Home Buyers Use 100% Financing

Over the last decade, typical conventional lenders have been offering 100% financing to home buyers This usually involves creating an 80% first trust deed and a 20% second trust deed. This further allows home buyers to purchase a home with no money down.

To understand how this works, you will also need to understand two basic types of loans:

Conforming and Jumbo.

Conforming interest rates cover loan amounts up to $417,000. Jumbo loans amounts cover loans over $417,000.

The differences between conforming and jumbo loans are usually the interest rates and certain conditions required. Conforming interest rates are lower than jumbo interest rates.

When you are looking on the internet for current interest rate quotes, the typical rates shown are for conforming rates.

Your first trust deed or the 80% loan is based on conforming or jumbo rates, depending on the purchase price of your property.

The second trust deed or the 20% loan is based on what's called "piggy back" 2nd financing, wherein the lender gives special rates based on the fact that you are also obtaining a new first trust deed with that lender.

The interest rate for the 2nd trust deed is going to be higher than the first trust deed, sometimes as much as 3% to 5% higher.

The lender then gives you what's called a blended rate, combining the interest on the first trust deed and the interest on the second trust deed.

Typically, this type of 100% financing is fixed for 2 to 7 years and many include prepayment penalties.

Some lenders also require an impound or escrow account to pay property taxes and home owner's insurance in your monthly payment. There will be an initial deposit prior to closing to establish your tax and insurance account so that when these bills are due, there is enough in the impound account to pay these bills.

This loan program will help you purchase a home with no money down.

If your loan comes with a prepayment penalty, when that period is over, you are free to refinance the two loans into one, fixed for 30 years, if you so desire.

A really good aspect of 80/20 type financing; there is no mortgage insurance premium to pay each month, which will keep your monthly payment lower. This premium is typically based on .50% of the loan amount divided by 12. (example; loan amount of $250,000, monthly mortgage insurance premium would be approximately $104.17) There is also an upfront premium to pay in your closing costs. Some lenders will add this to your 1st trust deed loan amount.

In order to have no mortgage insurance the first trust deed must be at 80% or lower.

There is also a single 100% loan available.

If you have necessary credit and debt requirements, it is possible to obtain a 100% first trust deed. Each lender who gives this type of financing has their requirements.

You will be making a single monthly payment based on your entire purchase price.

This type of loan will include the monthly mortgage insurance payment added into your monthly payment as the loan is over 80% of the purchase price.

To recap, 100% financing means that you are financing the whole purchase price of the home you are buying. You are putting no money down. Under typical circumstances the financing is 80% first trust deed and a 20% second trust deed.

Because you are financing the whole purchase price, interest rates may be higher than a typical 30 year fixed rate loan, but you are putting no money down. The lender is taking a higher risk so interest rates are probably going to be higher.

By Patti Schopper
Published: 9/6/2006

Home Buying Tips

You probably have already heard the usual home buying tips. Here are three that aren't as common.

1. Home Buying Tip - Buying A House Isn't Always The Best Plan

Of course real estate agents may say that buying a home is always a good idea. It certainly is good for them, as well as for title companies and bankers. But it isn't necessarily a good idea for you.

Believe it or not, there are towns where the home values haven't gone up much - if at all - in ten years or more. Of course in the last year (this is being written in 2007) the prices in many areas have actually dropped in value. The point? Home values do not always go up - at least not in a given year or even several. So don't buy a home as a get-rich plan.

Maybe you are sure that prices will rise where you are. Even then, though, a home isn't necessarily a good investment, if rents are low relative to home prices. In Tucson, Arizona, for example, a two-bedroom home might sell for $190,000, but you can rent one for just $750 per month. If you spend $700 less each month versus buying, and bank that money, you could be further ahead financially three years from now.

Consider how long you'll be in the home. This is important because of transaction costs. Buying and later selling your home can cost 10% of the home value. It will have to go up that much in value just to even break even. If you move in the first couple years and prices have gone nowhere, you'll end up thousands of dollars further behind.

2. Home Buying Tip - A Real Estate Agent Is Not Your Friend

Even if your agent actually is your friend, she won't necessarily look out for your best interest. In fact, she can't, if she is working for the seller. Unless specifically is working as a buyer's agent, she is legally obligated to work for the interest of the seller. The seller, after all, is the one paying the commission. If you say something like "I might go $5,000 higher," she is obligated to pass on this information to the seller.

Even with a buyers agent, be careful, because people talk - even good agents. Don't say things you don't want known by all. Also keep in mind that agents make money only when there is a sale, and they make more on larger sales. This might mean less than perfect objectivity when helping you choose a home.

3. Home Buying Tip - Low Offers Sometime Work

The real estate agents out there won't appreciate this tip, because low offers are embarrassing for them to bring to a seller. It may even be embarrassing for you to make the offer. However, I have a friend who embarrassed himself into a lakefront home for 15% less than it was worth. Would you like to immediately increase your net worth by $40,000 when buying a home?

By Steven Gillman
Published: 6/21/2007

How to Show Your Home for Sale

When buyers make an appointment to see your home they have already made several important decisions. They have selected your neighborhood as a possible location. Your lot and exterior style appeals to them. Your price is within their range. If the floor plan and interior style works for them, and if the buyers feel a sense of trust in your home, they will move to the contract stage. Here are some tips to help you make the most of this important step in the sale of your home - the showing.

1. Setting Showing Appointments

Homes may be shown by appointment with the Realtor, appointment with the owner, or by using the house key placed in a lockbox. The lockbox is a popular system in many areas, and facilitates showings by all members of the local Multiple Listing Board. To arrange a showing, agents must first call your home or cell number. If you do not answer, they may leave a message, and proceed with the showing. Most lockboxes record the agent's identity and time of showing. Whether your home is shown by special appointment or by the lockbox system, the objective is to make your home easy to show to potential buyers. This is your first contact with the buyer, and you should make them feel welcome in your home.

When you receive a call from a Realtor for a showing, keep in mind that he/she is showing lots of homes, and it is difficult to set precise times. Be flexible on the timing, and allow a window of one hour for arrival, if possible. If you are going to be at home, you may ask the Realtor to alert you when they are 15 minutes away. You may occasionally receive a last minute call, with the visitors already in your driveway. If you are prepared for a showing, invite them to come in. If you are not ready, let the Realtor know that you need some time to prepare. Always thank Realtors for trying to show your home. You need them to come back!

2. Consider Children & Pets

If you have children it is very important to educate them on the showing procedure. They should know that real estate agents will be calling for appointments to show their home, and they should know how to respond. If they are at home by themselves during the day, they will need to let in the agent and buyers, and vacate the house during the showing. They may wait in the backyard or go to a neighbor's house. Televisions and video games should be turned off. Hopefully, they will know how to tidy up the kitchen. Children must know that an advance phone call by the agent is required for a showing. They must not allow entry to anyone who comes to the door without an agent.

Pets pose special problems for showings. If pets are left in the home during the day, leave a note alerting the agents that a pet is in the house. Give instructions as to how your pets should be handled. For example, "Cat must not be allowed outdoors." Often pets are fearful or uncertain about strangers entering the house when you are not home. Many people are afraid of (or allergic to) pets, and are not happy to encounter them in the house. It would be best to crate your pets during showings, place them in a restricted area, such as the laundry room, or take them out of the house. Keep in mind that a great variety of people may enter your home, including children. If there is any uncertainty as to how your pets will react to strangers, you should remove them from your home during showings.

3. Provide Lots of Information

Have brochures laid out on a table for prospective buyers. Anticipate the information that would interest your buyers. Examples are: a copy of your survey or floor plan, photos of neighborhood amenities, school information, neighborhood newsletter, nearby country club, golf course, etc. Answer their questions early. Remember, prospective homeowners are choosing a home and community - a lifestyle.

4. Don't Hang Around

Do not be present for the showing. Sit outside or run an errand. When you are there, buyers may feel that they are intruding. They will not discuss changes they might make to your home, or how they would use the space. This could limit the time spent in your home. Never take over the showing or attempt to sell your house. You do not know the buyer's special interests, and may inadvertently turn them off. Remember that this not a social visit. Buyers need to make an emotional commitment to your home. They usually need some quiet time to experience your home and sense how they would enjoy living there. Your presence is distracting and inhibiting to potential buyers.

5. Appeal to Buyers With Sights, Sounds and Scents

People gather impressions about your house from all senses - sight, sound and smell. Improve your home's appeal to all senses. Leave blinds open, and consider removing some screens. Natural light sells houses! Increase the sizes of your bulbs if the light is dim in certain areas. Put on some instrumental music, but keep it very low and mellow. Do not leave televisions on. Have the temperature cool in summer and warm in winter. Use pleasant scents, such as candles or potpourri. An unpleasant odor will have a very negative impact on a buyer's reaction to your home. In particular, cigarettes and pet odors are a turn-off. Do not try to mask an unpleasant smell with another smell. Work toward a clean, fresh smell.

6. Have a Safe Showing

Keep in mind that the public will be entering your home, and consider their safety and yours. Do you have rugs, wires or small toys that could be stumbled over? Buyers should be able to move easily from room to room. You may need to remove some furniture to keep traffic patterns open. Leave your stairs completely free of clutter. Replace any missing handrails. Remove valuable objects from tables where they may be accidentally bumped. If you use candles for a nice scent, do not leave them burning when you leave the house. Do not leave money, guns, medicines, jewelry, x rated magazines or any personal items in public view. Consider your security, and the buyer's safety as you prepare your home for viewing.

7. Set the Stage

Consider using a staging service to help you present your home. It should be perfectly clean and clutter free. Homes generally look better with furniture, but they must not appear crowded. Your furniture and accessories should give your home a very general appeal. Avoid strong political, personal or artistic statements. The focal point should be the house, rather than your family. Use decorative objects, such as pillows, framed photographs, books, fresh towels and flowers. Create a mood with natural and lamp lighting and soft music. The goal is to make potential buyers feel that they could move right in. Home buying is an emotional process. You must build a sense of trust and attachment to your home during the short time that buyers are in your home. They must positively imagine themselves enjoying your home and gardens.

By Roselind Hejl
Published: 6/24/2006

Neutralize Your Home For Sale

We often arrange our homes to express ourselves - our travels, collections, families, favorite colors and unique tastes. However, when selling a home, the goal is to create just the opposite - a clean, neutral background that many different buyers would like to move into. Buyers must feel that they could fit right in and be comfortable in your house. You can help to create this feeling inexpensively by simply cleaning and neutralizing your home before putting it on the market.

(1) Clean Wall to Wall

Bathrooms
Clean bath tile with mildew cleaner. Often the caulking around the bathtub is darkened. This may need to be removed and replaced. It can be purchased in rolls, which is easier to install. Wash or replace shower curtains. Make sure all soap residue is removed. Remove toilet brushes or cleaners from view in bathrooms. Mirrors, counters and all bath fixtures should be immaculate. Buy new soaps and towels, if necessary.

Windows
Have the windows cleaned. Clean windows add a sparkle to the room. During showings, open blinds and expose as much glass as possible. Nothing sells a house better than natural light. If your lights are dim, increase the size of the bulbs. Combine indoor lamp lighting with natural light for warm, cheerful rooms. Remove any broken blinds or dusty curtains.

Floors
Floors must be immaculate. Make sure that your tile grout is perfectly clean. If your flooring is worn or damaged, consider replacing it. Often clients ask if they should provide an allowance for carpet replacement. Rather than offering an allowance, go ahead and replace the carpet. Your home will benefit from the improvement in presentation. New carpet will transform a house, and make everything in it look better. Do not worry about whether the buyers will like it. Just choose a neutral shade.

Walls
Walls usually need touch up, especially if there are children or pets in the house. Freshly painted walls are a strong contributor to the value of your home. Don't forget the baseboards and door trim. Fix nicks and paint over, for a fresh new look. Remember to leave some labeled paint cans for your buyers. They will appreciate it. Surfaces that cannot be cleaned can be painted.

Kitchen
The kitchen carries a lot of weight in the purchase decision. Kitchen appliances and countertops must sparkle. If needed, new stove burner pans may be purchased at Home Depot. Make sure the oven is clean. Look closely at cabinets. Repaint or refinish any scuffed cabinetry. Do not leave trash containers on display. Clean, and empty the under sink cabinet. Do not display any object that is stained or dirty. Invest in new kitchen towels.

Smells
Buyers are sensitive to bad smells, and will be suspicious of a house with an odor. Pleasant smells are subtle, but important. Use potpourri, candles or cinnamon sticks in hot water. Do not use air fresheners to cover up bad smells - this just compounds the problem. Remove the source of the smell first. Often, people cannot recognize a smell in their own home. If you smoke, have pets, or cook with strong spices, ask for feedback on smells from a third party. Unfortunately, if pets have used your carpet as a bathroom, the only choice is to replace the carpet. Cleaning does not work. The smell is in the pad under the carpet. In the garage, chemicals that have a strong odor should be sealed in plastic bags or removed.

Exterior
You may need to wash the exterior of your house with mildew cleaner, or with detergent and chlorine bleach. Often the shady areas have dark stains that will disappear with washing. Deck wood may need to be washed and sealed. Clean out flower beds and add fresh mulch. Purchase a new door mat.

(2) Neutralize the Space

Simplify Floor Materials
Neutral colors will increase the pool of potential buyers for your home. Your home will appeal to a wider audience. Stay within the range of tans, beiges, and cream colors for tile and carpets. Avoid strong colored or white carpets. Wood floors may be variety of browns. Natural stone floors have their own earth tones that work well. Avoid having many changes in floor materials, if possible.

Use Muted Wall Colors
Unify the house with the same or similar colors. Accent walls are OK in moderation. If buyers see pink and purple walls, they see work. Remember, buyers are in the process of moving, and are already overwhelmed with things to do. Light colors can be very appealing, but stay fairly neutral. Grayed yellows, sage greens, creams, light browns, and tans are muted colors that create a warmer, richer look. In general, avoid stark white, very dark, or bold colors.

Refinish cabinets
One of the problems we often see in kitchens is worn out cabinet finish. Consider painting woodwork for a fresh new look. Natural wood cabinets can be improved by lemon oil or wax. "Howard's Restore-a-finish" from Benjamin-Moore Paints works wonders to bring back color on scratched, or faded cabinets. New, updated cabinet pulls are an inexpensive improvement for cabinets. If you have dated wallpaper, consider painting the walls instead of replacing paper.

Create a Neutral Background
Strong political or artistic statements are not appropriate when your home is on the market. We do not want buyers to focus on these matters while viewing your house. Large groups of family photos are distracting. Collections, trophies, clippings and projects should be put away, for display in your next home. It is hard for buyers to look past these and visualize themselves in your house. Create a clean, simplified background. Within this background, use nice pieces of furniture, books, art and other objects to add color and beauty. Flowers in the entry and kitchen are very nice touches. Find the best visual presentation using your furniture and possessions.

Clean and Neutralize to Sell
It seems obvious that you should clean you house for sale, but, surprisingly, many people do not. An immaculately clean house is a well cared for house - the kind that buyers love. Clean the place wall to wall. Paint over anything that cannot be cleaned. Neutralize the space in terms of colors and objects on display. Allow buyers to imagine themselves in your home during the showing. The goal is to reach the buyer emotionally, and sell your house quickly and profitably.

By Roselind Hejl
Published: 4/26/2006

Home Equity Loan - When Does Refinancing Make Sense?

For the last two years, interest rates have been much lower than anytime during the last thirty years. This has resulted in an unprecedented boom in real estate sales, home refinancing and home equity lending, as borrowers try to take advantage of these rates for the long term. But refinancing or even borrowing against your home’s equity may not make sense for everyone. When is it a good idea to refinance your home? When is it not advisable?

Traditionally, lenders advised homeowners not to refinance unless doing so would lower the interest rate on the loan by 1-2%. While anyone who can save 2% on their interest rate would almost certainly benefit from doing so, others might find refinancing worthwhile even with a smaller reduction in the interest rate. Increased competition among lenders has brought the costs of refinancing down in recent years, so homeowners can realize a significant reduction in their home payments with reductions of ½% or so, depending on the size of their mortgage.

The key to whether or not refinancing makes sense is how long the homeowner intends to remain in his or her home. The costs of the refinancing, which can run $1000-2000, are amortized over the life of the loan. For many people, a reduction of $50 or more in the house payment would be more than enough to justify a new mortgage. If payments cannot be reduced by at least that much, or if the homeowner plans to live in the home only a short while, refinancing may not be a good option.

Refinancing may also make sense for those with Adjustable Rate Mortgages (ARMs.) At the moment, at 30-year fixed-rate mortgage is quite competitive with an ARM, and may actually be cheaper. With rates at historic lows, an ARM can only adjust upward, making it a less desirable choice in comparison with a fixed-rate loan.

Anyone considering a home remodeling project or debt consolidation might ordinarily think of a home equity loan or line of credit. These are often wise choices, as they offer deductible interest and great repayment flexibility. On the other hand, a chance to obtain a 30-year loan at 5% might make a complete refinancing with a cash-out option a better choice, as home equity rates are somewhat higher than first mortgages.

A new mortgage might also make sense for anyone with a second mortgage or a piggyback loan. A piggyback loan is a second loan used at the time of a home’s purchase to help the buyer avoid paying the sometimes-expensive private mortgage insurance. Simultaneous payments on two mortgages will be higher than paying on one, so this might be a great time to roll them together on a refinance. The same applies to anyone carrying a large credit card balance; that money could be rolled into a home loan with deductible interest at a lower rate. Anyone considering such a move should be careful, however, as failure to repay that debt could lead to home foreclosure.

Now is a great time for any homeowner to consider whether or not a new mortgage could help lower their payments. With interest rates as low as they are now, the timing is great, and there’s nowhere for the rates to go but up.

by Charles Essmeier