Thinking of Buying a Foreclosure?

Well here are some things to think about!

You may have heard on TV or radio, from your friends, from newspapers, magazines or the internet that there are some really good bargains out there in the foreclosure market. In fact, you see some ads about people purchasing homes for 10¢ on the dollar. They are even willing to sell you the information on where you can buy foreclosed homes and properties. But there are some things that they don’t tell you. Here are some of them:

You don’t have to pay for a list of foreclosures in your area – you can get this information for free in several ways. You can go to each banks foreclosure sight on the internet. Or, you can go to a Realtor® and he or she will do the work for you.

You get what you pay for – you may pay only 10¢ on the dollar but that is what the property is worth in today’s market. You get for that price because nobody would pay more.

Most foreclosed upon properties are distressed – In one form or another almost every foreclosed property is distressed, or has problems. They usually need work and many do not qualify for an FHA loan without significant repairs made. Sometimes it might only be repainting, carpet replacement and appliances replaced. Very often there is extensive work required to make the home live-able.

Cash is king – In the foreclosure market the cash buyer typically has the advantage. The bank or other owner of the foreclosed property will usually accept a cash offer over one that needs financing or appraisal approval.

Don’t just get pre-approved, get pre-committed – After cash, the purchase that has pre-committed funds is next in the pecking order. This means that if a loan is required, the lender has already committed to lending the purchaser the money. The only contingency is that the property meets the appraisal requirements. This is beyond pre-approval, where a credit check has been performed and the lender has determined that the client may be eligible to get a loan. And, it is certainly way beyond a pre-qualification which is not much more than recognition that the buyer is still breathing.

Don’t expect a quick response to your offer – most banks will wait for some time before responding to an offer. They are hoping for multiple offers to come in and will wait for that to happen. When they get multiple offers they will then issue a call for “highest and best” offer and will give a deadline for those to be received. Even if there is only one offer they will wait and then either negotiate or ask for highest and best.

You may have to offer, or pay, more than the asking price – Yep; this is a big surprise for many people. You may have to offer more than the asking price, especially when there are multiple offers on the same foreclosed property.

You will get special conditions from the bank before the offer is accepted – Most lenders of foreclosed properties will have special conditions or stipulations for the sale. This may require using a specific closing attorney that might be hundreds of miles away. It will almost always include a shortened due diligence period, the period you will need to perform all inspections, of the property, etc. They may even want you to be approved by a specific lender, although you won’t necessarily have to use that lender. The lender may, or may not, negotiate these conditions. So, if you have a particular attorney you would like to use to close with, you can attempt to negotiate that but don’t expect to have it happen.

Get your financing commitment before you start looking – Get that commitment for funding before you even start looking at a foreclosure. If you find one that you like, very often others will also like it. The best ones don’t stay on the market very long. Get that pre-commitment so that you don’t lose out on an opportunity by not being ready with all your financing requirements taken care of.

You can get renovation funds included in your loan – There is more likely than not going to be problems with a foreclosed home. It is possible to get a loan that will include funding to make any repairs/renovations required to bring the property up to standards to meet the loan eligibility. You can even add that deck, granite countertops, whatever renovations that you would like to make, if you qualify. Check with your lender on the programs available.

Work with someone familiar with the process – This is a strong recommendation. Work with a Realtor® that will guide you through the entire process and know the best ways to get you the property you want, whether for your own home or for an investment.

Armed with the above list, go ahead and look for that foreclosed property. You might not find your dream home, but you might very well find the home that you can make into the home of your dreams. And above all, be patient. You might not, probably won’t, win the first one, but keep it up, it will happen.

Note: This is not to be construed as financial advice or legal advice. Please check with an attorney for any legal recommendations and with a qualified lender for advice on getting pre-committed.

For information on buying or selling real estate in Athens and the surrounding counties, call me at 706-207-5290 or click here to email me. If you would like to search for properties available in this same area, please click to follow the link to The Athens Real Estate Page.

Thinking of Buying a Home - How Much Home Can You Afford

If you are thinking of buying a home you really need to understand how much home that you can afford. Not how high a payment that you are comfortable with, but how high a payment that your lender and loan type/underwriter thinks that you can afford. And, you should find this out before you look for a new home. You don't want to waste your time, or your buying agents time, looking at homes that are out of your price range.

So how can you get an idea of how much home that you can afford? It's a two step process. The first step is determining what your ratios are. But, just what are these ratios, you might ask.

The first is called the Front End Ratio. That is merely how much your cost of housing will be compared to your gross income. Note: it is not how much your loan payment will be but the total cost of housing which includes Principle, Interest (both of which are our loan paymet), Taxes and Insurance. These are commonly referred to as PITI. Gross Income is your total monthly income from all sources: wages, alimony, interest, dividends, social security, etc. Your monthly income is figured by looking at your previous 12 months income and dividing by 12.

Front-End Ratio = (Monthly Housing Expense / Gross Monthly Income) x 100

The second is call the Back End Ratio, or your Debt-to-Income Ratio. This is the total of all your monthly debt payments, including PITI, compared to your gross monthly income. This includes all debts: credit cards, student loans, alimony, child support, gym memberships, etc.

Back-End Ratio = (Total Monthly Debt Expense / Gross Monthly Income) x 100

Lenders use these ratios to calculate risk, or the likelihood of the borrower being able to make their payment on time. The higher the ratio, the greater the risk.

As mentioned earlier, various loan types can and do have different ratio requirements. Below is a list of current ratios. Note: These figures have changed recently and are subject to change at any time under current credit conditions.

FHA & VA - 31 Front End /43 Back End Ratio
USDA Rural Development - 29 Front End / 41 Back End
Conventional - 33 Front End / 45 Back End

Using these figures, if you have a monthly income of $3000.00, under FHA and VA, your total monthly housing expense can be as high as $930.00 and your total debt to income can be as high as $1290.00 a month. For Rural Development, this would be a bit lower, for Conventional, a bit higher. Depending upon where you are looking, your PITI will vary based upon tax rate and insurance. In the Athens Area, for a median home sale of $170,000 taxes could run $160. month and insurance $40 month for a total of $200.00. This means you can afford a home with a loan amount of $730/month. (Note: Taxes and insurance will vary. Those figures are only approximate and will be dependant upon assessment and any exemptions you may be eligible for.)

Lenders usually place more emphasis on back end rations than front end.

The second step is to determine how much home your loan payment will cover. Use the chart below to determine your monthly principal and interest payments at various interest rates for either a 15- or 30-year term.

Interest Rate Factors Per $1000

Interest Rate	15 Yr. Term	30 Yr. Term	Interest Rate	15 Yr. Term	30 Yr. Term
4%	$7.40	$4.77	8%	$9.56	$7.34
4.25%	$7.52	$4.92	8.25%	$9.70	$7.51
4.5%	$7.65	$5.07	8.5%	$9.85	$7.69
4.75%	$7.78	$5.22	8.75%	$9.99	$7.87
5%	$7.91	$5.37	9%	$10.14	$8.05
5.25%	$8.04	$5.52	9.25%	$10.29	$8.23
5.5%	$8.17	$5.68	9.5%	$10.44	$8.41
5.75%	$8.30	$5.84	9.75%	$10.59	$8.59
6%	$8.44	$6.00	10%	$10.75	$8.77
6.25%	$8.57	$6.16	10.25%	$10.90	$8.96
6.5%	$8.71	$6.32	10.55%	$11.05	$9.15
6.75%	$8.85	$6.48	10.75%	$11.21	$9.33
7%	$8.99	$6.65	11.25%	$111.36	$9.52
7.25%	$9.13	$6.82	11.5%	$11.52	$9.71
7.5%	$9.27	$6.99	11.75%	$11.68	$9.90
7.75%	$9.41	$7.16	12%	$11.84	$10.09

1. Find the appropriate interest rate from the chart above.
2. Look across the column to the appropriate term to determine your interest rate factor.
3. Multiply the interest rate factor by your loan amount in $1,000s.
4. Compare that to the payment you reached by applying the ratios.

For instance, if you assume a 30 year loan at 5.5% for a $170,000 home, multiply $5.68 x 170 (the number of thousands in 170,000). Your payment would be $965.60, much higher than you can qualify for. To find out the approximate loan amount, divide $730 by $5.68. Your result will be a $128,500 loan at 5.5%. If you want to buy a home higher than that amount you will need to either make a larger down payment or qualify for a lower interest rate.

Note: This is not to be construed as financial advice. It is merely to provide you a means of approximating the price of a home you may be able to afford. Please check with an experienced lender to determine the exact amount of loan and interest rate you qualify for. They will then be able to give you a more exact price of a home you may be able to get a loan for.

For information on buying or selling real estate in Athens and the surrounding counties, call me at 706-207-5290 or click here to email me. If you would like to search for properties available in this same area, please click to follow the link to The Athens Real Estate Page.

So You want to Sell Your Home - Part 12 - The Grand Entrance

OK, you have had a garage sale, put excess clothes and furniture into storage and your yard looks like a well manicured golf course. You are now ready to invite buyers into your home. Another chance for a first impression, where those buyers will actually be spending most of their time if they purchase your home.

Whether you are using an agent or selling the home on your own, or using a limited service agent where you are doing all the showings, etc., make sure that buyer are directed to enter the home through the room that will give the most dramatic, the most favorable impression to them. If you are showing your home, that is relatively easy to manage, you direct the prospect to the right door. If you are using an agent, you will usually not be there when the home is shown. Make sure that any lock-box the agent provides is as close to the preferred entrance as possible and that they put specific directions which entrance to use. After all, they might never see how the chandelier looks framed in front of the french doors if they come in the wrong door.

Give a feeling of space. If you have a narrow entrance hallway, makes sure that it is open and cleared of all obstructions. While you might be used to opening the door slowly so that you don't damage that hall tree, anybody looking at your home will not be. Make sure that there are no loose throw rugs or mats that someone may trip over as they enter your home.

Say "Welcome!" with colorful flowers or candles strategically placed to draw the eye but are out of the way. But be careful of anything that might provide an overpowering scent. Remember, those prospective buyers might not have the same discriminatory tastes that you do. Or, they just might not like a home that reminds them of a flower shop.

Make it look like new. Or at least make it look well cared for. A thorough cleaning is always in order. Make sure the carpet is cleaned and just vacuumed, or the tile is swept and the grout cleaned. Eliminate any hand prints or smudge marks from walls, doors, etc. If any minor repairs are needed, such has nail holes patched, warn carpet or damaged tiles replaced, and that any painting is completed.
You can get hints and tips at how to decorate, not just your entrance, but your whole home, by looking at magazines, websites, or even by touring model homes and open houses. Find something that reminds you of your entrance way and do something similar.

Remember, this is the rare opportunity to make another good first impression. Make the best of it! It will help set the tone for how the rest of the home is viewed.

Home Financing - The USDA 100% Rural Development Loan

A few weeks ago I wrote an article about the types of financing available in today's market. Today, I would just like to expand on just one of those types, USDA Rural Development loans.

The U.S. Department of Agriculture is also in the home loan guarantee business, just like the V.A.
Under it's Rural Development 502 Guaranteed Housing Loan Program the USDA is offering 100% loans to qualified buyers. Here are the highlights of the loan program:

• There is no down payment required. Similar to the VA, this is a true 100% loan program.
  
• There is NO Mortgage Insurance. Conventional loans require PMI or Private Mortgage Insurance on loans of greater than 80%. This is usually added to the loan payment. FHA requires MIP, or Mortgage Insurance Premium, part of which is paid at closing and the remainder in the monthly payments.
  
• There is no Cash Reserve Requirement. Some loans and/or lenders require you to have cash reserves, money left over after closing, to cover up to six months of payments. The Rural Development 502 program does not have that requirement. While I am not a financial planner, it does make sense to me to have some cash reserves on hand after your purchase.
• There is no Pre-payment Penalty. You can pay your loan off early with no penalties. Although this is common in today's market, there are still some loans and lenders that will impose a pre-payment penalty.
• You Don't Have to Meet First Time Buyer Requirements. You aren't getting a tax credit, but, you can use this type of loan when moving from one home that you own to another.
• Both new construction and existing homes are eligible. You can by new are a previously ownded home.
• There is no Seller Contribution Limit to Closing Cost. Unlike an FHA loan, if your agent, or you, can negotiate it, the seller can pay all of your closing costs.
• There is no Gift Contribution Limit to Closing Costs. You may get all of your closing costs in the form of a gift from relatives or friends. You are not required to use your own "seasoned" funds.
• It is a Fully Amortized 30 Year Loan. Payments are fixed over the time of the loan. There are no adjustable interest rates or payments. There is no balloon payment.
• You Can Receive a loan for up to 102% of the Appraised Value. Providing you qualify, you can cover some of the closing costs and/or repairs with a loan of up to 102% of the appraised value.

This loan is not available in Athens-Clarke County or in Watkinsville. However, large areas of Oconee, Jackson, Madison and Oglethorpe counties are eligible for this loan program.

For more information on USDA loans contact a qualifed lender who is experienced with this program.

If you have questions on properties available under this program, or, if you are interested in buying or selling your home in Athens and the surrounding counties and communities please call me at 706-207-5290. Or, you can click here to email me with your inquiries. To search for home in Athens, Watkinsville, Oconee County, Oglethorpe County, Jackson County or Madison County, please visit my website at http://www.theathensrealestatepage.com

So You want to Sell Your Home - Part 11 - Too Much Stuff

How much stuff do you have? If you have been living in your home for any length of time, the answer is probably "too much stuff".

Stuff, no matter what it is: furniture, pictures, appliances, toys, knick-knacks, clothes, etc., only distracts the potential buyer who is previewing your home. The buyer(s) want to picture the home as theirs, not yours. They are trying to see themselves living there. They are placing their furniture in the rooms, their pictures on the walls, their children in the yard, etc. The more "stuff" you have, the harder it is for them to picture their "stuff".

You need to minimize your stuff, or, declutter! That doesn't mean getting rid of everything and living in a bare house. It does mean getting rid of what you don't need to live there.

Start with the small things. Look in your closets to see what is there. Depending upon where your home is you might have four seasons of clothing in your closet. Pack up those clothes that will not be needed in the next few months. If your closets are still overfull, pick out the shoes, shirts, coats, etc. that you will be using. Try spacing your hanging clothes at least 3 fingers apart. If you have shelves in your closet, make small stacks of clothing, and don't crowd them together. Give the feeling of more space rather than less.

Clear your counter tops. In the kitchen limit your counter top appliances to a coffee pot. Place all your other appliances out of the way. Reduce the amount of dishes, pots, pans, etc. in your cabinets. Make them appear roomy. In the bathroom, do the same thing. Reduce what you keep on the counters and clear out those things from the cabinets that your don't regularly use.

Remove most, if not all, of your collectible items from view. This may include display cabinets and curio shelves that you have put in place just to display what you have collected. It allows the buyers to picture there items.

Get rid of pictures. Free up your walls as much as possible. One or two strategically placed pictures in a room are fine, recommended even. But don't have picture walls, especially those picture walls loaded with your family history. Some even suggest getting rid of all pictures of a personal nature. And, if you have pictures, be careful of the content. Risque, religious, political, and other pictures might distract the buyers, and even cause some to reject the home outright. We have a couple of Louis Icart prints, tasteful, but they might be offensive to some. We took them down when we sold our homes since having them.

Do you have too much furniture? Many of us do, at least for certain rooms. Get rid of excess furniture. And what is excess furniture? Any furniture that makes a room look crowded is too much furniture. It also might be that your furniture is over-sized for a room. You might consider temporarily replacing it.

Garages, basements, storage areas: While you may be able to store some of you stuff in these areas, do not fill them up. Make sure that cars can be parked in the garage. Keep your "stuff" from the middle of any of these locations.

What can I do with that excess stuff? There are many options. You can get a storage unit and store your things there. If you are storing a lot of books, or other delicate items, a climate controlled storage unit might be appropriate. Just remember, though, that for items you might need, such as clothing when a season changes, to place boxes, trunks, etc. so that they are easily accessible.

You can give items away, to friends, family or donate them to charity. You can sell items on Ebay or have a yard/garage sale. There are many ways to get your stuff out of the way.

Remember, you are trying to sell your home, not your stuff. The less stuff buyers see, the more of your home that they see. Whether you are using an agent, or trying to sell your home on your own, when it comes to "stuff", less is more!

For more information on getting your home ready to sell, or for any other real estate concern, call me at 706-207-5290 or you can email me with your information request.