Posts Tagged ‘Mortgage’

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Locking In


2010
04.04

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Posted in Buying a Home, Finances, Mortgage, Uncategorized | No Comments »

Day 1 - This being Easter (and Happy Easter Everyone) it is a time for new beginnings & rebirth, so my count down changes. Day 1 of my families new adventure into a new home.

 

Locking in, gambling the monthly payment away… Oh, the fun never ends.

 

Once we were under contract with our “house-with-the-view” we received a estimated settlement sheet from our mortgage broker. To my amazement and glee right there written at the bottom was printed our projected monthly payment. It was… Beautiful. Less than I was expecting. I was very happy. This whole move seems to be working. We are going to have less of an outlay and actually save money! The quoted interest rate was 4.875%. Pretty damn good. I was happy. So I tucked that thought into the “happy place” in the back of my mind where I tend to venture when I’m feeling down. Since then my brain has been occupied by moving, inspections, contractors estimates and work…

 

Drawing closer to settlement means the beginning of lots of papers to sign with the mortgage company. Things that have to do with our identity, social security numbers, blah, blah, blah. These were all signed in the middle of the moving process (not kidding, I believe I signed them on the floor because the table was in a POD somewhere). I actually can’t really remember what they were regarding, but I remember reading them and them making sense.

 

I’m not sure how we got here, but all of a sudden we couldn’t get the 4.875% interest rate anymore. But that’s what was on the estimated settlement sheet. Doesn’t that mean that’s our rate? No, you have to officially “Lock-in” But I thought we had. I’m confused. It was right there in print. OK, so I didn’t actually say the words “Lock me in” out loud, apparently you need to do that. Oh, the rules… Ok, so where do we stand today? Well, we could still get that rate if we take a point. A point, what’s a point? Apparently it’s 1% of the loan amount. 1.5 points… 1.5% of the loan amount and so on. And it’s not like you can wrap that into the loan amount, you have to pay cash up front. AARRGHH! There goes my renovation budget.

 

Well, what should we do? Now that the rate has gone up? Lock in at 5% or take the point. I don’t know, let’s think about it and get back to the broker tomorrow. Oh, my friends… you can’t do that. The next day the rates and point spread went up. What? Point spread? When did I wake up in Vegas? Ok, so we could do 5.125% or 5% with .675 points, or 4.875% with 1.5 points. The whole thing makes me dizzy and my dream monthly payment keeps rising. Should we gamble and “let it ride?” (Vegas again) hoping the rates fall? Well, we did. Wrong choice… The next day, even worse. HOW DID THIS HAPPEN? What happened to 4.875% with no points that we had a few weeks ago? That’s what I had always believed was ours. Why can’t it be?

 

Oh, let’s just lock-in and get it over with. The longer we compare and discuss it just keeps getting worse. Oh, anger was brewing in my soul. As you can see, I’m still not over it… So, in the end we put it to rest. We got 5% and 1.75 points. Wow, I feel like money is just disappearing. This raises my dream monthly payment by about $30 per month. And forking out the “points” is killing my future hardwood floors. Oh the humanity! Not quite sure I understand why we were so screwed. Guess, that’s just the way the world works. But, in the end… the next day it all went up again. So we locked in at the right time… two weeks too late. :(

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What is a Short Sale Anyway?


2010
01.23

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Posted in Buying a Home | No Comments »

Day 27 – I woke up to a car just sitting in my driveway. A woman and child, checking out the house. They were there for like 10 minutes. My dog was not happy! Showing tomorrow, these are the people who are coming for a second look! They are now coming at 5:30 pm, not 6:00. hmmm.

 

As I browse for a new home. I have come across a lot of “short sale” listings. What is this exactly? Does this mean I can move in next week? Does it mean the listing will only be available for a “short” time? Does the home only have 6 foot ceilings? I did a little research. Yes, went Google crazy, and just for you I’ll put it into language we can all understand.

 

A short sale is a sale of a house in which the sale proceeds fall “short” of the balance owed on the property’s loan. Ah ha, “short” get it! Yes, that’s it in a nut shell. It tends to happen when the homeowner cannot pay the mortgage loan on their property. The logic here being, the lender agrees that selling the property at a loss is the best situation for all parties involved. It allows the owner and the bank to avoid foreclosure, which can have some hefty fees for the bank (oh, I’m so sorry Mr. Money Bags) and bad credit for the homeowner. A Short Sale will lower the homeowners credit rating 75-100 points and of course will remain on your credit report for 7 years. From what I understand it is not as bad as what a foreclosure looks like on your credit score. Here we are talking 200-300 points. Either way, it’s a long journey back.

 

In a short sale, the bank or mortgage lender agrees to discount what you owe due to economic or financial hardship on the part of the borrower. I don’t know if I want to address this statement or not. In my opinion they should never have given borrowers more than they could afford anyway! I mean, it was like the banks had no criteria at all when handing out mortgages a few years ago. It was a sign and drive into your new driveway event. Just what were they thinking? Do they know how many lives they have screwed up? Yes, not a fan of the banks these days.

 

So a “short sale” is like cauterizing the wound before it bleeds out, but there will always remain a scar.

 

It’s also not that easy to sell on a short sale… Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria (oh, there it is) for such transactions, but they may be open to offers (sounds like everyone has their price), and their willingness varies (am I having a good day or a bad day?). A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal (and isn’t just about everything appraising lower these days?).

 

There are still crooks out there, so be wary… Some lenders have been accused of engaging in fraud during the short sale process. The fraud involves lenders of second mortgages or home equity loans demanding kick-backs in the form of cash payments from the home buyer or real estate agent, and not disclosing them anywhere on closing documents. Tisk tisk tisk. This is in violation of RESPA (Real Estate Settlement Procedures Act), which require disclosure of such payments. Bad lenders! Bad!

 

Buyers, like me, may choose to pursue short sales to get a good deal. So when you see a price listed for a home that you think is too-good-to-be-true, before you jump on it like white on rice, ask your agent to call the listing agent to find out if the home is a short sale. Because you might want to think twice. It’s not as simple as it sounds, and very few can close in 30 days or less. Oh, yes, “short” is the new “long.” Many home buyers have waited 4 to 6 months to close on a short sale, sometimes longer… Ouch!