New Conventional Mortgages with 3% down and Other Low or No-Down payment Options

Mortgage lenders are making it easier get approved for a mortgage.

bank pic

Fannie Mae and Freddie Mac have announced a new low-downpayment mortgage program which requires just 3% down at closing, joining other government agencies in offering loans which require little or no money down.

In offering a 3 percent down-payment program, Fannie Mae and Freddie Mac bring yet another financing option to today’s home buyers wanting to minimize their downpayment.  The new 3% down payment program is available for both detached and attached single family homes such as condos and townhomes.

FHA loans remain to be among the most popular low-down payment options in today’s market.  FHA loans require down payments of 3.5% and provide for flexible underwriting standards. Home buyers with less-than-perfect credit may find FHA loans to be more cost-effective than loans via Fannie Mae or Freddie Mac; and simpler to get approved, too.  FHA also offers opportunity for borrowers to include the financing of renovation costs in the purchase loan with the same 3.5% down payment.  This allows buyers to purchase lower priced homes which may need upgrades or repairs.

It is also important to note the interest rate for your chosen loan product.  FHA mortgage rates are typically 25 basis points (0.25%) below rates for a comparable conventional loan.  You want to make sure that between the principal, interest rate, PMI (private mortgage insurance) and any other fees that you are making the best choice for your loan product.  Your loan officer should be able to give you guidance with this comparison.

VA loans are another popular option. Available to veterans and active members of the military, VA loans allow for 100% financing and never require mortgage insurance to be paid.

VA mortgage rates are typically 37.5 basis points (0.375%) below rates for a comparable conventional loan. VA loans are backed by the Department of Veterans Affairs.

Lastly, there’s the USDA loan.  USDA loans are guaranteed by the U.S. Department of Agriculture and, although they’re sometimes called “Rural Housing Loans”, USDA loans can be used in some suburban locations in the Chicago area, too.

USDA loans offer very low rates and allow for 100% financing. They also require just a small mortgage insurance premium as compared to other low- and no-downpayment loans.

Today’s home buyer has plenty of financing options.  In today’s environment of low interest rates and lower down payments, 2015 may be your year to purchase a new home.

If you are looking to buy or sell in the Chicago area market, please give me a call.

Millie C Lumpkin
Broker
EXIT Strategy Realty
Phone:          (312) 217-5644
Email:            millie.lumpkin@gmail.com
Website:     http://millielumpkin.exitsellschicago.com/

Did Your Home Expire??

expired listing

When you hired your realtor to sell your home, you agreed to a certain time frame to get the job done.  For most sellers in the Chicago area, that period was 6 months to a year.  For many sellers, their home was not sold in that time.

There are several elements to the successful marketing of your home:

  1. Pricing
  2. Condition of the Home
  3. Marketing

Pricing

Many homes expire because the homes are priced higher than current market value.  Market value is determined by the recent sales prices of similar homes in the same neighborhood PERIOD.  Comparable homes are similar in architectural style, square footage, room count and condition. A home that has a dated décor or lots of repair and  maintenance issues should not expect to have same price as home that is newer with high end finishes.

It can be quite disturbing to a homeowner to find out how much the market has declined in recent years.  Prices have increased in the last couple of years but not back to the level of the real estate bubble of a few years ago. For many homeowners, their pricing decision is based more on their mortgage balance rather than market value. For other homeowners, they were planning for more money from the sale of their home than the market will allow. An overpriced home will end up having to take price reductions to get down to market value. And generally, a home that is initially overpriced will often sell for less than it would have if priced appropriately at the beginning. This is partially because the market loses interest in a home the longer it is on the market.

Condition of the Home

One consequence of lower home values is that many sellers are unwilling to make a lot of repairs or updates in order to sell their home.  However, a home with a lot of repairs needed (even if minor) ugly hometurns off sellers. The few dollars spent on fixing a leaky faucet, repairing the hole in the wall, painting over that ugly dark blue color or getting the carpets professionally cleaned can make a big difference.  Cluttered or unclean homes also turn off buyers.  As said on so many HGTV shows, buyers want to be able to see themselves living in your home.  In addition, make sure the curb appeal of your home has not turned off potential buyers before they can see how nice the interior of your home is.

If the price of your home does not match the condition of your home in the eyes of buyers, they will either wait to see if you reduce your price or move on to the next.  And the longer your home sits on the market, the more you will have to compete on price.

Marketing

Many agents put only a minimum amount of effort into the marketing of their home listings. The first step is putting the home in MLS.  However, many agents have only one exterior picture or a lack of descriptive remarks. Fairly or not, many buyers will assume that the lack of pictures indicate a problem with the home.  Sometimes the interior pictures taken don’t show the home at its best. Were there dishes in the sink and clutter that overshadowed your extensive counter space and maple cabinets in your kitchen?  Before your listing was posted to the MLS, were you given the opportunity to review the pictures with the agent to make sure they told a good story about what your home has to offer?

Sometimes a home takes little effort to get an offer.  Sometimes though a more aggressive marketing effort is needed.  Outside of the MLS, what were the other efforts taken to market your home?

If your home has expired or you are looking to put your home on the market for the first time, please give me a call to schedule a listing consultation.  We can sit down and discuss what it will take to get your home sold.  Our local market currently favors sellers with fewer homes on the market.  Homes are being sold.  Yours should be one of them.

Millie C Lumpkin, CDPE, SFR
Broker
EXIT Strategy Realty

Mobile: (312) 217-5644
Email Me:                        millie.lumpkin@gmail.com
Visit My Website:     http://ChicagoSouthHomes.com
Read My Blog:             http://ChicagoSouthRealEstateBlog.com

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Are You Planning to Buy in the Spring?

urban_01-country house

 

Many potential homebuyers still use spring as their target to “start looking” for their new home.  If this is true for you, there are some things you can do to be prepared now so you’ll be ready to GO in the spring.

    • Speak to a loan officer now to see if there are any issues with your credit, debt levels or income. A good loan officer will outline any “tweaks” needed and give you a loan amount you should qualify for if everything is in order.  There are also good sources for understanding your credit and how to repair your credit.  An early start in making sure your finances are in order will make for a less stressful home search later.

 

    •  In your conversation with your loan officer, you should also have a discussion about the different loan products available. Many people will automatically go for an FHA loan (which is a great with a lower down payment) but you should also consider whether the other loan alternatives may be a better option.  Make sure you have a good grasp of what the loan payment would be under the different alternatives available including PMI and loan fees. Also, are you getting the best interest rate? Note that there are other loans other than FHA which have lower down payments. Conventional loans are now available as low as 3% down.  Ask questions if you don’t understand.  This is a big deal and you have every right to make sure you understand what’s going on.

 

    •  Regarding the down payment, most loans will require a down payment. Down payments generally range from 3.5% for FHA up to 20%.  If you don’t already have the money saved, you will need a plan for getting it or closing the gap of what’s needed.  Your loan officer should also let you know about closing costs for your home purchase.  Typical closing costs are mortgage origination fees, attorney costs, escrow of taxes, etc.  Expect about 3% of the purchase price.  Often, these can be negotiated as part of the offer but not always.  Again, you should have a plan for taking care of this cost.

 

    •  If you will need to sell your home before buying, there are some things that make sense to do now. If needed, now may be a good time to do those small repairs around the house that might be issues for potential buyers.  Are there rooms that would show better with a little de-cluttering and fresh paint?  Is your furnace more than 20 years old? Are the harvest gold kitchen appliances screaming from the 80’s?  Is the carpeting soiled and worn?  You may not be in a position to make major investments in the home you are selling but are there affordable investments that will counter the impression of your home being dated or lacking proper maintenance?

 

    •  Now for the fun part …. Determine your wants and needs for your new home. It will help maximize your home search time if you already have a good idea of what’s important to you.  Think about location, schools, your lifestyle and which architectural styles appeal to you most. Do you want a family room, attached garage, big backyard, updated kitchen …. What are your deal breakers?  The clearer you are in what you want, the easier it is for your real estate agent to help you find your dream home.

 

  • Finally, what’s your exit plan for your current residence? If you rent, how will you handle it if you close earlier or later than your expiration date?  Do you need to discuss this with your landlord?  If you own your current home, do you need to sell it first?

Buying a home requires some planning.  If you’d like a consultation to discuss buying your new home, please call or email me.

It’s still a great time to buy!

Millie C Lumpkin, Broker
EXIT Strategy Realty
Phone:     (312) 217-5644
Email:        millie.lumpkin@gmail.com
Website:  http://ChicagoSouthHomes.com

Avoiding A Bidding War Buying Your Home in Chicago

“I don’t want to get into a bidding war. “  In the Chicago area real estate market, the supply of inventory remains generally frustrated facelimited and many homes listed for sale are seeing multiple offers presented.  This is great news for sellers.  For buyers, though, there’s a concern about paying too much.  That’s understandable.

The most important thing to remember about the multiple offer scenarios is to know that multiple offers do not necessarily mean multiple quality offers.  It just means that more than one offer has been presented.  I remember one listing that I had with six offers presented.  However, only two of the six offers were at list price.  The other four were less and a couple were just completely lowball.  Multiple offers just means more than one offer were presented.

In a tight market like today, knowing market value is key in making sure that you are not overpaying.  Prior to submitting your offer, a good agent will pull comps in order to determine market value for the property. It should be noted that for the 12 months ending January 2015, the median sales price to list price (final list price at time of sale) is 97.7% in the city of Chicago and 97.0% for the Chicago metropolitan area overall.  There are often price reductions before the market decides that the price is right but it seems like accepted offers overall are not far from the listing price. However, knowing the market value helps you to make sure that the list (asking) price is reasonable before determining your offer price.  From there, you and your agent can decide on best negotiating strategy or whether you move on to next property.

As part of a good negotiation strategy, you should already know the maximum you are willing to spend on the home.  Take into account the market value, the availability of other homes that fit your criteria and the cost of needed repairs or improvements that you want to make.  If you have already decided the maximum you will be willing to spend, there’s less chance of a frantic bid that breaks your bank or will cause buyer’s remorse later.

It should also be noted that legally, the listing agent is not able to reveal the amount of competing offers unless specifically authorized to by the seller.  Many buyers believe that there is an advantage in having the listing agent present the offer.  However, ethically speaking, the listing agent works for the seller and is not to provide any inside information that goes against the interest of the seller.  As a buyer, you have to decide whether your interests are better served having your offer presented and negotiated by your own agent or the seller’s agent.  In addition, this approach means working with different agents for every property rather than having one agent focused on finding your new home.

Multiple offers are just part of the current real estate landscape.  Avoiding them may very well keep you out of the home of your dreams.  If you’re not on the playing field, you can’t win the game.  Just play smart and keep cool.

If you are looking to buy or sell your home in the Chicago area market, please give me a call at (312) 217-5644 or email me at millie.lumpkin@gmail.com.

Millie C Lumpkin, Broker
EXIT Strategy Realty
Phone:     (312) 217-5644
Email:      millie.lumpkin@gmail.com
Website:  http:/ChicagoSouthHomes.com

Winter May Be Best Season to Sell

sold-sign-home-for-sale

Sellers may be surprised to learn that winter may net a higher sale price than other seasons. This is true even in cold weather cities like Chicago. The reason is partially attributed to lower inventory and more serious buyers. The study cited in the article states that February is considered the best month for listing.  In the current seller’s market, this may make even more sense.

The question then becomes “Why Wait to Sell”? Listing now may put you in place to move on by end of spring? Contact me so that we can discuss your options.

http://realtormag.realtor.org/daily-news/2014/12/15/winter-best-time-sell-study-shows

Investors – Understanding the 90 Day Restrictions for Foreclosures

As many investors are aware, the FHA flipping waiver expired at 12/312014.  Going forward, there is a 90 day waiting period for homes to be eligible for FHA financing.  Sellers will have to wait until the 91st day in order for buyers to be able to use FHA financing to purchase.  Buyer contracts must generally not be executed prior to the 91st day if FHA financing is needed.  Since FHA borrowers comprise a significant portion of the potential target market for these investment property rehabs, this is an important change.  Note that sellers and buyers should further be aware that within 12 months of the initial investor purchase, there are also guidelines related to second appraisals and/or appraisal reviews depending upon the timeline and amount of resale in regard to initial purchase price.  The FHA flipping rule change relates strictly to the use of FHA financing to purchase resale.

Fannie Mae and Freddie Mac foreclosures also have a 90 day rule.  The rule for Fannie Mae and Freddie Mac is actually a deed restriction.  It prevents the resale of the foreclosure for more than 20% of the initial purchase price within 90 days.  Since this is a deed restriction, the 20% limit is in place regardless of whether property has transferred.  The second buyer is also tied to the initial 90 day restriction.  After the 90 days, there is no restriction on resale value.  However, like the rule for FHA, there may be bank guidelines for properties resold within 12 months.

The Fannie Mae deed restriction also says that you can’t “encumber” the purchased property for more than 20% above the purchase price for 90 days either. In other words, if you purchase the property for $50,000, you would not be allowed to get a loan against the property for more than $60,000 for at least 90 days. This can certainly impact investors who get “rehab loans” that provide both the purchase funds and the rehab funds, as it wouldn’t allow the total loan to be more than 20% above the actual purchase price.

The discussion of these rules serve to emphasize the need for investors to have an exit strategy in place.  They should understand the various things that may impact your “flip” like holding costs and time, marketability, rehab financing, etc.

If you are an investor looking to buy or sell in the Chicago area, please contact me.

Millie C Lumpkin, CDPE, SFR
Broker
Keller Williams Preferred Realty
Email:  millie.lumpkin@gmail.com
Cell:  (312) 217-5644

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