Buyer Tips Archives - Page 19 of 25

Assumable Loans

January 16, 2017 By Tayson Rockefeller Leave a Comment

Most of us in the industry know that interest rates have already begun to rise, and while they are nowhere near historic levels, they are approaching levels we started to see prior to the recession. Average 30-year rates dipped into the low 3s at the bottom of the 2008 downturn, and held at these levels for some time.

While the recession was detrimental to most of us, many first-time home buyers with undamaged credit were able to purchase at very affordable prices, with very attractive interest rates. FHA loans also came back in full force due to their less stringent requirements for credit and other reasons.

FHA loans tend to have their ups and downs. More recently, the requirement for mortgage insurance to be carried until a debt ratio of 78% was reached was further implemented to stay with the loan, for the life of the loan. On the other hand, almost all FHA loans are assumable. This may afford new buyers the opportunity to inherit some of these FHA loans that were written while interest rates were abnormally low. Also, during much of this time, mortgage insurance was not required to stay for the life of the loan. These buyers may have the opportunity to assume the existing loan, and carrying a second loan at the higher rates for the difference. For loans held for a long period of time, there could be significant cost savings for these new buyers.

In case many of you are wondering, there’s really only one other loan product that is assumable, or at least the majority of the time. That product is the VA product. While the VA loans are almost always assumable, they can have a negative effect for that Veteran and their ability to borrow using the VA product in the future. VA loans have guarantee periods with dollar amounts associated with those periods of time. These dollar amounts are associated with how much the Veteran can borrow using the VA product. That amount has been just over $104,000 since January 1st of 2006. This number represents 25% of the total borrowing power. If the Veteran doesn’t use the entire borrowing power amount on one loan, they can use the remaining balance to borrow using the same loan product for another loan. However, if that loan is assumed, that borrowing power still counts it against the Veteran until it is assigned otherwise. This is an important element for those using this loan program to remember in the event the opportunity arises for this loan to be assumed.

For these opportunities to be a benefit to the buyer and the seller, all parties need to be aware of the current loan conditions, and if the seller has interest in allowing their loan to be assumed. This should also be explained to any real estate agents involved with the transaction, particularly the seller’s agent so it can be used as a marketing tool.

FHA Loan limits are increased in Teton County Idaho, currently at 625,000.

Building a Home? New Construction Tips, Q & A

December 22, 2016 By Tayson Rockefeller 2 Comments

In anticipation of new construction in the coming year, I thought I would run through a couple of frequently asked questions and provide a bit of advice for new home shoppers.

Does a new home lose value?

In general, real estate appreciates. We are finally seeing some new construction, and likely to see loads more this coming season. With that said, most of the homes you might compare with were built in, or around 2007. While I don’t think demand will diminish, or necessarily increase, I think the prices will likely stabilize because of the higher supply. Nothing drastic, but there will be more supply than there is now. Regardless, the newer homes will likely have a slight premium, but I wouldn’t look at it as if you are driving a new car off the lot. While real estate appreciates, it also comes with maintenance and repairs. The homes we’re seeing on the market today are already a third through their roof life span, assuming it’s a comp shingle or similar. In this regard, it’s sixes. Buy the house you like.

Does new construction cost more?

This question goes hand-in-hand with the last. I talked about the increase in supply which should reduce prices, but only to a certain degree. Remember that new construction only comes if it pays for itself. I think it’s going to cost more, but probably not substantially more than the prorated share of future maintenance that will come sooner than when purchasing a new home.

Should I get a home warranty?

It depends what you are referring to. If you are thinking about a home warranty like you see on TV for appliances and HVAC systems, in my opinion, no. Your new home will likely come with manufacturers warranties on all of the major appliances and systems. If you are talking about a builder’s warranty, I would advise working with a builder who offers one. If a builder is willing to stand by general workmanship and materials, it’s a good indication that they take pride in their work.

Local or Regional contractors?

In my local experience, subcontractors can be extraordinary difficult to line up, and shift around it another contractor gets delayed. If your general contractor does not have an existing relationship with the local subcontractors you will likely have to use, you could face major delays when it comes to the completion of each step in the process. Further, if that contractor has several jobs out of the area, you will find that they will likely take care of their local client base first. My best advice would be to at least find a contractor that has a pre-existing relationship with the local subcontractors.

Any other advice?

1) Be involved with your construction project, but not over involved when it comes to moving things around or changing finishes. Many people have a hard time visualizing what they want until they see it, at which point they begin to make changes. This is where higher than expected costs can come back to bite you. Your contractor should have a good idea of what you were looking for, and they are skilled in visualizing in anticipation of the end result.

2) Know that your project likely won’t be completed on time. I hate to bring it up out of the gate, but we have such a limited number of available contractors, and the Teton region is relatively secluded when it comes to available materials. Set high expectations, but prepare for this in the back of your mind.

3) I have a vast number of construction related articles available at tetonrealtyblog.com as well. If you have questions about HVAC systems, insulation, or other construction-related items, you might try searching them in the search bar on the site. Also, the Idaho Office of the Attorney General has put together a very nice 12-page brochure on what to expect in terms of residential construction in Idaho with a few tips when it comes to choosing, and working with your contractor. That link is below.

http://www.ag.idaho.gov/publications/consumer/ResidentialConstruction.pdf

Settlement statement breakdown, what is a flood certification?

December 15, 2016 By Tayson Rockefeller Leave a Comment

If you have ever obtained a loan on a property, and reviewed your settlement statement break down prior to closing, you’ve probably noticed a breakdown of fees associated with your loan. We don’t normally see some these things when it comes to cash transactions. One of those fees required by most lenders is the flood certification fee. It can sometimes be overlooked, typically the cost is less than $100. So what is it?

Basically, it’s a real estate-related document that outlines the flood zone status of the property. If the lender determines the property is in a flood zone, They will require an additional flood insurance policy (in most cases). The status of the property is subject to re-evaluation. If it is later determined that the flood maps changed, the lender can usually come back at any time and require the additional insurance.

So, if you are obtaining a loan, in most cases you can rest assured that someone will help you with this process. But what if you are paying cash?

There are a number of resources available to help research flood zones. The first place to start, in my opinion, would be the FEMA flood maps service center. There is Interactive map with address search capability to help pinpoint the property in relation to the latest FEMA map that is available. These maps can be amended overtime as topography changes either naturally or as a result of excavation or man-made structures.

Second, most counties have an available map layer that provides some of the same information, or similar information. This can also be a starting point when researching properties in or close to a flood zone.

Third, the US Fish and Wildlife service has a wetland map that was compiled over the past three decades using old infrared satellite technology, and other technologies as they came available. These maps are mostly related to Wetland habitat, though they do depict Wetland areas, and should be considered for development projects, but can also be a good resource for someone doing their own homework.

Finally, what if you want to skip the hard part and simply pay for a flood certification through a third party such as what a lender might do on your behalf? Not a bad idea. Online resources such as CoreLogic offer these services at a minimal cost.

Tayson is happy to provide sources for this information upon request.

What does the election mean for my Real Estate investment?

November 16, 2016 By Tayson Rockefeller Leave a Comment

I am going to do my best to tie this article to National trends, events that have an affect on Real Estate (such as elections), and the seemingly cyclical Real Estate pattern that applies in almost all cases, barring any outside catastrophe.

Hours after our recent election, it seemed as if the National election result(s) were catastrophic, though that subsided quickly, and the markets rallied. Yes, there are talks of rising interest rates which can also have an affect, but things seem to be settling back into place. In my opinion (as far as Real Estate goes) things settled right back in their respective place with regards to the Real Estate cycle, more on these economic cycles below.

The question is, will that last? Will the transition into the next President’s era once again upset the current cycle? I don’t think so. An a associate of mine sent an article from Harvard University (source below) that also seems to back that prediction.

The article talks about economic cycles with regards to Real Estate, and the phases of the cycles after recession. The cycle ultimately leads to another recession, due to oversupply (history shows us we never learn) Our last recession was 2008.

While reviewing the cyclical pattern ternds (the article refers to them as Market Cycle Quadrants) in the article, my small market mind’s gears were turning – “Where are WE now in the current cycle?” My answer was somewhere right above Long Term Occupancy average, during a period while vacancy is declining, and new construction is just now staring to occur. For those of you not referencing the article, The quadrants are broken into 4 phases of the cycle;

Phase I – Recovery
Phase II – Expansion
Phase III – Hypersupply
Phase IIII – Recession

I later discovered that the article also answers my question above, and we’re on the same page in terms of where we are in the current cycle, in the beginning stage of the expansion phase. All of that aside, I need to get back on track with regards to the election, how it may affect our market, and tie all of this together.

The great thing about this article is that it provides for a timeline, and even shows a nifty graph depicting these market cycles. It is actually quite remarkable. The findings go back to 1819 to gather data, and locate the peaks in Land Values, Construction, and Business. The average interval is approximately 18 years with one exception, WWII. The good news? I don’t see any clear pattern with regards to election cycles years, and these respective market swings.

For those of you refusing to open this fascinating article, and the contributors to the information in the article are correct, the next housing market recession will be in 2024.

Does that mean our local community is immune to a localized bubble filled with our own “hypersupply” will not affect us? Nope. Check out next week’s article.

Source: https://extension.harvard.edu/blog/how-to-use-real-estate-trends-to-predict-the-next-housing-bubble/

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