire and stop working as they had just taken out a new 30 year mortgage. They were just looking at the date on the note.

The next morning  I ran their numbers and projected the amortization schedule with a small yearly home appreciation (3%) to see how much their projected equity would be.  At age 62, they would have paid down their mortgage enough to get a Reverse Mortgage and eliminate a mortgage payment out of their retirement budget.  I immediately communicated the good news to them. The conversation went a little like this:

“If you stay on the regular payment plan of your new mortgage, you should have enough home equity to put a reverse mortgage in place when you both reach age 62.”

Delivering great news to clients is just one of the many satisfying aspects of my profession.

Lesson is: No matter how late you are to the retirement planning, you should start.  Even 10 or 15 years of planning will drastically improve your retirement.

For more information on how a reverse mortgage works, go to: My Reverse Mortgage information website

or you can contact me at 208-955-9080

 

 

 

 

WSJ article, “The new math on reverse mortgages”

A really good, short read on Reverse Mortgages here:

http://www.wsj.com/articles/new-math-on-reverse-mortgages-1458525888

Quote: Prof. Moulton cites a recent report by Harvard University’s Joint Center for Housing Studies that found that nearly 40% of seniors age 65 and older carry a mortgage today, a rate that has more than doubled since 1992. “Using a reverse mortgage to pay off a forward mortgage frees up monthly cash flow to a household,” she says. “Essentially it has the same effect on a household budget as receiving a monthly annuity payment.”

This is why more and more people are looking at a Home Equity Conversion Mortgage, aka Reverse Mortgage when they are considering retirement or early in their retirement years rather than waiting until it becomes a last resort.

Just recently I helped a client who was in the pre retirement phase and planning for the day they can quit their job.  Eliminating their mortgage was the same as putting $800 a month back into the budget.

Sometimes, its worth bringing cash to closing is your initial HECM benefit is not enough to payoff your existing forward mortgage.  If you brought a years worth of payments into close, assuming you had it in an account like IRA, 401k, or any other account, wouldn’t it be worth it to have the option to retire when you want to?

Other times a client might have a home paid off or mostly paid off but now we are establishing a HECM standby line of credit.   The HECM standby line of credit cannot be cancelled nor do you never make a monthly payment.  It can be a valuable retirement planning tool.  You might not need the line of credit in your 60’s or 70’s but by the time most of us are in our 80’s, we probably will have some health care needs or necessary home modifications and the HECM standby line of credit can be used to address those needs.

Establishing the HECM standby line of credit early on, you will benefit from the growth of available funds, currently in the 5% range per year.  Your available funds could more than double in a decade or two if you don’t draw out the funds until you have a real need.

By waiting to do so, you miss out on this growth and you might find you can’t qualify for a forward mortgage like a traditional bank HELOC.

Anyway, more and more financial advisors and sources like the Wall Street Journal are learning more about Reverse Mortgages, aka HECMs and more and more are coming out in favor of them as a valuable retirement planning asset.

To learn more, you can go to my HECM website  or simply call me at 208-955-9080 and I will be happy to discuss your individual situation.

 

 

How to use a Reverse Mortgage to cover future healthcare expenses

I recently attended a workshop on healthcare cost and was astonished by the impact of healthcare costs on the net worth of senior home owners.  The average cost of a nursing home averages $91,000 per year, in home care about one third of that.  At that rate, someone who has been able to accumulate wealth, pay off their home, and enjoy retirement in that home are all at risk by a healthcare event.

If you have to go into a Medicaid facility, any home equity will be liened by the facility and will be not be available for the senior homeowner to use.  Furthermore, in order to get into a Medicaid facility, you cannot have more than $2000 in assets.  Many times, people end up spending assets in advance to qualify.  In effect, they are “spending themselves poor” as I heard it called.  Medicare also requires that any transfers of assets for a certain time are examined and could be taken back from family members if it was determined that it should have been used for healthcare expenses.  This can be a very stressful and exhausting process for all at a time when the health of a loved one should be at the top of everyones’ concerns.

The Home Equity Conversion Loan, also called a Reverse Mortgage, can provide access to the homes equity to pay for: home modifications, medical expenses, and ideally, long term care insurance policies that take the burden off the individual and create a pool of money that can be drawn upon to pay for care, either at home or in a facility.   The Home Equity Conversion Loan puts a “protective umbrella” over the home’s equity and make the filing of future liens untenable.

Long term care policies come in several forms from stand alone policies with monthly or single lump sum premiums and other hybrid type policies that combine long term care money and life insurance into one policy.  By taking the procedes from a HECM and buying LTC insurance you can guard against a healthcare event that destroys net worth that might have taken decades to aquire.

One of the more interesting uses of a HECM is to have the home remodeled and adaptaed to current needs.  Doorways can be widened for wheel chairs, showers and bathrooms made more accessable, and any other adaptations needed to age in place.  At the end of our lives, I think we would all prefer to stay in our home.

Here is a useful booklet from the Council on Aging.

If in home care is an option, it will cost much less than a facility and can extend the time that insurance funds can cover care.

A Reverse Mortgage can be used to pay premiums on long term care policies.  If a Reverse Mortgage is obtained early enough, the growth of the line of credit can offset the annual premium costs.

As our citizens grow older and our life spans increase, the problem of outliving our assets is very real. A lifespan of 100 years or more is becoming more common.

Personally, I will be obtaining my own reverse mortgage in a few years as soon as I can.  I might not need the funds now, but who knows what my health care needs will be at age 90,100 or even 120.  I might be a bit optimistic, but who knows?

Anyway, if you would like to see how the program can help you protect your assets and provide for the long term healthcare needs, just contact me and I would happy to help.

 

 

 

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