Navy Fellas Realty Group

Real Estate, Residential sales and purchase

How Does the Escrow Process Work when Buying a Home?

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You Ask, We Answer: How Does the Escrow Process Work when Buying a Home? When you purchase a new home, escrow is a word that you will hear numerous times from different parties. There are several types of escrow accounts that will be established, and you may be wondering where your money will go when placed in an escrow account or how it is applied to your transaction. By taking time to learn more about the escrow process, you can be a more informed buyer.

Your Initial Escrow Deposit

Within a short period of time after your offer is accepted by the buyer, you will be required to make an escrow deposit to the title company. Typically, you will write a check for the escrow deposit, and your title agent will hold the funds in a non-interest bearing account. These are funds that will be applied to your down payment at closing, and they serve as a good faith of your interest to proceed to the seller.

In the event you back out of the contract after the option period has passed, the escrow deposit may be handed over to the seller and would not be refunded to you.

Escrows for Taxes and Insurance

In addition to this type of escrow deposit, you may also hear about an escrow account for your property taxes and insurance. Setting up this type of escrow account may be a requirement by your lender, but it is not always required. Essentially, this is the account that your property taxes and homeowners insurance will be paid out of. You will pay a specified amount of money into the escrow account to establish a balance at closing, and a portion of your monthly payments will be applied to taxes and insurance as well.

The amount of money that is required at closing will be dependent on the month that you close as well as the annual costs for taxes and insurance.

Essentially, escrow accounts are established to pay for specified expenses that you are required to pay for as a buyer. The initial escrow deposit for the sales contract is a short-term type of escrow account, and the property tax and insurance escrow will remain intact until your mortgage is paid off in most cases.

Now that you know more about the escrows that you will be required to contribute money to as a buyer, you will be a more informed buyer when making your real estate purchase.

Don’t Miss Out On How To Handle Common Home Buying Pitfalls

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Don't Miss Out On How To Handle Common Home Buying PitfallsThe process of buying a home can be riddled with obstacles. However, you can avoid many of the most common home buying pitfalls with some advanced preparation. Below are some of the most frequent problems home buyers face, as well as tips for avoiding them. 

You Can’t Qualify For A Mortgage 

Nothing is more frustrating than learning that, even though you make enough money to afford your dream home, you cannot qualify for the mortgage you need. This may happen because your credit score is low or because you cannot verify your income in a way that satisfies your lender. To avoid this pitfall, investigate lenders’ requirements before you begin the application process and make sure you meet them all. 

You Discovered Problems With The Home After You moved In

In some cases, a home may seem perfect at first glance, but problems may be hiding in plain sight. You may move into the home and find that it has a pest problem, leaks, or a broken furnace. The best way to guard against this pitfall is to ask for a home inspection before you buy the property. 

The Appraisal Amount Isn’t High Enough 

Some homebuyers make an offer on a property and hope to get a mortgage to cover the purchase price, only to learn that the property doesn’t appraise for the amount of the requested mortgage. This is more likely in cases where the homebuyer is rolling closing costs into the mortgage. When this occurs, you can either pay the difference, ask the seller to lower the purchase price, or cancel the sale altogether. You can avoid this pitfall by investigating home values before you make an offer, or by saving up a large downpayment that would allow you to pay the difference. 

You End Up With Bad Neighbors 

Chances are that sellers will not be upfront about any problems they may have with neighbors, since these problems could potentially cause you to pass on the home. For this reason, it is always wise to do your own research before you move into any neighborhood. Consider driving by at night to look for any activity that might make you unwilling to live next door. 

The Closing Takes Too Long

It can be incredibly frustrating when it takes weeks or even months to close on the property you love. In some cases, this pitfall may be unavoidable. However, you can reduce the risk of a long closing by having all of your loan documentation ready in advance and avoiding the purchase of homes that may have an extra-long closing process, such as real estate owned properties and short sales. 

What’s Ahead For Mortgage Rates This Week – May 3, 2021

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What's Ahead For Mortgage Rates This Week - May 3, 2021Last week’s economic reporting included readings from Case-Shiller Home Price Indices, data on pending home sales, and a statement from the Fed’s Federal Open Market Committee. The University of Michigan released its Consumer Sentiment Index and weekly reports on mortgage rates and jobless claims were also published.

Case-Shiller: February Home Prices Rose at Fastest Pace Since 2006

National home prices rose at a seasonally adjusted annual pace of 12.00 percent, which was the fastest pace of year-over-year home price growth in 15 years.  Case-Shiller’s 20-City Home Price Index reported 11.90 percent home price growth year-over-year and 1.20 percent growth month-to-month. All 20 cities reported in
February.

Phoenix, Arizona held its lead with 17.40 percent year-over-year home price growth followed by San Diego, California with 17.00 percent annual home price growth. Seattle, Washington reported 15.40 percent year-over-year home price growth. Rapidly rising home prices were fueled by high demand for homes and slim supplies of homes for sale. Mortgage rates remained below three percent, but rising home prices presented obstacles for first-time and moderate-income buyers as they competed with cash buyers and well-qualified buyers.

The Federal Housing Finance Agency reported that home prices for single-family homes owned or financed by Fannie Mae and Freddie Mac grew by 12.20 percent year-over-year and 0.90 percent month-to-month.

Federal Reserve Holds Benchmark Interest Rate Range Steady

The Federal Open Market Committee of the Federal Reserve voted to hold its key interest rate range steady at 0.00 to 0.25 percent. Although the Fed noted that the economy was improving, Fed Chair Jerome Powell said that the Fed was far from achieving its dual goal of achieving maximum employment and an annual inflation rate of 2.00 percent.

Pending home sales data provided further evidence of economic improvement in March; Home sales for which offers were received but not completed rose to a year-over-year pace of 1.90 percent. Analysts expected pending home sales to grow by 5.40 percent after February’s negative reading of -10.60 percent growth for pending home sales. Pending home sales usually depend on mortgage approval to be completed; lower mortgage rates encouraged buyers to enter the market, but high home prices and strict mortgage approval requirements could cause some pending sales to fall through.

Mortgage Rates, Jobless Claims

Freddie Mac reported little change in average fixed mortgage rates last week. Rates for a 30-year fixed-rate mortgage averaged 2.98 percent and rose by one basis point. Rates for 15-year fixed-rate mortgages averaged 2.31 percent and were two basis points higher. The average rate for 5/1 adjustable rate mortgages fell by 19 basis points to 2.64 percent; discount points for fixed-rate mortgages averaged 0.70 percent and rates for 5/1 adjustable rate mortgages averaged 0.30 percent.

New jobless claims fell to 553,000 initial claims filed as compared to the prior week’s reading of 566,000 first-time claims filed in the prior week.

Boosting Your Credit Score To Qualify For Better Rates

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Boosting Your Credit Score To Qualify For Better Rates

The better your credit score, the better the mortgage interest rate for which you should qualify. That can mean thousands of dollars saved over the life of the mortgage. If your credit score needs improving, get started prior to your search for a new home.

Pay Bills On Time
The simplest way to boost your credit score is by ensuring your bills are always paid on time. Nothing harms a credit score more than late payments.

Check for Credit Report Errors
Check your credit reports for any errors. These issues are not uncommon, and can really impact your score. Each of the three major credit card reporting bureaus –Equifax, Experian, and TransUnion –will provide you with a free annual report.

Credit Utilization Rate
Look into your credit utilization, or CU, rate. The CU rate is another big credit score consideration. Your CU rate is the amount of credit authorized versus the amount you use. It’s one reason maxing out your credit cards is not a wise move.

Never allow your CU rate to exceed more than 30 percent of your available credit. In simple terms if you have $1,000 in available credit, never use more than $300. High CU rates are a red flag, as they indicate someone with potential financial problems. For best results, keep your CU rate as low as you can.
Calculate your CU rate by adding up the credit limits on all cards, as well as the balances. Divide the total balances by the total credit limit, then multiply by 100. That amount is your CU rate percentage.

Reduce Your Debt
If you carry credit card debt, pay it down as much as possible. That also helps lower your CU rate.

Avoid Opening New Credit Card Accounts
Do not open new credit card accounts while trying to boost your credit score.   A new account lowers the age of your accounts, affecting your credit history and lowering the CU rate.

Do Not Close Unused Credit Card Accounts
Do you have credit cards you never use? You might think closing them would boost your credit score, but that is not how it works. When you close the account, the amount of credit you have drops. That triggers a CU rate increase.

Refinancing Credit Card Debt
If you have substantial credit card debt, consider refinancing all of it with a personal loan. You should receive a lower interest rate with your balances now merged into a single monthly payment. This also causes your CU rate to go down.

How Long Will It Take?
How long it will take to improve your credit score depends on the severity of your credit problems. Those with serious credit issues may find it takes years to raise their scores significantly, but most people should see improvement within a few months. Then it is time to think about mortgage shopping!

Do You Need a Real Estate Attorney to Help Close Your Home Purchase? Let’s Take a Look

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Do You Need a Real Estate Attorney to Help Close Your Home Purchase? Let's Take a LookWhen buying a new home, you may have a close eye focused on your budget and expenses, and your goal may be to keep related expenses to a minimum. However, you may also be well aware that a real estate purchase is a legal transaction, and you may be wondering if you need to pay for legal services from a real estate attorney. With a closer look, you can make a better decision that is right for your home buying plans.

The Legal Forms Used With A Typical Transaction

The majority of real estate contracts will be written using standard legal forms. These are legally binding forms with clauses that protect buyers and sellers alike. While they are standard forms, you do want to read the forms in their entirety and understand your obligations before signing the contract. Keep in mind that you are not required to use these forms, and you can request an attorney to prepare a separate contract for you. However, these are commonly used forms that real estate agents typically will use.

The Services Of A Real Estate Agent

A real estate agent is not a legal professional, and your agent likely will not be licensed to practice law in the state. However, the agent can explain your obligations with a standard contract so that you have a better understanding about what you are committed to. Your real estate agent may refer you to a real estate attorney if you require a special contract to be drawn up or if you are not comfortable with different clauses in the standard forms.

When Special Situations Arise

The standard real estate contracts will typically be feasible for use with most transactions, but there are special situations that may arise from time to time. For example, you may only want to purchase a portion of a large estate. While the seller would need to subdivided, your attorney would need to review special documents to ensure the transaction is legal. Perhaps you want to purchase real estate in a corporation or under another entity, or you want to protect your rights when purchasing property with a partner who you are not legally married to.

While real estate agents are not legal professionals, they are able to prepare standard contract forms for you and explain them to you. Because of this, many people will not need to pay for additional legal services, but each situation is unique. When you speak with your trusted mortgage professional about your upcoming purchase, he or she can help you to learn more about services an attorney may provide that your real estate agent may not be able to.

Buying a Home? What to Do if Problems Are Found During the Final Home Inspection

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Buying a Home? What to Do if Problems Are Found During the Final Home InspectionAs a home buyer, you may go through a number of different steps to ensure that the property that you purchase is in great condition. For example, you may complete an initial walk-through or even several home tours before you make an offer. You may also order a property inspection and even negotiate for the seller to make some repairs on your behalf.

A day or two before your closing date, you may set up a final home inspection to ensure that the home is still in the same condition as the initial walk-through. In most cases, there will be no problems with the final inspection. However, in the event that there is a problem with the final inspection, you will need to know how to handle it.

Work With Your Real Estate Agent

As a first step, you should discuss the issues with your real estate agent. Your real estate agent may have some strategies or ideas that can be used to help you overcome the issue in the best possible way. Minor issues may be resolved with a last minute negotiation to the sales contract. More significant issues may need to be rectified prior to closing, and you may need to delay the closing by a few days or longer until any issues are resolved.

Consider Walking Away

It may be rare for a property to have issues during the final home inspection, and most issues that do arise at this late stage in the buying process may be resolved through negotiations between the buyer and seller. However, in the event that the seller plays hardball and refuses to work with you to resolve the matter, or in the event that the issue is so significant that you are not comfortable with it, it may be an option to walk away from the property.

In most sales contracts, wording is present that requires the property to be delivered to the buyer in the same condition as it was when the contract was signed less general wear and tear. Walking away may not be ideal, but it may be the best option in some cases.

Making a final home inspection is not a requirement, but it is advisable. It can ensure that the home your purchase is in the same condition as it was when you did the initial walk-through, and you can apply these tips if you discover that the home is not in the same condition.

Buying in a Sellers Market

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Buying in a Sellers MarketHome buying is often made possible or unreachable due to the local and national economy. Fortunately, what goes up, must come down. So, for buyers who can wait, economic changes in supply and demand can create opportunities. These shifts in real estate are known as buyer’s markets and seller’s markets. 

The seller’s market specifically tends to be the harder one for homebuyers. In short, sellers see a lot of demand, so they can command higher prices for a sale. Things are competitive, sell fast, and inventory is low. 

For buyers, it’s a headache, but there are ways of handling the challenge.

Understand Your Local Market Better

Many people might throw out the statement locally, “Oh good luck, it’s a seller’s market,” but that’s not necessarily the case until you can confirm it objectively. It may be that certain neighborhoods have high demand, but overall regional inventory is available. 

Understanding your local market as a whole and by neighborhood gives a buyer a far better idea of what’s really going on and how to compare homes in different locations.

When Making an Offer, Go With Your Best Offer First

The worst that can happen is someone responds “no.” You didn’t really lose anything with a rejected offer. However, if they accept your offer as-is, then you may have scored a better deal than trying to hedge and bargain down after the fact. Negotiation can be more difficult in a seller’s market, and sellers can be quite motivated to drop a negotiation the instant a second buyer becomes available.

Be Prepared to Move Quick and Bid Fast

Sellers’ markets go fast. Bids are taken in a day and a sale happens the next day or by that evening. If going out to buy, you need to be ready to make an offer on-site. That means also having your pre-approval for financing squared away and having enough liquid assets to cover the down payment along with enough cash to cover closing fees as well. If you’re not wired up already, you will lose sales waiting for your financing prep to get taken care of.

Have Cash, Will Talk

Buyers who are able to show they have the cash to purchase make the process go much more smoothly. Sellers are far more interested in parties who can show they are a firm sale versus those with financing approval still pending. 

Known as earnest money, a deposit placed on a home with larger than the minimum amount will get attention and commitment faster than someone with a nice bid but waiting for financing approval, thereby delaying the seller.

Anticipate Non-Cash Sweeteners

Sellers often have interests or desires to meet when letting go of a home. A buyer who can fathom what these are can improve a buying position considerably.

In some cases, it might be as simple as agreeing to additional time for a seller to move out. 

In other cases, the seller might have an attachment to the home that they want to keep protected versus seeing it destroyed by a new seller. 

Finding these things out can help a buyer make commitments in a sale that make it better for the seller and for the buyer versus other bids.

Sellers’ markets are hard, but there are ways around the challenge and getting into a home you want. By being flexible, creative, and ready you stand a better chance than bidders with half a heart in but one foot still hanging out.

What’s Ahead For Mortgage Rates This Week – April 26, 2021

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What's Ahead For Mortgage Rates This Week - April 26, 2021Last week’s scheduled economic news included readings on sales of new and previously-owned homes and weekly reports on jobless claims and mortgage rates.

March Sales of  Previously-owned Homes Dip; New Home Sales Rise

Sales of single-family homes fell in March as demand for homes exceeded availability. 6.01 million previously-owned homes were sold in March on a seasonally-adjusted annual basis; analysts expected a pace of 6.11 million sales based on February’s reading of 6.24 million sales of existing homes. The March reading for sales of pre-owned homes was 3.70 percent lower year-over-year and was the lowest sales pace reported since August 2020.

High demand for homes coupled with low inventories of available homes constricted sales. Lawrence Yun, chief economist of the National Association of Realtors® said, “Sales for March would have been measurably higher had there been more inventory.” Mr. Yun also addressed affordability concerns arising from lean inventories of homes and high demand. “Without an increase in supply, the society’s wealth division will widen with homeowners enjoying sizable equity gains while renters will struggle to become homeowners.” 

The average price of a single-family home in the U.S. rose to $329,100 in March, which indicates year-over-year growth of 17.20 percent in home prices. While a six-month supply of homes for sale indicates an average inventory, the March inventory of homes for sale rose to a 2.10-month supply from February’s 2.0- month inventory of homes for sale.

Shortages of existing homes for sale boosted March sales of new homes, which sold at a seasonally-adjusted annual pace of 1.02 million sales. Analysts expected 888,000 new homes to be sold year-over-year in March based on February’s sales pace of 846,000 new homes sold. Rapidly rising materials costs created obstacles for builders and limited their ability to meet the need for affordable homes, but they raced to meet the ongoing demand for homes.

Mortgage Rates Mixed; Jobless Claims Fall

Average mortgage rates fell below three percent last week; the rate for 30-year fixed-rate mortgages dropped by seven basis points to 2.97 percent. Rates for 15-year fixed-rate mortgages averaged 2.29 percent and were six basis points lower. Rates for 5/1 adjustable rate mortgages rose by three basis points to an average rate of 2.83 percent.

Jobless claims were lower last week with 547,000 new claims filed; analysts expected 603,000 initial claims filed. 586,000 first-time claims were filed in the prior week. Claims were also lower for ongoing claims filed. 3.67 million continuing jobless claims were filed as compared to 3.67 million continuing claims filed in the prior week.

What’s Ahead

This week’s scheduled economic reports include readings from Case-Shiller Home Price Indices, data on pending home sales, and the University of Michigan’s consumer sentiment index. Weekly readings on mortgage rates and jobless claims will also be published.

Home Buying Horror Stories: How Buying a Home Can Go Wrong – and How to Avoid These Mistakes

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Home Buying Horror Stories: How Buying a Home Can Go Wrong - and How to Avoid These MistakesWhen you buy a home, you may have dreams of settling into a beautiful new space that meets your needs and that your family can feel comfortable in. While many will enjoy this vision of domestic tranquility after taking ownership of their dream home, others have had their dream turn into a veritable nightmare due to some simple mistakes or oversights on their part. By understanding these mistakes, you can avoid making them yourself.

Paying Too Much For The Property

One the surface, the main cost of buying a home relates to the sales price, and it is true that your monthly housing payment may be the primary related expense. However, other expenses such as homeowners insurance, property taxes, repair and maintenance costs, utilities and more will all need to be factored into the cost of home ownership. Some buyers believe that because an online calculator or a lending professional tells them that they can afford a high priced home that it is the case. You can review your budget and estimate all related home expenses to determine how affordable a specific property is for you.

Finding Out That The Location Is Undesirable

There are many things that can make a location undesirable, and you should take time to become comfortable with the location before making an offer. Consider, for example, if the neighbors like to throw loud parties on the weekend or if there is a teen driver that likes to speed down the street. If you are buying a property with open land or vacant buildings around it, consider researching zoning, and think about future uses for these properties that could influence value and desire.

Discovering That Your Property Is In Bad Condition

Some home buyers discover after purchasing a property that it is not in the best condition, and some even learn that their home needs tens of thousands of dollars of repair work or more. Even properties that appear to be in great condition on the surface may have hidden issues with the foundation, structure, roof, pipes or electrical work, to name a few. You can order a property inspection to learn more about the true condition of a property.

These are among the most common issues that can turn a dream home into a nightmare. When you work with a local real estate agent when buying a home, your agent can help you to avoid unpleasant and costly mistakes such as these.

The Three Essential Habits That Successful Home Buyers Must Embrace

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The Three Essential Habits That Successful Home Buyers Must EmbraceWhether you are preparing to purchase your first home or it has been many years since you last walked through the home buying process, you may be starting to feel overwhelmed at the thought of all of the work that lies in front of you. From concerns about finding the right home to the physical act of relocating all of your belongings after the closing, there is certainly a lot to think about. While each home buying transaction is unique, the most successful home buyers have typically adopted a few behaviors. You may keep these in mind to help you navigate through the process with success.

Keep An Eye On Your Budget

Financial stress when buying a home is common. You may have saved for years to afford your down payment, but there are various expenses that some may have not calculated or planned for. It is important to leave extra funds available for unexpected expenses, such as paying for the appraisal up-front on the home you have fallen in love with. Likewise, keep a close eye on your budget so that you are aware of your financial situation at all times.

Be Available And Flexible

It is imperative that you remain available and flexible as much as possible. Your real estate agent may call you at the last minute with a great new listing that has come on the market, and you may need to be flexible with your schedule to see this property before other buyers do. In addition, you may need to be flexible and accommodating with regards to contract negotiations, working with title company requests and more.

Seek Advice And Knowledge

Buying a home does not have to be stressful, but it also is not something that you do every day. There is a lot for even an experienced home buyer to learn, and you should be prepared to seek advice and to educate yourself along the way. Ask questions as necessary, and use the Internet for additional research.

Home buying is a process, and you may consider taking one day at a time as you proceed through the journey to reach your ultimate goal. A skilled real estate agent can guide you through the process and can help you to more successfully reach your goal. Reach out to a real estate agent today to begin looking for your new home.