Select one of the frequently asked questions below to learn more about buying, selling, and renting real estate. Also, begin to think about important things to consider when diving into your real estate search.
Question about SELLING
Can a home depreciate in value?
Generally, real property never depreciates in value, or more so, it is not very common for property to depreciate. This is why it’s a great investment. Make sure you carefully consider location and community when choosing a home, it can effect the homes future value greatly.
If you are in a newly developed area, do some research on the construction of the surrounding areas being developed to determine if they may effect your homes value.
What is a real estate broker?
A Licensed Real Estate Broker is a person who provides real estate services to another person in exchange for a commission. Brokers can also sponsor and supervise real estate sales agents.
What is title insurance?
Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.
If you take out a mortgage loan when you buy your property, your lender will require a loan policy of title insurance. This protects the lender’s interest in your property until your loan is paid off or refinanced. On the other hand, an owner’s policy of title insurance insures your ownership rights to the property.
How can I avoid private mortgage insurance?
The easiest way to avoid PMI is by putting 20% down payment; however, PMI can also be avoided if you only have 5% or 10% for the down payment. The way to accomplish this is via a first and second mortgage combination commonly referred to as 80/10/10^s or 80/15/5^s.
These two methods combine a first mortgage lien for 80% of the home price with a second mortgage lien for either 10% or 15% of the home price leaving the remaining 5% or 10% as the down payment. Because the first lien is at the magical 80% loan-to-value, there is no PMI required, even though a second mortgage is being piggybacked onto the financing thus allowing for the lessor down payment.
While the second lien terms are not as attractive as first lien rates, the second mortgage is still home mortgage interest and thus deductible as such on your federal tax return where PMI is insurance and offers no deduction.
Another way to avoid paying PMI is to make a down payment that is equal to at least one-fifth of the purchase price of the home; in mortgage-speak, the mortgage’s loan-to-value (LTV) ratio is 80%. If your new home costs $180,000, for example, you would need to put down at least $36,000 to avoid paying PMI.
How is interest calculated on a mortgage loan?
Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.
Is there a minimum credit score to qualify for a home mortgage?
What Are FHA Credit Score Requirements in 2020?
The Federal Housing Administration, or FHA, requires a credit score of at least 500 to buy a home with an FHA loan. A minimum of 580 is needed to make the minimum down payment of 3.5%. However, many lenders require a score of 620 to 640 to qualify.
It’s possible to get an FHA loan with a credit score of 580 or 500, depending on the size of your down payment. VA, USDA, and conventional loans do have a set minimum credit score but lenders will generally require a credit score of at least 620.
This table outlines the minimum credit scores typically needed to buy a house based on loan type: conventional, FHA, VA or USDA.
|Loan Type||Minimum FICO Credit Score||Intended For|
|FHA||580 with a 3.5% down payment or 500 with 10% down||Homebuyers with low- to moderate-income|
|VA||No set minimum from the VA although most lenders with require a 620 or higher credit score (some may allow a score as low as 580)||Veterans & Active Military|
|USDA||No set minimum from the USDA although most lenders will require a score of at least 640||Buyers purchasing a home in a designated rural area|
|Conventional||620 to 640||Buyers who want a traditional mortgage|
What benefits do I receive from private mortgage insurance?
Private mortgage insurance enables borrowers to gain access to the housing market more quickly, by allowing down payments of less than 20%, and it protects lenders against loss if a borrower defaults.
Private mortgage insurance protects the lender while mortgage insurance protection is for the borrower… It’s not uncommon for homeowners to mistakenly think that PMI will cover their mortgage payments if they lose their job, become disabled, or die.
Is an older home as good a value as a new home?
An older home may be just as valuable as a new home if these features are up to date and concern for maintenance costs is minimal. The quality of initial construction also affects value. Some would argue, due to increased regulation of building codes, that new homes are built better than older homes.
This is really just a matter of preference, but both newer and older homes offer distinct advantages, depending upon your unique taste and lifestyle.
Older homes can generally cost less than new homes, however, there are many cases where new homes can also cost less then older homes. Most new homes will not have any backyard landscaping and some don’t include any front landscaping either. With an older home, the landscaping is normally already completed and could have 10’s of thousands of dollars in landscaping done, which is included in the purchase price.
Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they’re concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve. A good Home Warranty plan protects you against unexpected repairs on many home systems and appliances for a full year or more after you move in.
In a new house, you can pick your own color schemes, flooring, kitchen cabinets, appliances, custom wiring for TV’s, electrical, computers, phones and speakers, etc., as well as have more upgrade options. Modern features like media rooms, extra-large closets and extra-large bathrooms and tubs are also more attainable in ground-up construction. In a used home, you rely largely on the previous resident’s tastes and technological whims, unless you plan to farm thousands into a remodeling and rewiring.
New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.
Builders have to follow very strict guidelines in new-homes and additions, especially in the West and Northwest, where earthquake safety standards must be observed. In general, new homes are usually more fire-safe and better accommodating of new security and garage-door systems.
Older homes can be better judged for their quality and timeless beauty. New homes that now possess a smooth veneer might reveal the use of substandard building materials or shoddy workmanship over time.
As you can see there are advantages and dis-advantages to each, but it really comes down to what fits you and what you are looking for in a home.
What is the difference between being prequalified and preapproved for a loan?
Prequalification tends to refer to less rigorous assessments, while a preapproval can require you share more personal and financial information with a creditor. As a result, an offer based on a prequalification may be less accurate or certain than an offer based on a preapproval.
If you’re prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a preapproval.
If you’re preapproved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment – and the lender is willing to give you a loan, basically meaning you’re approved!
You will usually be provided an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.
Can I pay my own property taxes and insurance?
You might be able to cancel your mortgage escrow account and pay property taxes and insurance on your own. Mortgage lenders often require borrowers to have an escrow account… The servicer keeps this extra money in the escrow account until your property tax and homeowners’ insurance bills are due.
When a loan is originated, the mortgage documents specify the escrow conditions. This has become a standard practice for all mortgages, including FHA, VA and conventional mortgages. Occasionally on conventional loans, FRFCU waives the collection of escrow requirement at closing if the member has a minimum 20% equity position in the property.
What do I do if I receive a property tax statement for a mortgaged property?
If you underpay your property taxes, you’ll have to make an additional payment. When you pay property taxes along with your mortgage payment, your lender deposits your property tax payment into an escrow (or impound) account… Both you and your lender should receive a notice from your local tax authority.
Many tax authorities will mail an informational copy of the real estate tax statement to the homeowner in addition to the Mortgagee (lender). However, there are some statements tax authorities do not forward to the lender, and in special cases they will need your assistance in obtaining the bill.
If you receive a statement for any of the following, please forward it to your lender’s office by mail or fax.
- delinquent real estate taxes
- supplemental or additional real estate taxes
- special assessments
- if the tax authority will not honor a bill request from another party