While many experienced real estate agents have a general understanding of the mortgage approval process, there are a few important details that frequently get overlooked which may cause a purchase to be delayed or denied.
New regulation, updated disclosures, appraisal guidelines, mortgage rate pricing premiums, credit score, secondary approval layering, rescission deadlines, property type, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on a borrower’s home loan financing.
With today’s volatile lending environment, it’s obviously important for home buyers to get a full loan approval which clearly defines all contingencies that pertain to each unique home buyer’s scenario prior to spending any time looking at new homes with an agent.
Either way, we’ve listed a few of the top things your agent should keep in mind while showing you new properties:
High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.
Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city? What if I’m buying a home for my children to live in, it is still considered an investment property?
These are just a few of several possible residence related questions that should be addressed by your agent and loan officer at the initial loan application.
Mortgage Rates are typically locked for a 30 day period, and one of the only ways to get a new rate is to switch mortgage lenders. Rates also have certain adjustments for property / residence type, credit score and down payment which could have a big impact on monthly payments and therefore approvals.
Underwriters watch the news as well. Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.
Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.
A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period. Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a significant profit margin.
While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.
These rules change frequently, and are specific to particular property types, so make sure your agent is aware of all the boundaries associated with your approval letter.
Some lenders require Condos and Town House communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.
It may also take a few weeks and cost up to $300 to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.
Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.
Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.
VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.
For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.
Most people are surprised to learn what appraisers actually look at when determining the value of a real estate property.
A common misconception homeowners generally have is that the value of their home is determined after the appraiser has completed their physical property inspection.
However, the appraiser actually already has a good idea of the property’s value by the time they have scheduled an appointment to stop by the property.
The good news is that you don’t have to worry so much about pushing back an appointment a few days just to “clean things up” in order to help influence the value of your property.
While a clean house will certainly make it easier for the appraiser to notice improvements, the only time you should be concerned about “clutter” is if it is damaging to the dwelling.
Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…
Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.
When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.
Since the appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.
If you’re interested in what specifically appraisers are looking for, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.
Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.
This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.
Why is there such a difference between what my appraised value is and the price similar homes are selling for on my street?
It’s a great question, and you don’t have to be a mortgage professional or a real estate agent to understand the answer.
The purpose of an appraisal is to make sure that an independent non-interested third party verifies the “most likely” sale price based on the market value and condition of the home.
Appraisals are meant to be a realistic determination of the value of a home if it were to sell in the current market, in its current condition.
In addition, appraisers are governed by rules intended to standardize the subjective process of determining a home’s value.
Some of the key factors appraisers look at are: location, above ground size, room count, bathroom count, style of home, condition of property, amenities, and market conditions such as how long it takes for home to sell and if values are increasing, decreasing or steady.
Appraisers are also asked to look only at comparable sales within a certain distance, usually one mile except in rural areas, and within a specified period of time, which is 3 months in the current market.
Listing prices on the other hand are influenced by the real estate agent, and set by interested and often emotional sellers.
Sellers are not held by any rules when they list a home. In some cases, sellers take what they paid for the house, add what they have spent on improvements and even add amount for profit.
Often times, sellers will list their home based on the amount needed to pay for the real estate agent, closing costs and cover the amount of the mortgages.
Extra low prices are generally the result of an extra motivated seller that has to sell and move in a rush, so they’ll list their property below market comps in order to be the most competitive.
Throw in bank owned homes (foreclosed properties), and listing prices may be all over the place without a logical explanation due to an asset manager making decisions from another part of the country.
While list price is never a good indication of what a home in your neighborhood is worth, appraisals are not an exact science that will determine the true value of your home either.
Some will argue that a home is worth what people will pay for it, so there’s obviously a little room for personal interpretation. Either way, the bank securing that piece of real estate for a mortgage loan generally always has the final opinion that matters the most.
Posted in Real Estate Appraisals	Tagged Appraisal, Frequently Asked Questions, LTV, Real Estate, Selling	
During periods of economic growth, when home values are typically just going up, most homeowners do not question appraisals much.
And in times of turmoil when property values are declining, home sellers and even listing agents quite often question and pick apart appraisals.
However, the actual appraisal process changed very little over the course of the housing boom and bust cycle American homeowners witnessed between 2001 – 2009.
Since the topic of home values seems to be a hot discussion, let’s address the top five appraisal myths.
Not all improvements to the property are equal in producing added value. A local real estate investment club used to tout buying a run-down, roach-infested property cheap, and after de-bugging and adding a fresh coat of paint and carpet – *presto* – the house would appraise like the new homes up the street.
Even with cosmetic repairs, the property may still be much more comparable to the foreclosure next door than the new home a block away. Look first to the “guts” of the property, the electrical, heating & air, etc. If they are updated, then the number of beds/baths and square footage are the next biggest weight, followed by a genuine updating of cosmetic improvements.
For example, if a homeowner preparing a house to sell adds $150,000 in upgrades to the kitchen, built-in cabinets and flooring, it may help the property show better in an open house and in magazine advertisements.
However, the seller might still be stuck with a $450,000 appraised value like the three comparable properties on their street vs the $750,000 they were hoping to list it for.
Even though the neighborhood across the main street had similar homes in the higher price range, especially after the seller’s extensive upgrades, appraisers will always use homes from the actual neighborhood to establish value first.
It isn’t fair, especially if your home is well-kept and in great condition compared to the run-down foreclosures in the neighborhood.
Unfortunately, if every recent sale, or nearly all sales, are foreclosures at reduced prices, then the appraiser is forced to use the recent sales and trends as comparable values. High foreclosure rates generally depress values and show a trend of lowering prices.
Pools and professional landscaping rarely see a dollar for dollar value add on a property. The value is going to mainly be based on comparable sales in a neighborhood.
This is a typical question for older neighborhoods where similar models may have drastic price differences.
Additional rooms and square footage can be the main reason for one property appraising higher than another.
Keep in mind, just because the market trend in a particular neighborhood is improving over time, the individual properties need to meet the same conditional improvements as the others in order rise with the tide.
An appraiser is looking at several things when determining the value of a property: improvements, size and square footage of the living area, neighborhood amenities, location and the market trends around the area.
It’s obviously easier to picture the process of estimating value on an existing property in a neighborhood that has a history of home sales, but the task of determining the value on new construction projects does pose some challenges.
Appraisals on homes that haven’t been built yet generally require the contractor and home buyer to supply more documentation in order to get a more accurate estimate of the property’s value.
The main purpose of this article is to give an overview of the appraisal process for a home buyer that is building a home vs purchasing standing inventory.
For some, building a new home can be both exciting and overwhelming. Watching a project transform from idea to completed home with a front yard, white picket fence and a custom red front door is a rewarding experience.
Even if you are paying attention to all of the information from the beginning, there are still several details that have a tendency to catch even experienced builders off guard.
Game time decisions have to be made as cabinets and corners line up differently than the initial drawing could show, flooring doesn’t match the wall colors, or the sun hits a window the wrong way at dinner time.
While the last minute updates may cost you more money, they might also have an impact on the value of the property.
The plans or construction drawings are usually done by your builder or architect. It lays out the floor plan of your home, sizes of rooms and square footage of your home.
They should include a floor plan layout, front elevation, real elevation & side elevations, mechanical and electrical details.
A “Spec” sheet has the type of construction materials you will be using. For example, whether your home will be built with standard 2 x 4’s or 2 x 6’s.
It also contains the type of insulation, roofing and exterior products that will be used in the construction, as well as floors, counter tops and appliances for the inside dressing.
The document that breaks down all of the costs associated with the construction, including land, building materials and labor.
A lender can generally provide you with blank forms for the spec and cost breakdown if your builder does not have them.
Shows where your home will sit on the site, any accessory buildings, well and septic locations, if applicable, and the finish grade elevations and direction of the drainage.
Once the lender has obtained the above information from you, they will forward a copy to the appraiser. It is the appraiser’s job to determine what the future value of the home will be once it is completed, per your plans, specs & cost breakdown.
Even though an appraiser will use the cost approach in the appraisal report, it is not the value that will ultimately be used by the lender. The market approach to value, which uses existing sales of homes similar in size, quality, construction and location is the most common approach that lenders want for new construction.
The more complete and detailed your plans, specifications and cost breakdowns are, the more accurate your appraisal will be.
Once your home is complete, the appraiser will be asked to go out and inspect the home. They will report back to the lender what they have found, whether your home was completed according to the plans and specifications originally given, and if the value is the same as originally given in the report.
Sometimes the value has to be adjusted due to changes that were made during construction which may have affected the value of the home.
Most builders have basic plans they work from, and make modifications specific to their clients’ needs. When building a custom home, it’s generally a good idea to work with a reputable architect.
Yes, HUD has a generic form that most lenders use and it will give the appraiser most of the details they need to complete your appraisal. Anything not listed on this form can be added by you separately on an additional sheet.
In most cases, the lender will accept the contract, however, they will want the builder to provide a cost breakdown to ensure that the builder has accurately bid your home.
Posted in Real Estate Appraisals	Tagged Appraisal, First-Time Home Buyer, Frequently Asked Questions, New Construction, Real Estate	
Buying a new home is literally a team sport since there are so many tasks, important timelines, documents and responsibilities that all need special care and attention.
Besides working with a professional team that you trust, it’s important that the individual players have the ability to effectively communicate and execute on important decisions together as well.
A Realtor® is a licensed agent that belongs to the National Association of Realtors®, which means they are pledged to a strict Code of Ethics and Standards of Practice.
A common misconception of many First-Time Home Buyers is that hiring a real estate agent will end up costing more money.
However, the typical arrangement in a purchase transaction is for the seller to cover the buyer’s agent commission. In some cases where a new home developer or For Sale By Owner is listing a property and offering a lower price to deal direct, it is still a good idea to have an agent in your corner to protect your financial and investment interests.
Considering that some buyers may see 5-7 real estate transactions in a lifetime, compared to an agent that closes the same amount in a month, it is obvious to see that there is a big advantage to having the ability to rely on that experience when your home and security is on the line.
A mortgage professional (loan officer, mortgage planner, loan consultant, etc.) is the glue that holds the entire transaction together (biased comment).
In addition to establishing the purchase price and monthly payment a borrower can qualify for, the mortgage team will also need to communicate with all of the other players on the home buying team throughout the entire process.
The lender in any mortgage transaction will require a homeowner’s insurance policy (hazard insurance).
This policy protects the property in the case of fire, theft or other damage (except flood or earthquake, those are separate policies and may be optional).
If it is determined that the property that you want to purchase is in a flood zone, flood insurance is not optional, it is mandatory.
Also, some states use closing attorneys and there are still a few states where they use abstract of title instead of title insurance.
The title and escrow officers are often thought of as the same role, but in reality are quite different positions.
The title officer takes care of all issues that have to do with the title (also referred to as the deed) of the property.
The lender may require a title insurance policy guaranteeing that the title is clear of all liens except those being filed by the lender.
Escrow takes care of receiving, signing, and notarizing the final loan documentation, as well as collecting the other paperwork associated with the home sale.
The escrow officer is a neutral third party that makes sure no money is transferred until all conditions for each side are met.
Finally, the escrow officer will see that you are properly recorded as the new owner with the county.
When you have found the home that you like, it is a wise idea to have a professional take a look at the home to see if there are any issues with the property that could be a problem in the future.
Even though some buyers have an “Uncle Joe” who has owed several homes and knows what to look for, a certified Home Inspector can be money well spent.
They will look at the functionality of the home to make sure the electrical, plumbing and physical aspects of the home are strong, which will help the buyer make an educated decision about following through with the purchase, or renegotiating certain aspects of the contract.
Keep in mind, the home inspector and appraiser have different jobs. An appraiser determines value, while the inspector looks for structural problems, defects or maintenance issues.
The inspector is doing this strictly for the buyer’s sake. The lender is not concerned if a faucet has a minor leak as long as the property is worth the sales price. Therefore, the lender generally does not require an inspection unless the purchase contract requires one.
So, an inspection is not required, but it is recommended. As a matter of fact, one of the forms in an FHA application package is one that says “For Your Protection: Get a Home Inspection.”
While the appraiser is typically never seen by the home buyer, an appraisal is obviously an important component of a home purchase transaction.
The appraiser will conduct an analysis of the property to determine the current market value. The bank will always require an appraisal, and in some cases need a second opinion of value if the program guidelines or loan amount require it.
Appraisers compare the sales prices of similar properties sold in the neighborhood and surrounding areas with the subject property.
This can be a very tricky process, especially if there are few properties to choose from, or if there is an overwhelming amount of foreclosures and short sale listings.
Now, since two homes are rarely identical, the appraiser has the difficult job of trying to compare apples to apples; sometimes red delicious to yellow delicious, or sometimes Fuji to Winesap.
When done, the estimate of value is given. If that value is below the purchase price, then negotiation may take place. If it is at or above the purchase price, we are ready to go forward.
Short sales, foreclosures and new construction homes all have caveats that need to be considered when pursuing financing.
If the guidelines and potential pitfalls are not properly understood, you could face delays in closing or potentially even a denied loan.
Short sales and foreclosures are everywhere. They often represent great value when looking to by a new home.
However, they also present a unique set of problems that homebuyers need to be aware of and plan for.
Typically, when homeowners are facing foreclosure or looking to short sell their house, it means they lack the financial means to pay the mortgage or maintain the property.
A property in poor health can cause many financing issues for traditional financing. FHA loans have specific rules requiring that the property is move-in-ready, unless you’re using a 203(k) Rehab Loan.
Each bank is different, but approval can take anywhere between a week to 120 days. As a general rule, the larger the bank the longer it takes to get short sale approval.
The lack of a set timeframe for short sale approval makes the timing of loan submission, rate locks and closing very challenging. You have your approval conditions cleared to close on time, just to find out that new appraisals, income, employment and asset verifications need to be updated by an underwriter to cover the most recent 30 days. Worst case, purchase contracts and legal documents may have to be re-submitted to a bank for an updated approval.
Home buyers looking to purchase new construction using FHA financing will have more hoops to jump through than those purchasing through conventional (Fannie Mae / Freddie Mac) financing.
If you want to use FHA financing to purchase new construction then you need to be aware of a number of issues that can trip you up.
First, you MUST have a certificate of occupancy (C.O.) certifying that the property is complete and move-in-ready. If you do not have this then you typically CANNOT go FHA. You’ll need a renovation loan, but a FHA 203K WILL NOT work.
In addition to the C.O. you’ll need some combination of the following documents as dictated by your lender and your unique situation:
There are a number of factors which go into exactly what combination of documentation will be required to satisfy your lender and FHA, so it is best to work with an experienced loan officer when purchasing new construction with FHA financing.
If you plan on using conventional Fannie Mae / Freddie Mac financing you’ll still have hoops to jump through, just not as many as FHA. You’ll also have a higher down payment requirement and the credit qualification guidelines tend to be stricter.
Whether it be FHA financing, conventional financing or renovation financing, it’s important to have a qualified home buying team in place that can lead you through the maze of paperwork and negotiations.
Posted in Home Buying Process	Tagged Appraisal, Down Payment, Foreclosure, Government Loans, Investment Property, Real Estate Terms, Short Sale	
A mortgage is generally the largest debt most homeowners have to manage. It’s a good idea to give your personal real estate finance portfolio a check-up at least once a year.
Since there are many reasons a homeowner may choose to refinance, we’ll take a look at the four most common.
Typically, the most common reason that homeowners refinance their mortgage is to secure a lower interest rate. Interest rate and loan amount determines the total cost that a borrower will pay. The lower the interest rate, the less the overall cost will be. Interest is calculated on a daily basis and usually paid back to the lender on a monthly basis.
Lowering a mortgage payment can be achieved by lowering the mortgage rate, lengthening the loan term, combining two or more loans or removing mortgage insurance.
Refinancing an Adjustable Rate Mortgage (ARM) to a new Fixed Rate Mortgage (FRM), combining a first and second mortgage or paying off a balloon loan are three possible reasons to explore a refinance.
If there is sufficient equity, sometimes paying off consumer debt by combining all debts into one lower monthly mortgage payment can significantly reduce the short-term deficits in a budget. However, it’s important to keep in mind the total cost of that debt by adding it into a 30 year mortgage payment.
No, you may choose any company to refinance your mortgage since the new loan will replace the existing mortgage.
It is possible your current mortgage company may require less documentation, but this could add additional cost or a higher interest rate. Do your homework and shop around to make sure you’re getting a great deal.
No, you will have to qualify for your new refinance. However, certain programs will allow for reduced documentation like a FHA to FHA Streamline Refinance.
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Rumford at its best. This gem is on one of Rumford's premier streets and the incredible curb appeal is carried throughout the house. The inviting exterior features handsome automatic replicated garage doors, and attractive landscape in both front and rear. The living room with brick gas fireplace leads to a sweet, screened in porch. Between the living room and kitchen is the dining room with bay window and direct access to the yard. Spectacular best describes the kitchen: oversized honed granite island and countertops, two stainless sinks, six-burner Thermador gas cooktop and 2 ovens, Swarovski crystal pendants, built in Subzero refrigerator with 2 freezer drawers, a 2-drawer built-in Kitchen Aid dishwasher, and a twin-bed size window seat with storage beneath. The kitchen area offers mega storage and direct access to the rear yard and attached garage. A full bath completes the 1st floor. The second floor may be accessed by two staircases, one that leaves from the kitchen and one from the front hall. A curved formal front staircase takes you to the master bedroom with walk-in closet, 2 wardrobes, and access to a private deck. Down the hall are a double bedroom, a full bath, an inviting sitting room, a bedroom/office, laundry, and 4th bedroom. Included are living room and den TV's included.
East Providence is a city with a mix of quiet and waterfront neighborhoods, as well as several major shopping areas. The Seekonk and Providence Rivers are to the west, Narragansett Bay is to the south, and the Running and Ten Mile Rivers (including the Reservoir and Central Pond) are along most of its eastern border.
The real estate data on this web site comes in part from the IDX Program of the State-Wide Multiple Listing Service, Inc. The IDX information is provided exclusively for consumers’ personal, non-commercial use, and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Information deemed reliable but not guaranteed. Copyright© 2018 State-Wide MLS, Inc. All rights reserved. Data last updated 11/12/18.