Lee Morof's Real Estate Blog

Like credit cards or car loans, some mortgages allow borrowers to have co-signers on the loan with them, enhancing their application. However, a co-signer on a mortgage loan doesn’t have the same impact that it might on another loan. Furthermore, it poses serious drawbacks for the co-signer.

Mortgage Co-Signers

A mortgage co-signer is a person that isn’t an owner or occupant of the house. However, the co-signer is on the hook for the loan. Typically, a co-signer is a family member or close friend that wants to help the main borrower qualify for a mortgage. To that end, he signs the loan documents along with the main borrower, taking full responsibility for them.

When a co-signer applies for a mortgage, the lender considers the co-signer’s income and savings along with the borrower’s. For instance, if a borrower only has $3,000 per month in income but wants to have a mortgage that, when added up with his other payments, works out to a total debt load of $1,800 per month, a lender might not be willing to make the loan.

If the borrower adds a co-signer with $3,000 per month in income and no debt, the lender looks at the $1,800 in payments against the combined income of $6,000, and may be much more likely to approve it.

Co-Signer Limitations

Co-signers can add income, but they can’t mitigate credit problems. Typically, the lender will look at the least qualified borrower’s credit score when deciding whether or not to make the loan. This means that a co-signer might not be able to help a borrower who has adequate income but doesn’t have adequate credit.

Risks of Co-Signing

Co-signing arrangements carry risks for both the borrower and the co-signer. The co-signer gets all of the downsides of debt without the benefits. He doesn’t get to use or own the house, but he’s responsible for it if the mortgage goes unpaid.

The co-signer’s credit could be ruined and he could be sued (in some states) if the borrower doesn’t pay and he doesn’t step in. For the borrower, having a co-signer adds an additional level of pressure to make payments since defaulting on the loan will hurt him and his co-signer.

As always, it’s a good idea to speak with your trusted real estate professional for advice in your specific situation.

U.S. military veterans have opportunities to enjoy some richly-deserved benefits in other aspects of their lives, including some special options for financing their homes. VA loans may give active military personnel, retired veterans, and sometimes surviving family members of veterans the ability to purchase homes that might not prove available to them through more conventional mortgage loans.

But the mere fact that you can do a thing doesn’t necessarily mean that you should. In some circumstances, military home seekers may find other types of loan options more amenable to their specific needs.

If you’ve decided to pursue a mortgage loan during or following your military career, you may want to examine these considerations before leaping into a VA loan application.

Loan Qualifications and Limits

A VA loan can open the door to home ownership for cash-strapped or credit-challenged military personnel who might otherwise struggle to get a conventional mortgage loan. This type of loan offers tremendous flexibility in qualifying factors such as credit scores and debt-to-income ratios; in fact, VA loans may come with no maximum debt ratio at all.

Potential For Zero Down Payment

Additionally, VA loans do not require the down payment typically needed for a more conventional or FHA loan. (The only other loan with no down payment requirement, the USDA loan, applies to rural areas and comes with some prohibitive income restrictions.)

The elimination of a mandatory down payment, coupled with the relaxed financial qualifications, can make a VA loan the most sensible choice for individuals who suffer from limited resources, “upside-down” credit and short credit histories.

Additional Qualifications To Consider

That said, VA loans usually impose some qualifications of their own — qualifications which may not appeal to some buyers. For one thing, a VA loan can only go toward the primary place of residence, not a summer cottage or second home. Military personnel who already own a home may therefore find this restriction a deal-breaker for their specific needs.

VA Loan Limits

VA loan amounts may also impose varying guaranty limits depending on where you live. The guaranty limit refers to your VA entitlement, the portion of your loan that escapes the down payment requirement.

In most counties, that limit currently levels off at 435,100, although in several major metropolitan markets it can range as high as 679,650. If you want to buy a more expensive home, you may end up making a down payment — potentially making your VA loan competitive against other loan options.

As always, your best move is to call your trusted real estate professional to discuss the VA home purchase process and find out if it’s the best option for you.

Sustainable materials, energy savings and smart home technology are high on the list of buyer wants in a home. But there are some other architectural and design trends that will change the way Americans live this year and beyond.

When planning a remodel, it pays to pay attention to green features, as well as to improved floor plans that will make a home more comfortable, more appealing and more functional. 

Here’s a list of what’s hot right now:

Natural and Sustainable Materials

Eco-consciousness and concerns about individual health and wellness prompted a return to natural woods and stone, as well as organic forms and living greenery. All are prominently featured in today’s show houses and and on design shows. For both residential and commercial design, there is renewed emphasis on the importance of natural light, views, air quality and open space as elements that affect not only mood and function but also health and well being.

Reclaimed and Recycled Products

No matter what the design or decor, there is a way to incorporate previously used materials. Recycled plastic is commonly used for roofing tiles, carpet, insulation, composite lumber and decking material, decorative trim and landscaping rocks. Reclaimed beams, distressed wood flooring, stunning countertops fabricated from recycled glass, wood chips and even cardboard, are only a few trendy possibilities. For a planned remodel, be sure to investigate what’s available, including “repurposing” used building materials like old windows, vintage gates or antique furniture.

LEED Certified Construction

Resource conservation and energy-savings are a way of life and worthy of attention. In some ways, Europe and Asia lead the U.S. in terms of conservation, but one way to assure that new homes are built to a certain standard is to insist on LEED certification, which stands for Leadership in Energy and Environmental Design. It’s a compliance and rating system for both residential and commercial construction that is recognized internationally.

Energy-Star Rated Appliances, Systems, Fixtures and Fittings

It would be difficult today to buy a new appliance or furnace that is not energy-efficient. But in an older home, even if existing appliances, faucets and fixtures, heating and cooling systems are still operational, it might be wise to consider replacing them. Sometimes the savings on monthly water and electricity alone makes financial sense. And new replacements always add to a home’s appraised value.

Rooftop Solar Panels

There is ample evidence that buyers will pay a premium for solar homes. Although the initial investment is relatively high, an owner will benefit from an immediate reduction in energy cost, and the added property value might make such an investment worthwhile.  

Smart Home Technology and Home Automation

Buyers today almost universally want a wireless security system and some form of programmable temperature control. Additional smart home features high on the list of consumer wants include lighting controls, wireless hubs that integrate entertainment and convenience features, and trendy apps that allow control of home functions via smart phone, whether from across the block or across the globe. 

Owners who are motivated to sell will look to these buyer wants in order to be competitive in today’s hot real estate market.

The major problem that the vast majority of buyers will run into – especially when purchasing their first home – has to do with a lease agreement that is still active with their apartment complex at the time of the purchase. If you locate the perfect home in February but your lease isn’t over until August, you can’t be expected to wait around.

But at the same time, the remainder of that lease agreement could represent thousands of dollars that you’ll be paying to essentially “live” in two different places at the same time.

Luckily, all hope is not lost. There are a variety of steps that you can take to help mitigate your remaining financial risk at your apartment as much as possible.

Breaking Your Lease Early: What You Need to Know

First, look at your existing lease agreement and make sure you understand their early termination policy. This will outline the various acceptable ways, usually dictated in large part by state and other local laws, that you can break a lease early without being forced to pay through the duration of the agreement itself.

Much of this will vary based not only on the state, but also the property manager in question. Your property manager may very well allow for early termination for home buyers – particularly if they’re in an area where they know they can rent the apartment quickly.

This is not always the case, though, which is why you need to begin by reviewing the situation thoroughly so you know what you’re dealing with.

Next, you should review what state laws have to say about your landlord’s duty to find a new tenant in the area of the country that you’re living in. In some states, for example, your landlord MUST make “reasonable efforts” to re-rent your unit as quickly as possible, regardless of the reason you’ve decided to leave.

Many state housing laws require landlords to make every effort to keep their own losses at a minimum – meaning that you may not have to pay much, if anything at all, to break your lease early provided that you give said landlord enough notice. 

Why Conversations Matter

Finally, you’ll want to sit down with your landlord face-to-face (if you haven’t already done so) and explain to them exactly what is going on. Landlords are people too and oftentimes they can be more sympathetic than you think.

According to an authority on the matter, the “worst case scenario” for most renters-turned-buyers breaking a lease agreement is often that they’ll need to pay an early termination fee to break their agreement early. This can be as little as one month’s rent to “a few month’s rent” depending on the situation.

At the very least, this is better than being forced to pay every month for the remainder of your term.

In the end, it’s important for you to understand that you should not let anything get in the way of buying the home you’ve always wanted – even if you’re currently living in an apartment with an active lease agreement.

You just need to know as much about the specifics of that agreement as possible so that you can move into your new home while mitigating as much risk as possible for both yourself and your landlord at the same time.

It’s wise to consult with your trusted real estate professional about the implications of your specific situation.

Last week’s economic releases included reports on Non-Farm Payrolls, ADP payrolls, and the national unemployment rate. Weekly readings on mortgage rates and new jobless claims were also released.

Public and Private Sector Jobs Show Mixed Readings

ADP Payrolls reported 235,000 private sector jobs added in February as compared to January’s updated reading of 243,000 jobs added. Analysts estimated 205,000 private sector jobs would be added, but this was based on the original reading of 234,000 jobs added. February was the fourth consecutive month when private sector job growth exceeded 200,000 jobs.

According to the federal government, Non-Farm payrolls added 74000 public and private-sector jobs in February for a reading of 313,000 jobs added. February’s gain was the largest in a year and a half. Analysts expected 222,000 jobs added in February. Analysts cited solid economic strength as contributing to higher-than-expected job growth.

Strong economic growth can encourage prospective home buyers to move from renting to buying a home, but first-time and moderate-income buyers continued to face headwinds including short supplies of available homes and strict mortgage requirements. Rising mortgage rates have also impacted buyers’ ability to qualify for mortgage loans.

National unemployment was unchanged at 4.10 percent.

Mortgage Rates, New Jobless Claims Rise

Mortgage rates rose again last week; the average rate for a 30-year fixed rate mortgage gained three basis points to 4.46 percent. 15-year fixed rate mortgage rates rose by four basis points to 3.94 percent. 

The average rate for a 5/1 adjustable rate mortgage rose by one basis point to 3.63 percent. Discount points held steady at 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

New jobless claims rose to 231,000 new claims filed as compared to an expected reading of 220,000 new claims and the prior week’s reading of 210,000 first-time claims filed. 

Analysts said that job growth remains robust regardless of higher first-time jobless claims. While layoffs rose in February, analysts said that anomalies including bad weather made it difficult to project February readings for first-time jobless claims.

What‘s Ahead

This week’s scheduled economic releases include readings from the National Association of Home Builders, Commerce Department reports on housing starts and building permits issued and the University of Michigan’s report on consumer sentiment. Weekly readings on mortgage rates and new jobless claims will also be released.

Do you find yourself staring out the window, longing for an early sunrise, hot days and late evenings? With spring just around the corner, it might feel like summer is a lifetime away.

However, the good news is that you can be productive around the home while you wait for summer to arrive. Let’s take a quick look at three easy do-it-yourself projects that will keep you busy until the summer sun is shining.

Add A Splash Of Spring-y Color

As long as you are willing to do the prep work, painting is one of the most straightforward home improvement projects you can undertake. It is also the best way to put your own personal touch in each room in your home.

If you haven’t painted before, it is best to start with a single room. Spend an hour or two watching instructional videos on YouTube before you head out and begin buying supplies.

The colors that you choose are up to you, but if you are going for a ‘spring’ look, consider pastel colors including soft greens, powder blues and creamy whites.

New Planters For The Garden

If you have a flower or vegetable garden, building new planters is a fun weekend DIY project. You can make planters out of wood, but a more durable option is to use granite, marble or another hard stone.

Simply buy four slabs of stone and a tube or two of stone adhesive. Line up the slabs together and, using a ruler, ensure they are at 90-degree angles. Caulk or glue the slabs on the inside of where they meet and then tape them together on the outside to hold them until the glue cures.

Bird Seed Rings For Your Feathered Friends

Do you enjoy the sound of birds around your home? If so, bird seed rings are the perfect treat to attract them. Creating these delicious treats is easy. Combine gelatin, corn syrup and flour into a thick paste. Mix this paste with a bag of bird seed, ensuring that it is fully combined. Then mold the rings together using a donut pan. Hang these tasty treats outside for your feathered friends to enjoy.

Investing your time in home improvement projects is an excellent way to wait out the sunny days of summer. If you decide that it’s too much work to renovate and that you would rather explore a new home, give us a call. Our friendly mortgage team is happy to help you get ready for your next purchase.

Often times, home buyers can be disappointed when they find their dream home only to discover they are not able to get a mortgage to purchase the property. There are methods that potential buyers can use to ensure this does not happen to them.

One of the options is to ensure you obtain a pre-qualification from your lender. It is important to understand the difference between a pre-approval and a pre-qualification. While both are helpful, they do not carry the same weight.

What are the differences between these options?

A pre-qualification allows a borrower to determine how much money they may be able to borrow. For most borrowers, this allows them to start the house-hunting process with a mortgage amount in mind. Borrowers should understand, while the loan amount can be calculated, changes in interest rate as well as the borrowers credit are not evaluated in this process.

In general, the lender will request specific information from the borrower including income and expenses as well as ask about their credit. None of this information is typically verified by the lender through an underwriting process before sending a pre-qualification letter.

On the other hand, a pre-approval requires the borrower to provide a number of documents to the lender, typically the same documents borrowers need to apply for a loan. The documentation supplied to the loan professional is then treated as a full purchase loan application and run through underwriting to secure a conditional commitment from a bank or mortgage lender.

Oftentimes, this difference between the two options leads borrowers to speculate as to whether a pre-qualification is useful.

Why pre-qualification helps in your home hunting?

There are many valid reasons why potential homebuyers should ask about pre-qualifying for their mortgage. Some of these include:

• Home prices – if a borrower is eligible for a mortgage of $200,000 they will know they will have to seek homes in a specific price range. If a borrower is only able to put down 10 percent, they know the maximum home price they can afford is $220,000.
• Down payments – in most cases, borrowers who can afford to put down a large down payment will have more options available to them. In some cases, understanding how much mortgage a borrower may qualify for beforehand allows them to save additional money for a down payment.
• Estimates of dollars needed – another advantage to pre-qualifying is borrowers can get an idea of what additional closing costs they may need to qualify for a mortgage. This can be very helpful for a first time home buyer.

Pre-qualifying for a loan can save a home buyer from being disappointed. There are few things that are more upsetting than finding a home you love only to discover you are not eligible for the loan you need in order to purchase that home.

Typically, when you are seriously looking for your next home it would be a good idea to move to the full pre-approval process in order to get the most leverage when you find the home of your dreams.

As always, it’s a good idea to consult with your trusted real estate professional for advice when preparing to look for your new home.

Selling your home is one of the most stressful things you’ll ever go through and one of the most important decisions you’ll ever make. However, there’s a lot more to selling your home than just sticking a sign out in the front yard. Most likely, your home will need a little work before it is perfect.

Therefore, you’ll have to decide whether you need to take care of home improvement issues yourself or, to sell with the expectation that the buyer will be the one to do so. We put together a few pros and cons to doing it each way to make your decision a little easier.

Do The Improvements Yourself

Choosing to complete needed improvements yourself means that you will likely get a higher sales price for your home. In addition, with less work to do, it opens up your home to more buyers than one that is a fixer-upper does. Selling will usually be faster and closing more likely to go smoothly.

On the other hand, chances are good that you will not get the full value you put into those improvements at the closing table. In addition, when you are moving, money may be tight making this an even more difficult proposition.

Sell It As A Fixer Upper

The main benefit of selling your home as a fixer-upper is that you will not have to put that money in up front. If you are in a difficult financial situation or selling your home at a loss, this may be necessary. Additionally, you aren’t the one that has to deal with the contractors and calling around to get quotes on all of the work.

One of the downfalls to selling your home as a fixer-upper is that you’ll likely get a lower price and some buyers won’t even come out and check out your house if they think there is too much work that needs to be done. Plus, depending on the type of work that needs to be done, you may wind up in a pickle during the inspection process. Certain problems can prevent lenders from closing on the deal. You often find the closing process is slower and fraught with more concerns.

The reality is, it really depends on whether doing the improvement yourself or selling it as a fixer-upper is the right choice. Discuss your concerns and speak honestly about your financial picture with your trusted real estate professional and perhaps you will have a better idea of which of these options is the smart choice for your situation.

When you are considering purchasing a home , understanding the lending guidelines regarding a down payment is important. 

Here are a few key tips to consider:

Gifting of a Down Payment

There are some programs that will allow you to use a gift for your home down payment. However, before you assume this, make sure you talk to your loan officer. Generally speaking, the lender will require the person making the gift to provide a letter stating the money was a gift and does not require repayment.

Windfalls as a Down Payment

When people hit the lottery or come into money through an inheritance, one of the first things they may consider is buying a new home. However, it is important ot keep in mind that lenders will typically want to know exactly how you came up with your down payment.

Borrowers still need to show a “paper trail” of how they came into money. If your down payment amount has not been “seasoned” the lender may not accept your loan.

What is a Seasoned Down Payment?

Generally speaking, your loan officer will want a “paper trail” to document your down payment. Most lenders require down payment funds to be at a minimum 60 days old. For example, let’s assume a borrower did win the lottery: If they deposit the funds into their checking account and leave it there for 2 months or more, the funds would be considered seasoned.

However not all lending guidelines are the same. Some lenders require even more seasoning to consider the money in your account truly yours. So it’s a good idea to plan well ahead of your purchase date to get your down payment funds in your account if you plan on getting money from another source.

Lender restrictions on down payment funds are fairly common. If you are uncertain if your funds meet the lender’s criteria, talk to your loan officer. In most cases, a lender will require at least one-half your down payment fall into the category of seasoned funds.

The One Place You Can Borrow For Your Down Payment

Some borrowers may use their retirement account or other savings to make their home down payment.  And most lenders are perfectly fine with you borrowing against your own savings in a 401(k) or IRA account. Of course you will likely want to discuss the tax implications with your accountant or financial advisor before making these withdrawals.

Don’t wait until the last minute to discuss your down payment with your real estate agent because you may wind up disappointed. Keep in mind, your real estate professional is available to help guide you through the whole process of buying your new home.

Last week’s economic releases included readings on new home sales, pending home sales and Case-Shiller Home Price Indices. Construction spending and consumer sentiment reports were also released, along with weekly readings on average mortgage rates and new jobless claims.

New Home Sales Drop in January

New home sales were reported at a seasonally-adjusted annual rate of 593,000 sales in January according to the Commerce Department. Analysts expected a rate of 693,000 sales based on December’s upwardly revised rate of 643,000 sales of new homes. January’s reading was 7.80 percent lower than for December; January’s reading was one percent lower than for January of 2017.

The average price of a new home was $323,000, which was 2.40 percent higher than for January 2017. The current supply of new homes for sale is 15 percent higher year-over-year, which is expected to ease low inventories of available homes.

Meanwhile, pending home sales were 4.70 percent lower in January than for December, which was unchanged as compared to November. Analysts said that sales activity, which is typically slow in January, was not likely a concern overall.

Case-Shiller Reports Higher Home Prices in December

Home prices were 6.30 percent higher year-over -year in December according to Case-Shiller’s 20-city home price index and were 0.60 percent higher month-to-month. The top three cities leading year-over-year home price growth were Seattle, Washington at 12.70 percent, Las Vegas, Nevada with 11.10 percent growth and San Francisco, California with 9.20 percent growth in home prices.  

None of the 20 cities in the index saw home prices fall in 2017 even after adjustments for inflation.

Construction spending was unchanged in January as compared to analyst estimates of 0.40 percent growth in spending. Builders cited concerns over higher materials prices and shortages of lots and skilled labor. Winter weather was also a factor in lower construction spending.

Mortgage Rates Rise New Jobless Claims Fall

Freddie Mac reported higher average rates for fixed rate mortgages last week; rates for 5/1 adjustable rate mortgages were lower on average. Mortgage rates for a 30-year fixed rate mortgage averaged three basis points higher at 4.43 percent. Rates for a 15-year fixed rate mortgage averaged 3.90 percent and were five basis points higher.

The average rate for a 5/1 mortgage was three basis points lower at 3.62 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages. Mortgage rates rose for the eighth consecutive week, which caused concerns about affordability for first time and moderate-income home buyers. Combined effects of rapidly rising home prices and higher mortgage rates may sideline buyers.

New jobless claims fell by 10,000 to 210,000 first-time claims filed last week. Analysts expected 226,000 new claims based on the prior week’s reading of 220,000 new claims filed. In other news, the University of Michigan reported a lower reading for consumer sentiment in February with an index reading of 99.7 against an expected reading of 100.0 and January’s reading 0f 99.9.

What‘s Ahead

This week’s scheduled economic news includes multiple readings from the labor sector along with weekly reports on mortgage rates and new jobless claims.