Lender Checklist: What You Need for a Mortgage

·     W-2 forms — or business tax return forms if you're self-employed — for the last two or three years for every person signing the loan.

·         Copies of at least one pay stub for each person signing the loan.
·         Account numbers of all your credit cards and the amounts for any outstanding balances.
·         Copies of two to four months of bank or credit union statements for both checking and savings accounts.
·         Lender, loan number, and amount owed on other installment loans, such as student loans and car loans. 
·         Addresses where you’ve lived for the last five to seven years, with names of landlords if 
appropriate.
·         Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account. 
·         Copies of your most recent 401(k) or other retirement account statement.
·         Documentation to verify additional income, such as child support or a pension. 
·         Copies of personal tax forms for the last two to three years.

Common First-Time Home Buyer Mistakes

1. They don’t ask enough questions of their lender and end up missing out on the best deal.
2. They don’t act quickly enough to make a decision and someone else buys the house. 
3. They don’t find the right agent who’s willing to help them through the homebuying process.
4. They don’t do enough to make their offer look appealing to a seller. 
5. They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years

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Energy Efficiency Tips

You don’t need to be a professional to learn where your home is losing energy. A careful walk-through can help you find the energy-zapping areas in your home and help you prioritize where you need to make efficiency upgrades.

Locate and seal air leaks. You could save 5%-30% on your energy bills by reducing drafts. Look for gaps along baseboards and where walls join ceilings. Check the exterior for leaks that can occur where two different building materials meet. Once you pinpoint the problem areas, seal them by caulking all holes and cracks around faucets, pipes, electrical outlets and wiring. Seal leaks in the mortar, siding, doors, windows and foundations as well.

Check the insulation. If your home has less than the recommended minimum amount of insulation, you could be losing large amounts of energy through your walls and ceilings.

·      Check to see if the attic hatch is as insulated as the attic.

·      Make sure pipes, ducts and chimneys are sealed with permanent sealers.

·      Your water heater, hot water pipes and furnace ducts should all be insulated.

·      Check for insulation on exterior walls.

·      Turn off the circuit breaker and unscrew any fuses. Once you’re sure the outlets aren’t conducting electricity, remove the cover plate from one outlet and burrow into the wall with a thin stick or tool. A plastic crochet hook works well. If you feel any resistance, you have insulation.

Inspect heating and cooling equipment. Ideally, you should have this equipment professionally checked and serviced once a year.

Appliances and electronics. To reduce the amount of energy your appliances and electronics use, think about

Unplugging an item when it’s not in use
Using an item less often. 
Changing the settings on the item.
Buying a new product that’s more energy efficient. 

5 mortgage market insights

The vast majority of homebuyers in the U.S. are also borrowers. Poorly regulated and predatory mortgage lending fueled the real estate bubble. As many pundits have noted since the real estate market collapse, regaining traction has been stalled by lender overcorrection. Thus, the moniker for our recent economic situation: the “credit crunch”.

After nearly six years of severely stunted mortgage lending, lenders are loosening their purse strings once again, according to a recent Wall Street Journal report. Check out these five must-knows about the future of our mortgage markets.

1. Low down payment loans are coming back. True, the 3.5% Federal Housing Administration (FHA)-insured loan never totally went away. But 2008 saw the FHA’s market share balloon to an unsustainable size as FHA-insured loans were the only option for buyers with little savings, post-bust. The share of all non-FHA-backed loans with a down-payment of 10% or less reached a 5-year high last year, according to Black Knight Financial Services.

2. No-money-down mortgages still exist. The VA still offers no-down-payment loans. Veterans can also get special loan privileges through the Navy Federal Credit Union. The USDA insures some no-down-payment loans in certain rural areas. The fact is, however, we ought to be thankful such loans are no longer available to wider public. Having some skin in the game vastly decreases the chances of default and thus protects against another foreclosure tsunami.

3. The return of low-down-payment loans does not necessarily mean another bubble. True, low- and no-down mortgages were the accelerant of the real estate wildfire in the early 2000s. However, it’s important to remember that it wasn’t the lack of down payment alone that led to the mortgage market’s flammability.

The preponderance of loans that went belly up were no- and low-doc loans. New qualified mortgage (QM) and ability-to-repay (ATR) rules ought to prevent another subprime crisis of the same or similar character to the last one.

Adjustable rate mortgages (ARMs) remain a threat to the real estate market’s stability, however. Very little has been done to specifically regulate these products even though the combination of low teaser rates on ARMs and poor financial literacy was a huge impetus for the mortgage crisis. QM/ATR does address ARMs. They are to be underwritten at the maximum allowable interest rate after five years from the date of the first payment. So the ARMs threat has been eased but not neutralized. 

4. Credit standards are easing, but remain tight.Fewer than 0.2% of mortgage borrowers had a credit score less than 620 last year. This is compared to 2001 when more than 13% of borrowers fell below this threshold. The tighter credit score standards means the millions of Californians still recovering from foreclosure and short sale will have a harder time qualifying for mortgage funds. However, the new ATR rules do not include any specific credit score minimums. Thus, lenders may have an opportunity to focus more on an applicant’s ability to repay based on their current financial situation rather than their tainted credit history.

(ATR rules =ABILITY-TO-REPAY AND QUALIFIED MORTGAGE RULE)

5. Mortgages move the real estate market. There would have been around 200,000 more mortgages made in 2012 if credit standards had returned to pre-bubble levels, according to the Urban Institute.

Economists at Goldman Sachs estimate new home sales will rise to 800,000 homes in 2017, compared with about 430,000 in 2013. This increase ought to occur based on improving economic fundamentals such as job growth and household formation.

Tips for Lowering Homeowner’s Insurance Costs

1. Review the Comprehensive Loss Underwriting Exchange (CLUE) report on the property you’re interested in buying. CLUE reports detail the property’s claims history for the most recent five years, which insurers may use to deny coverage. Make the sale contingent on a home inspection to ensure that problems identified in the CLUE report have been repaired.

2. Seek insurance coverage as soon as your offer is approved. You must obtain insurance to buy. And you don’t want to be told at closing that the insurer has denied your coverage.

3. Maintain good credit. Insurers often use credit-based insurance scores to determine premiums.

4. Buy your home owners and auto policies from the same company and you’ll usually qualify for savings. But make sure the discount really yields the lowest price.

5. Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower. Avoid making claims under $1,000.

6. Ask about other discounts. For example, retirees who tend to be home more than full-time workers may qualify for a discount on theft insurance. You also may be able to obtain discounts for having smoke detectors, a burglar alarm, or dead-bolt locks.

7. Seek group discounts. If you belong to any groups, such as associations or alumni organizations, they may have deals on insurance coverage.

8. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.

9. Investigate a government-backed insurance plan. In some high-risk areas, federal or state government may back plans to lower rates. Ask your agent.

10. Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value.

What a Home Inspection Should Cover

Home inspections will vary depending on the type of property you are purchasing. A large historic home, for example, will require a more specialized inspection than a small condominium. However, the following are the basic elements that a home inspector will check. You can also use this list to help you evaluate properties you might purchase.

For more information, try the virtual home inspection at www.ASHI.org, the Web site of the American Society of Home Inspectors.

Structure: A home’s skeleton impacts how the property stands up to weather, gravity, and the earth. Structural components, including the foundation and the framing, should be inspected.

Exterior: The inspector should look at sidewalks, driveways, steps, windows, and doors. A home’s siding, trim, and surface drainage also are part of an exterior inspection.

·  Doors and windows
·  Siding (brick, stone, stucco, vinyl, wood, etc.)
·  Driveways/sidewalks
·  Attached porches, decks, and balconies

Roofing: A well-maintained roof protects you from rain, snow, and other forces of nature. Take note of the roof’s age, conditions of flashing, roof draining systems (pooling water), buckled shingles, loose gutters and downspouts, skylight, and chimneys.

Plumbing: Thoroughly examine the water supply and drainage systems, water heating equipment, and fuel storage systems. Drainage pumps and sump pumps also fall under this category. Poor water pressure, banging pipes, rust spots, or corrosion can indicate problems.

Electrical: Safe electrical wiring is essential. Look for the condition of service entrance wires, service panels, breakers and fuses, and disconnects. Also take note of the number of outlets in each room.

Heating: The home’s heating system, vent system, flues, and chimneys should be inspected. Look for age of water heater, whether the size is adequate for the house, speed of recovery, and energy rating.

Air Conditioning: Your inspector should describe your home cooling system, its energy source, and inspect the central and through-wall cooling equipment. Consider the age and energy rating of the system.

Interiors: An inspection of the inside of the home can reveal plumbing leaks, insect damage, rot, construction defects, and other issues. An inspector should take a close look at:
·  Walls, ceilings and floors
·  Steps, stairways, and railings
·  Counter tops and cabinets
·  Garage doors and garage door systems

Ventilation/insulation: To prevent energy loss, check for adequate insulation and ventilation in the attic and in unfinished areas such as crawlspaces. Also look for proper, secured insulation in walls. Insulation should be appropriate for the climate. Excess moisture in the home can lead to mold and water damage.

Fireplaces: They’re charming, but they could be dangerous if not properly installed. Inspectors should examine the system, including the vent and flue, and describe solid fuel burning appliances.

Source: American Society of Home Inspectors (www.AHSI.org)
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Common Closing Costs for Buyers

You’ll likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your lender must provide a good-faith estimate of all settlement costs. The title company or other entity conducting the closing will tell you the required amount for:
·  Down payment
·  Loan origination
·  Points, or loan discount fees, which you pay to receive a lower interest rate
·  Home inspection
·  Appraisal
·  Credit report
·  Private mortgage insurance premium
·  Deed recording
·  Title insurance policy premiums
·  Land survey
·  Notary fees
·  Pro rations for your share of costs, such as utility bills and property taxes·  Insurance escrow for        homeowner’s insurance, if being paid as part of the mortgage
·  Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and         insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.

A Note About Pro rations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Pro-rotation is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.