WHAT BUYERS CAN EXPECT WHEN NEGOTIATING A HOME PURCHASE

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WHAT BUYERS CAN EXPECT WHEN NEGOTIATING A HOME PURCHASE

We all know that negotiating price is important to the home buying process, however most buyers forget that it’s not the only thing that needs negotiating. Price is just the first thing that is negotiated – once you open escrow, the real deliberations begin.

There are hundreds of things to negotiate in a home sale once... you’ve signed the purchase contract such as inspections, repairs, home warranty, and closing costs so it’s important to be prepared.

YOU WILL WANT A BUYER'S AGENT
With so many things to negotiate in a home sale, it literally pays to have an agent on your side. So what do you need to look for in an agent? John Wenner, professional negotiator and co-founder of the Real Estate Negotiating Institute says, “One of the biggest things an agent needs to show is their ability to negotiate on your behalf.
Buyers need to ask their agent - What negotiating tools do you have available to help me accomplish my goal?”

It takes years of practice, market knowledge and some learning to be an ace negotiator. That’s why the first thing you should look into before you start making offers on homes and trying to negotiate sales is finding an agent to help you out. Negotiating tools your agent should have include prior knowledge of your local area, professional training in negotiation strategies and most importantly determination.

As a buyer, you don’t have to pay for your agent out of pocket. Their commission comes out of the home sale so don’t let fees stop you from finding a professional to do some smart negotiating on your behalf.

SELLERS ARE ASKING FOR MORE THAN THEY EXPECT TO GET
If you look at listing prices and sold prices, you will notice that sold prices are always lower. That’s because sellers are already highballing when they put their home on the market, anticipating a negotiation with buyers looking for a deal. Sellers ask for more than they expect to get so it’s ok to make an offer that is below their listed selling price.

Beware: Know the market you’re up against. In a seller’s market with low inventory and bidding wars, you don’t have the luxury of making a lowball offer. In a buyer’s market however you can offer as much as 10% below a seller’s price without worry.

BE READY TO GET INSIDE THE SELLER’S MIND
You have to look at what’s being said by the other side and decipher their goals or self interest in order to be a good communicator and negotiator says Wenner. Understanding the seller means understanding why they are selling their home in the first place. By understanding their standpoint and motivations, you will learn how to approach your negotiating. Are they looking forward to retirement? Are they in a rush to move out because they’re relocating for work? Knowing the seller’s motivation is the key to engaging them in negotiations and getting what you want.

LIST OF COMMON NEGOTIATIONS
There are hundreds of negotiations that are a part of a home sale. Here is a quick list of just a couple major points you and your agent with be negotiating on for your new home:
Price – Negotiating the initial price of the home is just the tip of the iceberg. Once that’s over, the bulk of your back and forth with sellers begins.

Timeline or length of escrow – Be prepared, the sellers will want a quick and speedy escrow because they are on their way out. However, as a buyer you will benefit from a longer escrow period to ensure any problems with the home are resolved and your loan is handled correctly.

Inspections – It is crucial to have an inspection done on a home before you buy – it is standard in all home sales today. You and your agent should work on a list of contingencies to put into your purchase contract based on the findings of an inspection.
Home Warranty – The home warranty can be paid for by seller or buyer. While the warranty is to your benefit, some sellers are willing to pay for it as a way of preempting any further responsibility on their own part in the event that there are problems with the home post closing.

Closing Costs – These costs can be paid by either party but in a seller’s market, you might offer to pay these in order to sweeten your offer.

Repairs – Based on the home inspection you will come up with a list of repairs. What it comes down to is asking the sellers to fix any problems that arise or negotiating a lower price.

A Big Year for V.A. Loans

A Big Year for V.A. Loans

The number of loans guaranteed by the Department of Veterans Affairs reached a record high in 2013, perhaps marking the peak of an upward trajectory that began after the housing market collapse.
The department guaranteed nearly 630,000 mortgage loans in fiscal year 2013, setting a new high just as the program enters its 70th year, said Mike Frueh, the director of the V.A....’s Loan Guaranty Program. The average loan was about $225,000, an amount that reflects the program’s value to “working-class America,” he said.
Calling the program’s growth “pretty incredible,” Chris Birk, the executive editor at Veterans United Home Loans, an online broker of V.A. loans, estimated that total loan volume has risen 372 percent since fiscal 2007.

One reason is historically low interest rates, which have driven a tremendous increase in loans for the purpose of refinancing. About half of last year’s V.A. loans were “refis.” That business dropped off toward the end of last year as interest rates rose.

Another factor is the tough lending climate of the last six years, which has made a V.A. loan the most viable option for many service members. “It’s become so much more difficult for military personnel and veterans to qualify for conventional financing,” Mr. Birk said. “This is the only path to homeownership for many.”

One big advantage for first-time buyers is that the loans do not require a down payment. About 90 percent of all V.A.-guaranteed purchase loans are made without any money down. “Our average borrower has about $7,000 in liquid assets at the time they close the loan,” Mr. Frueh said. “That’s not enough to make a significant down payment.”

Another benefit is that V.A.-backed loans do not require private mortgage insurance, which add to a borrower’s monthly payment. According to Mr. Frueh, for the loans made last year, borrowers will save $35 billion they might otherwise have paid out in mortgage insurance premiums over the life of their loans.
There are restrictions, of course. The loan must be for a primary residence. And the V.A. maintains limits on the amount it will guarantee, based on area median home prices. The 2014 limits, calculated by county, range from $417,500 to $1,094,625.
The V.A. does not set a minimum credit score requirement, but lenders typically add their own, which is currently around 620. The V.A. is more concerned with a borrower’s income and expenses.

To qualify, borrowers must show enough monthly income after paying personal debts and housing costs to meet “residual income” levels set by the department. The levels vary by region and household size. In the Northeast, for example, on loans exceeding $80,000, a two-person household must show at least $755 in leftover income, while a family of five must show $1,062.

“Their underwriting is a little bit more restrictive, but it’s prudent,” said William J. McCue, the owner of McCue Mortgage in New Britain, Conn., which has handled the agency’s loans since its founding in 1949. “That’s why the loans perform so well.”
Indeed, V.A. loans have shown the lowest foreclosure rate for the last five years, according to data gathered by the Mortgage Bankers Association. “People naturally assume that these loans are risky,”

Mr. Birk said, adding, “You really don’t see people who can’t afford a mortgage getting a loan, because of that residual income requirement.”

According to data gathered by Veterans United, the three states that saw the greatest jumps in loan activity last year compared to 2012 were Arizona, up 40 percent; Ohio, up 33 percent; and Connecticut, up 30 percent.

8 FEATURES OF THE 2014 MORTGAGE RULES YOU NEED TO KNOW

8 FEATURES OF THE 2014 MORTGAGE RULES YOU NEED TO KNOW
By JESSICA ROBERTS

The new mortgage rules issued by the Consumer Financial Protection Bureau (CFPB) are in effect as of January 10th, 2014. Banks can no longer engage in irresponsible lending practices leaving borrowers unable to repay their mortgages. Lenders can only provide “Qualified Mortgages” that comply with the “Ability-to-Repay” rule.
CFPB Director Richard Cordray says “when consumers sit down at the closing tab...le, they shouldn’t be set up to fail with mortgages they can’t afford. Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans.”

 Here are 8 features of the 2014 mortgage rules you need to know:

 No-doc or low-doc loans are prohibited: Lenders must supply and verify complete consumer financial information.
Limited points and fees: No more than 3% for a loan of more than $100,000.
No risky loan features: Terms cannot exceed 30 years, no interest-only payments, no negative-amortization payments where principal increases.

 Tightened Debt-to Income Ratio: Borrowers cannot exceed 43% Debt-to-Income Ratio (DTI)

 No “teaser” rates: Lenders must verify a borrower’s ability to repay BOTH principal and interest over the long-term, NOT only during an introductory or “teaser” period with lower interest rates.

 Contact with missed payments: Mortgage lenders must attempt contact with homeowners within 36 days of a missed payment. They must also provide available payment options no later than 45 days after the due date.

 Clear monthly billing statements: Lenders must send clear statements indicating what portion of your payment went to escrow and principal, balance owed, and any service or transactional fees.

 Early warning for ARM: Lenders must notify borrowers of increased rates 210-240 days before the next payment and follow up with an additional notice 60-120 days before the new payment is due.

 Gail Hillebrand, associate director at the CFPB, says "every lender has to do some commonsense things to make sure the borrower can pay the loan back.”

 “No surprises and no runaround.”

Are You Ready to Buy a House?

Are You Ready to Buy a House?

 Answering these eight questions will help you decide

 By Tasha Schroeder

The idea of owning your home is an exciting one, but how do you know if you’re ready? Before you take the plunge, answer the questions below.

What’s your financial situation?
Having a clear understanding of your finances is necessary when you’re considering buying a home. Prior to speaking with ...a real estate agent, you should make a budget to see how much you can reasonably afford to pay. Don’t forget to factor in the cost of taxes, insurance premiums, maintenance and other upkeep.

Can you afford even the initial costs?
Down payment amounts vary based on the type of loan you’re offered or if you’re eligible for a first-time homebuyers’ program, but remember that the more you put down, the lower your mortgage payments will be.
Other initial costs can be substantial: loan set-up fees, home inspections, insurance, property taxes and other fees will cost you about 2 to 4 percent of your home price.

Is your money organized?
Hopefully you’re the kind of person who balances your checkbook and understands where your money goes, but if you take a more lackadaisical approach to your finances, you’ll need to step up your game. Get organized, check your credit report and keep building your savings. Getting your affairs in order helps you improve your credit score, qualifying you for better interest rates, and good financial records will help you take full advantage of tax deductions.

What are your future expenses?
Think ahead to the next few years. Are you making any big life changes that will hit your wallet hard? If you’re planning to have children or start paying tuition soon, you should factor that cost into your decision now. It can become difficult to replace an aging car or take an expensive vacation once you’re paying a mortgage.

Do you have an emergency fund?
Before you devote all your savings into a down payment or upkeep for your house, look at the bigger picture. You need to build a financial cushion in case of financial setbacks like unexpected unemployment or serious illness.
It’s not just money that should affect your decision to buy a home.
Are you flexible when it comes to getting what you want?
Your first home may not have all the bells and whistles you’re looking for. Are you willing to defer on your wish list now in order to have a home of your own? In a few years, you may be able to find a home that better suits your needs, but in the meantime you could also consider fixing up a less expensive home, buying a home with friends or renting out part of your home for additional income.

Do you plan to move in three to five years?
There is a lot of effort, time and cost involved in buying a house – you want to make your investment pay off for you. In addition to the price of the house itself, you should also take into the set-up costs already mentioned.
If you’re planning to move in a year for work or school, you may want to wait until after that time. Otherwise, you might find yourself in a tough spot if you’re forced to sell your home for less than its purchase price in a slow market.

Do you enjoy home improvement?
If you’re already looking at homes, it’s hard not to imagine how adding a fresh coat of paint to the walls or changing the light fixtures will make a house truly yours. But if you’re used to calling the landlord for anything that goes awry in your home, owning a house might be a jarring wake-up call. When you own your house, any issue becomes your responsibility, from replacing blown electrical fuses to installing a new roof.
Now is the time to consider whether you enjoy home improvement projects. Are you confident in your ability to patch drywall or install a ceiling fan, or would you rather pay someone else to do it? If it’s the latter, consider that even if you hire someone else to handle your home improvement issues, you will still have to invest not only money but your time by researching contractors and supervising their work.

Real Estate in 2014: A Need-to-Know Guide

 Real Estate in 2014: A Need-to-Know Guide

 By Christina Couch

After year of struggles, the housing market roared back to life in 2013. The rebound will continue in 2014, but the pace will slow.
Experts say 2014 will be a year of continued growth and stabilization in the housing market with rising home prices, fewer foreclosures and greater activity among underwater homeowners.... But this year’s market faces strong headwinds as inventory remains tight and both homebuyers and builders face tough lending standards.

To buy a home in today’s market, you either need impeccable credit or the ability to make an all-cash purchase. The average FICO credit score on conventional loans used to purchase homes in November 2013 was 756, according to the most recent data from Ellie Mae, a company that produces mortgage underwriting software. The average score for denied applications was 729.
"To put that in perspective, the normal average acceptance score historically is around 720," says Walter Molony, a spokesman for the National Association of Realtors (NAR). "Right now, the average rejection score is now what the acceptance score was historically."
Don’t expect credit standards to ease up any time soon. This month, new Dodd-Frank regulations aimed at preventing risky borrowers and equally risky mortgage products from entering the market take effect. The new changes require lenders to closely evaluate such factors as a borrower's debt-to-income ratio, employment status, income, assets and credit history before underwriting a loan.

Home Prices Continue to Climb
In addition to tight credit, rising interest rates and home prices may discourage buyers from purchasing in 2014, says Jed Kolko, chief economist for Trulia.com, the real estate site. Average 30-year mortgage rates bounced from 3.34 percent last January to their current 4.48 percent rate, with many expecting further increases of up to a full percentage point in the New Year. Home prices nationwide have risen 11.2 percent on average over the past year, according to the S&P/Case-Shiller home price index. Sunbelt cities in places like California and Arizona have seen home values surge in excess of 20 percent.

While it remains a sellers’ market, price gains aren’t all bad news for buyers. First-timers may be discouraged, but increasing prices are music to the ears of current owners, many of whom are watching their formerly underwater homes gain value. More than 85 percent of homeowners with a mortgage in the second quarter have some equity in their home, up from less than 75 percent in the fourth quarter of 2011, according to CoreLogic.

"We saw a period where the first-time buyer was sort of a driving force," says Robert Denk, senior economist for the National Association of Home Builders. "We expect that to reverse.... As house prices rise, as fewer mortgages are under water, that should bring the more established [buyers], the trade-up market, back to some degree."

How much the housing market bounces back in 2014 also depends on construction activity. With builders still fiscally cautious and facing the same tight lending environment as buyers, expect a small increase in the number of new homes on the market. As buyer demand picks up, the pace of new home construction should follow.

"The [housing] bust was basically a five-year period where we produced and sold a fraction of the homes we would see in that normal market," Denk says. "We’re going to see a lot of that pent-up demand turn into realized demand. That will be an important driving force in 2014 and 2015."

Inventory Remains Tight
Still, the gains in demand (and the inventory that follows) will be slow. While total housing inventory declined in both October and November, unsold inventory is currently five percent higher than it was a year ago, according to NAR. The association predicts inventory won't radically accelerate until 2015.

"I think 2014 will be the year when we see that home price appreciation pulls back to more normal, sustainable levels," says Daren Blomquist, vice-president of RealtyTrac.com, a site that aggregates real estate data. Markets that boomed in 2013 will likely scale back to more modest growth in the low double digits, while nationwide growth should average about 4.5 percent, according to Blomquist.

Even with recent gains factored in, most markets are not at risk right now for another housing bubble. Nationally, home prices remained 4 percent undervalued in the third quarter, according to Trulia’s Bubble Watch. Only Orange County, Calif., and Los Angeles are more than 10 percent overvalued, the report finds.

The hottest markets for 2014 won’t be in the big cities. A joint study of more than 1,000 real estate industry experts done by PwC and the Urban Land Institute ranks real estate prospects in smaller secondary markets including Houston, San Jose, Dallas/Fort Worth and Austin above those in larger cities like Chicago, Atlanta and Washington, D.C., where “there's a lot of money chasing a few assets,” says R. Byron Carlock, Jr., PwC national real estate practice leader.

It’s still 35 percent cheaper nationally to buy a home than to rent one, but that doesn’t mean millennials are rushing out to get a mortgage. Just 18 percent of consumers surveyed in September by Credit.com said that buying a house was still their definition of “the American Dream.”

The Most Important Tips for Mortgage Borrowers in 2014

The Most Important Tips for Mortgage Borrowers in 2014

By Polyana da Costa

The clock is ticking for buyers and homeowners who want to grab a low mortgage rate in 2014. But if you stay on top of your game, keep your finances in order and act quickly, you can still grab attractive mortgage deals.

These 10 mortgage tips can help you with your mortgage decisions in 2014.

Document your finances.
Lenders will be extra diligent when underwriting home loans in 2014, as new mortgage regulations go into effect in January. The rules put pressure on lenders to verify that borrowers have the ability to repay their loans.

Keep good records of your finances, including bank statements, tax returns, W-2s, investment accounts and any other assets you own. Be ready to explain any unusual deposits to your accounts. Yes, the $500 that Grandma deposited in your account for Christmas could delay your loan closing if you can't prove where the money came from.

Lock a rate as soon as you can.
Rates will likely climb in 2014 as the Federal Reserve is expected to reduce the pace of the economic stimulus program that has long helped keep rates low. If you are planning to get a mortgage, lock in a rate as soon as you are comfortable with the numbers.

Refinance now -- if you still can.
Many homeowners lost the opportunity to refinance at a lower rate when rates jumped in 2013. But those who are still paying more than 5 percent interest on their home loans might still have an opportunity.

Read More From Bankrate: Why skimp on retirement?

If you think you may be able to save with a refinance, but you are not sure, it doesn't hurt to try. Speak to a loan officer and take a look at the numbers to see if refinancing still makes financial sense for you after you consider how long it will take to break even with the closing costs.

Buyers, use your bargaining power.
As mortgage rates climbed, lenders lost a big chunk of their refinance business. In 2014, they will turn their attention to homebuyers and will fiercely compete for their business. Buyers should take advantage of bargaining power they gain with that increased competition. Shop around for the best deal and look beyond the interest rate on the loan.

Learn your rights as a borrower.
Mortgage borrowers will get many new rights as consumers this year when new mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014. If you run into issues with your mortgage servicer in 2014 or fall behind on your payments, make sure you are aware of your rights and put them to use.

Take good care of your credit.
It's nearly impossible to get a mortgage without decent credit these days. That will continue to be the case in 2014. If you are planning to get a mortgage, monitor your credit history and score until your loan closes. The best mortgage rates usually go to borrowers with credit scores of 720 or higher. You may still get a mortgage with a score of 680, but lower scores will mean higher rates or higher closing costs.

Don't overspend.
Lenders don't want to give out loans to borrowers who will have little money left each month after they pay their mortgages and other debt obligations such as credit cards and student loans. If that becomes the case, the lender will tell you that your DTI, or debt-to-income ratio, is too high and you don't qualify for a loan. Try to keep your monthly debt obligations, including your mortgage and property taxes, below 43 percent of your income.

Consider alternative mortgage options such as ARMs.
Mortgage rates are rising, but there are alternatives to grab a lower rate, depending on your plans.

A homeowner planning to keep a house for seven to 10 years could take advantage of lower mortgage rates by choosing a seven- or 10-year ARM instead of the 30-year traditional fixed-rate mortgage. Rates on adjustable-rate mortgages can be as much as one percentage point lower than on fixed-rate loans.

If you are not sure for how long you plan to keep the house, a fixed-rate loan is probably the better choice.

Considering an FHA loan? Reconsider.
FHA loans have long been popular among first-time homebuyers because they require low down payments and have somewhat less strict underwriting standards than conventional loans. But they come at a price. Mortgage insurance premiums on FHA loans are likely to continue to rise in 2014, and after recent changes, the borrower is now required to pay for mortgage insurance for the life of the loan. Try to qualify for a conventional loan before you apply for an FHA mortgage.

Don't panic.
Yes, mortgage rates will likely climb in 2014. But don't panic, thinking you have to buy a home now to grab a low rate. If you are shopping for a home, do your best to move quickly, but remember that this is one of the biggest financial decisions of your life. Get your mortgage and buy your home when you feel ready.

New Mastermind Location!

Happy New Year Masterminds! 

The year is off to a great start. What is your plan for the new year? What is the ONE THING that you want to accomplish? More time with family? More business? More relationships? A special vacation?  

I would like to take a second to share my ONE THING. The one thing that I want to do this year is share my VA program with everyone. I am posting video’s, sending out emails and sharing on all social media. I am telling every man, woman and child about this awesome program. Is it enough? I don’t think so. I only have a small reach in the great state of Oklahoma. I need YOUR help. Please share IN this program. (You heard me right, share IN the program). Please participate and tell YOUR circle of influence about this awesome way to welcome our soldiers home! ZERO lender fees and up to a $1,000.00 lender credit! This is not a VA program, this is a Jerry Ashford Team program! I want to be THE VA lender in the state. I want to give every military family this special opportunity. I can only do it if you help me get the word out. Partner up with me and my team and lets thank those that fight for our country. Call me and we will discuss ways that you can be a part of this awesome program.

 

Is VA the only loan program we have? Of course not! We offer USDA, FHA and Conventional mortgage loans as well. Construction Loans? Yes!

 

Our Mastermind has moved to the Bethany Library this month. The link is below. Please sign up so we can get a head count. Bring your friends with you, I would love to meet them!

 

https://www.eventbrite.com/e/mastermind-okc-a-7l-gengen-event-9-2014-business-plan-january-8th-tickets-9585473409