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The Real Estate Corner
Financing Your Home Purchase
ELLENVILLE – Our featured columnist for this month is Gail Vesely. Many people have done their homework before starting the process of looking with a realtor to find the home of their dreams, but others are naive to all the ins and outs of how lending companies do business.
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Our featured columnist for this month is Gail Vesely.
Many people have done their homework before starting the process of looking with a realtor to find the home of their dreams, but others are naive to all the ins and outs of how lending companies do business.
When a buyer steps into my office with a pre-approval letter in hand, I get excited, that means they have talked to a lender, have an understanding of how things go and we hit the road looking at homes that fall into their budget and with a checklist of needs and wants. Wait, what? You want to look at foreclosures? Your letter says you are approved for FHA financing; most homes on the foreclosure market are not financeable, let alone FHA qualified. “Oh, but why? We can buy a home at a very low cost and do the work ourselves,” is usually the first thing I hear. If a bank does approve you for a home renovation loan, the first thing they tell you is the work must be done by qualified contractors. No DIY for this type mortgage. A FHA inspector will come to the house and give you a long list of things that the bank will require you to have repaired or replaced.
Even if you don’t want, say, a new deck, if the bank thinks the present one is not safe, you must replace it. The buyer may say, “we will do that later,” about many issues. Sorry, no, it has to be done before the bank will give you a mortgage. (Somewhere, somehow (probably HGTV) it looks easy and people can get into a home for little money.)
The other surprise I hear is the concept of the seller paying closing costs. In the true sense of how this works, you, the buyer, are paying for them by adding them to the mortgage. It looks good on paper, because of the way it has to be written to satisfy the banks and the underwriters, but essentially what you are doing is financing the closing costs for the duration of the mortgage. It looks like this: the selling price is actually $100,000, plus a six-percent seller concession of $6,000. Now, the sale price is actually $106,000 and your mortgage is based on the higher amount, less your down payment. So if you have a 30-year mortgage you will be financing the $6,000 over the same 30 years.
And you must remember that the house now has to be appraised at the higher amount. It can get dicey.
There are more types of mortgages, including USDA, conventional, VA, fixed rate, adjustable rates, reverse mortgages, bridge loans and occasionally you may find owner financing. There are probably a few other types that I haven’t dealt with.
The buyer can do themselves a huge favor and get the best advice from the lending institutions themselves so they are ready and prepared to make an offer when they see the home of their dreams. In this market, it’s quite possible to list a house this morning, and have multiple offers by 5 p.m. If you aren’t prepared, you won’t stand a chance to even put your bid in; they will be asking for that pre-approval letter with your offer. As a realtor, we do work with many lenders, but because each bank offers different programs, I can only give you contact information, not advice.
Please call me at 845-901-4553 if you are interested in listing your home, or are ready to buy. I love what I do!
Gail M. Vesely is New York State Licensed Real Estate Broker and owner of Lucille Hand Real Estate, located on Main Street in Ellenville. She has a Certified Negotiation Expert designation, is a current member of the Board of Directors of the Ulster County Multiple Listing Service, Chairperson for the MLS Wawarsing Caravan, serves on the MLS Grievance committee and past Board of Directors member on the Ellenville/Wawarsing Chamber of Commerce. Gail has been recognized for her Sales achievements for the past 6 years from the Ulster County Board of Realtors.
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