American Mortgage Corporation Explains: How To Save On Closing Costs

Closing costs are fees paid at the closing of a real estate transaction. This point in time called the closing is when the title to the property is conveyed (transferred) to the buyer. Closing costs are incurred by either the buyer or the seller. A great alternative for homeowners looking to save on out-of-pocket expenses is a low, or zero-closing cost loan. If you’re buying a home, it’s not uncommon to ask the seller to contribute towards paying some or all of your closing costs.

Your loan program may limit the percentage of costs the seller can pay. Be sure to ask American Mortgage Corporation how much the seller can pay according to your particular loan.

Examples of typical closing costs

• Attorney (Lawyer) Fees, paid by either or both parties, for the preparation and recording of official documents. The principals and/or lender may each be represented by their own attorney. Typically required by institutional/commercial lenders to ensure documents are prepared correctly.

• Title Service Cost(s), paid by either party according to the contract but by default seller may pay the majority, for title search, title insurance, and possibly other title services. In some cases the attorney may do the title search or the title service and attorney fees may be combined. Required by institutional/commercial lenders and often by the real estate contract.

• Recording Cost, paid by either party, charged by a governmental entity for entering an official record of the change of ownership of the property. Required by the government for recording the deed.

• Document or Transaction Stamps or Taxes, paid by either or both parties depending on location (area of jurisdiction), charged by a governmental entity as an excise tax upon the transaction. Required by law.

• Survey Fee for a survey of the lot or land and all structures on it, paid by either party, to confirm lot size and dimensions and check for encroachments. Required by institutional/commercial lenders

• Brokerage Commission, paid by the seller to a Real Estate Broker, to compensate the Broker(s) involved in the sale for their services in marketing the property, finding a buyer, and assisting in the negotiations. Brokerage commissions are usually computed as a percentage of the sale price, and are established in a listing agreement between the seller and the listing broker. The listing broker may offer Buyer Agents a portion of their commission as an incentive to find buyers for the property. Payment is required if real estate brokerage service was used. This is often one of the largest closing costs.

• Mortgage Application Fees, paid by the buyer to the lender, to cover the costs of processing their loan application. In some cases, the buyer would pay the lender the application directly and prior to closing, while in other cases the fee is part of the buyer’s closing costs payable at closing.

• Points, paid by the buyer to the lender but may be reimbursed by the seller. Points are a form of pre-paid interest, charged by the lender as an alternative to charging a higher rate of interest on the mortgage loan. One point equals one percent of the loan principal, and usually reduces the interest rate by 1/8% (0.125).

• Appraisal Fees, usually paid by the buyer[citation needed] (although occasionally by the seller through negotiation), charged by a licensed professional Appraiser. Many lenders will require that an appraisal be performed as a condition of the mortgage loan. The purpose of this appraisal is to verify that the sale price of the property (upon which the underwriting of the loan is based) is equal to or less than the fair market value of the property.

• Inspection Fees, usually paid by the buyer[citation needed] (although occasionally by the seller), charged by licensed home, pest, or other inspectors. Some lenders require inspections (such as termite inspection) to verify that the property is in good condition, which is necessary to assure that the property will retain the necessary collateral value to secure the mortgage loan.

• Home Warranties, paid by either the buyer or the seller. Warranties are available on resale homes insuring major household systems against repair or replacement for the buyer’s initial year of ownership. Sellers will sometimes offer these warranties as a marketing strategy, or buyers can elect to purchase them at closing.

• Private Mortgage Insurance (PMI), paid by the buyer but may be reimbursed by the seller. Lenders will typically require that a mortgaged property be insured if the Down payment is less than 20 percent, and will usually require that the first full year’s mortgage insurance premium (MIP) be paid in advance by the buyer. If the buyer has not already paid the insurance company directly, this would become another closing cost payable at closing. The buyer can request cancellation of PMI once their equity reaches 20 percent of the market value, and the lenders are required to automatically cancel the PMI once the equity reaches 22 percent by federal laws.

• Pre-paid Homeowner’s Property Insurance, paid by the buyer in advance to protect the home against fire, earthquake, flood (normally a separate policy from other hazard insurance), theft, and other casualties. The lender will require this coverage. Flood insurance may or may not be required, depending on the location.

• Pro-rata property taxes, paid by the seller, the buyer, or both. Most (but not all) jurisdictions assess taxes on real property, which are usually payable at a specified date annually. Since all but a tiny fraction of real estate transactions close on a date other than this one specified annual date, most transactions must include an adjustment to assure that both the seller and the buyer end up paying their share of the annual property tax, proportionate to the percentage of the year that each has ownership of the property. Usually required by institutional/commercial lenders and by the real estate contract.

• Pro-rata Homeowner Association Dues, paid by the seller, buyer, or both. If the property is covered by a Homeowner Association (HOA), the HOA will normally be funded by dues assessed against each property owner. Again, since the ownership of the seller and buyer are each fractional in the year of the transaction, there must be an adjustment made so that each owner pays their proportional share. Often required by institutional/commercial lenders and by the real estate contract.

• Pro-rata Interest, paid by the buyer but may be reimbursed by the seller. The monthly mortgage payment is calculated and payable on a specified day each month. If the closing does not actually fall on that specified date (which is usually the case), then an adjustment must be made to calculate the interest on the loan for the number of extra days until the first payment is due.

Other items in addition to the above may be common in some jurisdictions, and some transactions may include unusual or unique items as closing costs. In the United States, Federal law requires that all residential transactions financed by a mortgage have all closing costs documented in detail upon the standard HUD-1 form. This information must be provided to the principals but does not have to be sent to the government. Instead a Declaration or Statement by Buyer and/or Seller is often required to be provided to the government office recording the deed. Form 1099-S may be required to be sent to the United States Internal Revenue Service, but Federal law does not allow a charge for this

How Long Does it Take to Build a House?

According to the 2015 Survey of Construction from the Census Bureau, the average completion time of a single-family home is around seven months.

It’s important to note that factors, such as the complexity of the project — the land on which the home is being built, the area where the home is being built and the intricacy of the home’s floor plan — will affect the building timeline. Custom homes can take longer to complete than production homes, while manufactured homes typically can be completed in a few months.

After speaking with the experts, we’ve identified the five most commonly cited factors influencing construction time: pre-construction and permits, environment, workers and supplies, changes and construction style. Although knowing what to expect may not speed up the process, it might just help you maintain your sanity.

Pre-Construction and Permits

Before a builder can start building your home, the home’s lot must be prepared. That means clearing trees, rocks and other items, rough grading and leveling for the foundation. Depending on how much work is involved — say there’s an unexpected issue while clearing the lot — there can be delays during pre-construction.

Getting proper approvals and permits can also cause delays. “Factors like approval on building permit and inspections process can vary between locations and can lengthen the time to a completed home,” says Matthew Gaudet-Walters, a sales representative for Walters Homes.

Environment

Depending on where the home will be, building times can be affected by region of the country — homes in the Middle Atlantic Region averages about 9.5 months from start to completion, while the Mountain Region construction averages around six months. Construction in metropolitan areas is usually quicker — seven months, compared to nine months in more rural areas.

“Although construction workers can do a lot of work in the rain, such as trenching or cutting down trees, there are some things that can be held up because of the rain,” says Kyle Alfriend, a Realtor with the Alfriend Group in Dublin, Ohio. “Primary weather factors — including the winter freeze — prohibits the pouring of concrete for the foundation and spring rains saturate the ground so much that holes cannot be dug for basements without walls caving in.”

Availability of Workers and Supplies

The summer months are generally the busiest time for home construction, so you might find your new home’s construction delayed while waiting for the necessary labor to be available.

“One element in our construction time calculations is the available labor pool and how which specialists are needed among the subcontractors, like the electricians, plumbers and framers that the design calls for,” says Peter Di Natale, president of Peter Di Natale & Associates, a New York-based homebuilder and contractor.

Changing the Plan

Change orders will usually extend the build time, especially if they occur in the latter part of the process.

Di Natale also notes that when buyers wait until the last minute to choose their finishes, this can cause delays. “For example, cabinets usually take six to eight weeks to order and one to two weeks to install, so selecting cabinets when it is time to install them will cost you two months or more.”

To limit the amount of time lost to decision delays, you should maintain open communication with your builder. After all, throughout the construction process, there will be many decisions that you must make along the way.

Construction Style

The style of your home will also influence construction time. Custom-built homes average 10 to 16 months, while personalized production plans average four to six months. Because the floor plans used by production builders have been built many times before, there are generally fewer delays. “Choosing a standard floor plan will quicken the building process, because it eliminates any variations that the builder will need to work out,” says Gaudet-Walters.

So what can you do to make sure the construction of your new home is as painless as possible?

Collaboration is the key: “Engaging construction managers and going through adequate pre-planning and estimating as early as possible will save time and money in the long run,” says Di Natale. Delays in construction may be a fact of life, but knowing what to expect and how to manage your expectations can help make the building process less stressful.

Source: New Home Source

Breaking News: FHA Lowers Annual Mortgage Insurance Premiums

In a move that will make home loans more affordable, the Federal Housing Administration (FHA) announced today that it will reduce the annual premiums most of its borrowers pay on mortgage insurance premiums by 0.25 percentage points from 0.85% to 0.60%. The agency said that the new lower premium rates are projected to save new FHA-insured home owners an average of $500 this year.

American Mortgage Corporation supports this action to further boost the housing recovery and reduce the cost of housing for creditworthy borrowers, particularly for first-time home buyers. In response to FHA’s announcement.

American Mortgage Corporation commends the FHA for reducing its annual mortgage insurance premiums by 25 basis points to 0.6%. With mortgage rates rising in recent weeks, lower premiums will make home loans more affordable, particularly for creditworthy young families and first-time buyers. The new premium structure will also help to ease stubbornly tight credit conditions in the mortgage market, and represents sound policy given a recent actuarial report that shows that the agency continues to strengthen its financial reserves.

The new premium will be effective for mortgages closed on or after Jan. 27, 2017. For a full schedule of the new premium rates announced today, read FHA’s mortgagee letter.

For additional information, contact American Mortgage Corporation at 888-402-6097.

Homeownership Less Costly Than Renting in Two-Thirds of Housing Markets

For Rent Real Estate Sign in Front of House

Buying a home is more cost-effective than renting in two-thirds of the nation’s housing market, according to the 2017 Rental Affordability Report issued by ATTOM Data Solutions.

In a data study of 500 U.S. counties, the report concluded that it is more cost-effective to making monthly house payments on a median-priced home — including mortgage, property taxes and insurance — compared to the fair market rent on a three-bedroom property in 354 counties, or 66 percent of the total markets analyzed in the report. The least affordable rental markets requiring the highest percentage of average wages to pay fair market rent in 2017 are Marin County, Calif., in the San Francisco metro area (77.3 percent); Spotsylvania County, Va. in the Washington, D.C. metro area (73.7 percent); Monroe County (Key West), Fla. (72.2 percent); and Hawaii’s Honolulu County (70.7 percent) and Maui County (70.6 percent).

On the flip side, the most affordable rental markets requiring the lowest percentage of average wages to pay fair market rent in 2017 are Madison County (Huntsville), Ala. (23.9 percent); Allegheny County (Pittsburgh), Pa. (24.4 percent); Fulton County (Atlanta), Ga. (24.8 percent); Anderson County (Knoxville), Tenn. (25.1 percent); and Rock Island County, Ill. (25.3 percent).

“While buying continues to be more affordable than renting in the majority of U.S. markets, that equation could change quickly if mortgage rates keep rising in 2017,” said Daren Blomquist, senior vice president with ATTOM Data Solutions, the new parent company of RealtyTrac. “In that scenario, renters who have not yet made the leap to homeownership will find it even more difficult to make that leap this year. Additionally, renting may end up being the lesser of two housing affordability evils in a growing number of high-priced markets.”

Source: National Professional Mortgage Magazine

Getting A Mortgage When You Have No Credit

First-time home buyers face challenges that more experienced home buyers do not.

For example, a first-time home buyer may not be able to show the same stable work history that a more experienced buyer can show; and a first-time home buyer not have as much money saved.

But, perhaps, the biggest difference between a first-time home buyer and an experienced one is that first-time home buyers are less likely to have credit history.

First-time home buyers have had no mortgage, may own their car outright, and may reach for debit cards over credit cards when given the chance.

These three traits put first-time buyers “off the credit grid” and can make getting mortgage-approved a bit of a challenge.

Call it the unintended consequence of debt-free living: with no visible evidence that you’ve managed credit accounts in the past, mortgage lenders become (rightfully) nervous about your ability to repay on a loan — there’s no history for them to go on.

Thankfully, you don’t need a traditional credit profile to get mortgage-approved.

The FHA mortgage is available to first-time home buyers with “thin credit” or no credit whatsoever; and FHA-backed mortgages are available from nearly every mortgage lender.

What Is A Credit Report?

A credit report is a written account of all creditor accounts which belong, or have belonged, to a person in their lifetime.

Credit reports are a compilation of information from credit bureaus, which are companies to which creditors report borrower payment history on a regular basis.

In the mortgage space, there are three main credit bureaus — Experian, Equifax, and TransUnion. Each bureau uses the information available to it to assess your individual credit score.

A credit score is a numerical representation of the likelihood that you’ll stop paying on your mortgage. The higher your credit score, the more likely you are to make payments.

The algorithm which uses your credit report to determine your credit score is cloaked; we don’t know how each line item affects the final score. However, we do know that your payment history is the single biggest factor in determining your credit score.

It’s why first-time home buyers rarely have credit scores that are “excellent”. There’s just not enough history of managing credit and making payments to make that kind of determination.

It’s okay to have less-than-perfect, though. It’s even okay to have no credit. As a first-time home buyer, you can still get mortgage-approved.

FHA Mortgages Don’t Require “Traditional” Credit

First-time home buyers tend to carry credit scores which are lower than the general population.

Often, this is because first-time buyers have only a short history of managing credit, and payment history is the largest component of a person’s credit score.

The solution, though, is not to go out and get a credit card or two; or open up a car loan. This would actually do more harm than good to the credit score.

Seeking new credit lines is a negative in the credit bureaus’ credit score algorithms and, besides, until 12 months of payment history exist for each of the new accounts, the effect on a borrower’s credit score is heavily muted anyway.

The better, faster solution is to seek out mortgage loans meant for borrower with little or no credit to their name. The FHA mortgage is one such option.

As the FHA loan’s sponsor, the Federal Housing Administration, states on its website:

“The lack of a credit history, or the borrower’s decision to not use credit, may not be used as the basis for rejecting the loan application.”

Instead of turning away borrowers who have not had a chance to build a credit history (or who have preferred not to), FHA mortgage guidelines instruct lenders to look at all aspects of a mortgage application.

This is good for first-time home buyers because FHA loans allow for a low down payment of just 3.5%, which can help a household with good income but less-than-optimal savings move from renting into homeownership.

And, there’s a large market for this type of loan, too. Some estimates put the number of credit-lacking consumers at more than 5 million nationwide.

Don’t let your lack of a credit score discourage you from purchasing a home. There are ways forward.

Via the FHA mortgage program, first-time home buyers don’t need to show credit history — or even an active credit score — to get approved for a mortgage loan.

Source The Mortgage Reports

Why We Need More Newly Constructed Homes

The number of new home sales is far off historic norms. The National Association of Realtors (NAR) just reported that the percentage of all house sales that were newly constructed homes has fallen to the lowest numbers in forty years. Here is a graph showing the percentages


Bottom Line

We need more new construction for two reasons:

It will relieve some of the pent-up buying demand that is causing price appreciation to continue to increase well above historic norms.
It will give better opportunities to many current homeowners who want to sell but can’t find an adequate home to move in to.

Source Simplify The Market

More single women are buying homes, says new report

The relationship status of homebuyers is shifting. In 1985, 81 percent of homebuyers were married couples. Today, that figure is closer to 66 percent, even though the number of unmarried couples buying homes has only barely grown. What accounts for the change? All the single ladies.

Some 17 percent of homebuyers are now single women, up from just 11 percent in 1981, according to a report from the National Association of Realtors (NAR). The proportion of home-buying single men, on the other hand, shrank over the same period from 10 percent to 7 percent today.

Some of this shift may be because more women are raising children on their own. According to a Pew Research Center analysis of census data, the number of households with a single mom has grown since 1960 from 1.9 million to 8.6 million in 2011; The number of single-father households also rose from 300,000 to 2.6 million during that time period—a greater increase proportionally, but still at much lower levels.

“A lot of people are facing rising rents and the possibility of higher interest rates and this could cause some insecurity with children at home,” Jessica Lauz, manager of member and consumer research at the NAR, tells Construction Dive. “Single women might be looking to lock in more favorable interest rates at the moment.”

On average, single women homebuyers fetch an annual income of $55,300, as compared to $69,600 for single men buying homes. The ladies also tend to be older, with a median age of 50 to the unmarried man’s 47.

Industry experts believe that the proportion of single female homebuyers will continue to increase in 2017 as more first-time buyers enter the market. HUD, FHA, USDA, VA Disclosures

Via: Construction Dive, NAR

Whether You Rent or Buy: Either Way You’re Paying a Mortgage

There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either yours or your landlord’s.

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

Are you ready to put your housing cost to work for you?

Christina Boyle, Senior Vice President and Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

Bottom Line

This holiday season, why not give yourself the gift of homeownership? Lock in your housing costs for the next 30 years and guarantee you are the one building wealth.

Source Keeping Current Matters

The Impact Your Interest Rate Has on Your Buying Power

Some Highlights:

Your monthly housing cost is directly tied to the price of the home you purchase and the interest rate you secure for your mortgage.
Over the last 30 years, interest rates have fluctuated greatly with rates in the double digits in the 1980s, all the way down to the near 4% we are experiencing now.
Your purchasing power is greatly impacted by the interest rate you secure. Act now before rates go up!

Source: Keeping Current Matters