From Phoenix Arizona, Eddie and Tom Knoell answer the mortgage questions that buyers, sellers, and real estate agents have when it comes to the process of getting a home loan in Arizona. Eddie and Tom's family has been living in Phoenix for 4 generations and they have a 30 years combined experience in the mortgage and real estate industry.
<ul><li>Buyers and sellers, and real estate agents should review the HOA addendum for accuracy</li><li>Are the dues correct? How about the frequency? Any special assessments? </li><li>Besides the HOA fees are there any Master Association fees? What is the difference?</li><li>We need to know the Master Association contact information and if there is an addition fee</li><li>Discuss Transfer Fees, Prepaid Association fees, and Disclosure fees</li><li>Buyer always pays Prepaid HOA fees </li><li>Seller always pays HOA Disclosure fees</li></ul>
<h1>How does Personal Property in a Purchase Contract affect Lenders?</h1><p>Why are we talking about it? </p><ul><li>Avoid pitfalls when personal property is tried to be made part of a purchase contract </li><li>It becomes problematic when it is viewed as a Seller Concession or type of Inducement for Purchase (& Seller just doesn’t CARE and wants it gone!!!)</li><li>Lender wants only the house to be the reason for the purchase because the house is what secures the loan.</li></ul><p><br>What are the basic things to know? There Two Types of Property<br><br><b>1- Real Estate</b></p><ul><li>Buildings & Land</li><li>Real Estate is also items that were purchased as personal property and then affixed to the property. Once you affix it to the property, it becomes a part of Real Estate. </li><li>Example: Built-In Book Case become real estate once they are affixed to the property</li><li>Example: Chandelier become real estate once they are affixed to the property</li></ul><p><b>2- Personal Property (Non-Affixed)</b></p><ul><li>Can be defined as property that is not attached or affixed to the property.</li><li>Examples: Furniture; Painting; Grill, Lawn-Mower; Dishes, sheets, etc</li></ul><p><b>What are the basic restrictions to be aware of?</b> Any Non-Affixed Personal Property besides the following should be handled outside of the purchase contract</p><ul><li>In Arizona purchase contract Lines 56 – 60 Dishwasher; Washer-Dryer; Refrigerator; Window Treatments; </li></ul><p><br></p><p><br></p><p><br><br></p><p><br></p>
<p>- Lenders are not involved in the BINSR process directly. We want to discuss how the BINSR and home inspection process affects a mortgage indirectly</p><p>1.     Buyer has 10 days by default on the Purchase contract to do their home inspection</p><p>2.     Buyer uses the BINSR form to respond to the seller with any items they would like repaired or remedied</p><p>3.     Seller has 5 days to reply to the buyers request</p><p><br> - Lenders need to order the appraisal with no less than 21 days from the close of escrow..., that being said we typically like to wait to order the appraisal after the BINSR has been negotiated OR when we receive a clear signal that there are no deal killers in the home inspection. Lenders should have a conversation about this with buyers and buyers agent to set their expectations.</p><p><br> - Buyer and Seller should finalize any seller concessions through the standard contract addendum and not through the BINSR. This helps us keep underwriters looking at the BINSR and any inspection issues with the home. That can open up a can of worms. </p>
<p><b>LSU Forms - Loan Status Updates and what you need to know</b><br><br>We go through the LSU (Loan Status Updates) which is an Arizona specific form. This is an important form that lenders will need to send to the sellers throughout the purchase transaction. We give our insight on the form and highlight the items we think are important for seller, buyers, and Realtors to be looking at. </p>
<p><b>The Arizona Prequalification form<br></b>- We highlight the important line items that borrowers and realtors need to look at in the Arizona Prequalification form<br>- We talk about the advantage of showing a higher loan amount on the prequalification form to show strength if it is a competitive market and multiple offers are expected on homes for sale<br>- We discuss the importance of borrowers sending income and asset documentation so sellers can feel confident in the buyer's ability to qualify</p>
<p><b>What is a “Delayed Financing” (vs delayed financing)?</b></p><ul><li>Delayed Financing (Defined Term) has more to do with avoiding normal Seasoning Requirements (6 months) when doing a Cash-Out Refi then really anything else.  It could be called “No Seasoning Cash-Out Refinancing”.  Basically Someone delays getting financing by first paying cash (or can be from a HELOC, or secure loan) and THEN decides to put financing on the property after COE but doesn’t want to wait the standard 6 months seasoning!  </li></ul><p><b>2 scenarios could happen-</b></p><ul><li>Not realizing it Ahead-of-Time: Use your own cash to buy and then you decide to replenish cash and don’t want to wait the std 6 months seasoning requirement for CashOut.</li><li>Planning Ahead-of-Time: same concept above</li></ul><p><b>Why would someone ever want to do Delayed Financing (what is the benefit)?</b></p><ul><li>Avoid Seasoning Requirement for Cash-Out Refi</li><li>Want quick COE and save time by paying cash</li><li>Better negotiating position by offering to pay cash </li></ul><p><b>Requirements</b></p><ul><li>Follow standard Cash-Out LTV & Cash-Out Interest Rates</li><li>New Appraisal Required</li><li>Money replenishes where money came from</li></ul><p><b>Example for Delayed Financing</b></p><ul><li>Bought Home For: $200,000</li><li>CCs/PPs: $5,000</li><li>Max Loan: $205,000</li><li>New Appraised Value = $230,000 x .80% LTV (for Primary) = $184,000 Max Loan</li><li>Like having put an original 8% down-payment</li></ul><p><b>Alternate way to do delayed financing”. Example - Parent buying a home for child with cash and then child does R/T refinance to cashout parent. Requirements:</b></p><ul><li>Parent would have to have basic standard loan with child (deed of trust etc…title company can really help) and then child would do normal R/T Refinance to pay Parent off</li><li>R/T Refinancing LTV and Interest Rate % would apply</li><li>New Appraisal would be required</li></ul><p><br></p>
<p><b>3rd Party Contributions<br></b>Who is a typical interested party in a purchase transaction? Sellers, Buyer Agents and Listing Agents are 3rd party contributions.  <br> <br>3rd party contributions are allowed on purchase transactions but can only be applied toward closing costs and prepaids. <br> <br>3rd party contributions cannot be applied toward Down Payment <br> <br>Contribution limits apply to any and all 3rd party contributors as an aggregate limit. So, if seller and buyer agent are giving a contribution, the total of their contributions cannot be more than the MAX limits. <br> <br>We discuss the importance of not having too much 3rd party contributions because of running the risk of leaving money on the table. It is not easy for a lender to estimate exactly what total costs will be because of title aggregate adjustments and seller prorations for taxes, interest, and insurance. We like to be conservative in our number <br> <br>- FHA loans have is 6% contribution limit no matter what down payment amount <br>- VA loans have is 4% contribution limit no matter what down payment amount<br> <br>- Conventional loans on primary and 2nd homes with 10% down or less - MAX is 3% contribution <br> <br>- Conventional loans on primary and 2nd homes with 10%-25% down - MAX is 6% contribution <br> <br>- Conventional loans on investment properties on any loan - MAX is 2% contribution <br><br></p>
<p><b>Recasting a loan: Great strategy to delay large principal reduction and reduce mortgage payment<br></b>I)        What is a Re-Cast?<br>a.        The borrower has the option to make a large principal reduction at nearly any point in the life of the loan and request a “Recasting” of the loan.  What that means: Recasting is the result of a one time “paying down” of the principal and then re-amortizing the loan so the payment actually goes down.  Terms of loan stay the same (Int %, fixed term, etc. except PMI could drop) but payment goes down!<br>i.        Its like going in a Time Machine back to when we did the loan and you putting a larger down-payment down which lowers your monthly payment<br>II)        Who would ever do a thing like this (who ALL OF SUDDEN HAS LOTS OF MONEY)<br>a.        People Not wanting to sell current primary until AFTER buying new primary<br>b.        People receiving an unexpected large bonus from work!!<br>c.        People maybe receiving an unexpected inheritance <br>III)        Every loan can be a tiny bit different but to Recast you need to do the following:<br>IV)        To recast:<br>a.       The borrower must have made at least their 2 payments<br>b.       The principal reduction must be at least for $10,000.  Higher reductions are fine.<br>d.       Fees to recast range from $100 to 350 in most cases<br>e.       Recast only available on Conventional loans, not FHA or VA<br>V)        WHAT’s NEXT - Ok, you’ve sold your old primary home, or got that BIG juicy bonus from work – now what??<br>a.        The borrower generally sends three things to servicer:  i) a request for recasting in writing.  ii) the check in the amount of the requested principal reduction.  iii) a check for the Recast fee.  Once received, they will process the request and within 30 to 45 days, the recasting will be completed and the loan modification documents sent to borrower.   The modification letter details the new reduced monthly payment.</p>
<p>This week, we discuss a common question they we from borrowers <b>"How do Solar Panels affect the mortgage and closing process?"</b> We discuss what borrowers need to know about Solar Panels whether they are owned or leased, join us as we dive and discuss the pros and cons of solar panels from the lenders perspective. This is a great episode to share!</p>
<p>- Why insurance is required by a lender?<br>- How do we come up with the replacement cost?<br>- How can coverage and deductibles impact loan qualification?<br>- Why an “independent agent” is the better way to go over a “captive agent”?<br>- When does a borrower pay the insurance company in the purchase/refinance transaction?</p>
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