Why Is There So Much Paperwork to Sign to Get a Mortgage?

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage.

During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

2. The banks don’t want to be in the real estate business.

Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation.

The housing crash that mandated that banks be extremely strict on paperwork requirements also allows you to get a mortgage interest rate as low as 3.43%, the latest reported rate from Freddie Mac.

The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of less than 4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

Source: Keeping Current Matters | The KCM Crew 08302016

10 THINGS YOU HAVEN'T THOUGHT OF THAT'LL MAKE YOUR MOVE EASIER

Moving is one of the most stressful activities there is. It's true - experts put it right up there with getting married - and divorced - and remodeling a house. If you're getting ready to move or are in the process of buying or selling a house, you may have been thinking about the unpacking and the packing and the change of address and turning on utilities. But there may be a few things you haven't thought of. These tips can help you make a smooth move.

1. Hook up your cable and internet ASAP Many utilities require only a phone call to switch them to a new address, but cable/satellite and Internet are a different story. There are a lot of options out there today, but not all of them are necessarily going to be available in your home. Doing the research ahead of time, figuring out what's best for your home, and making any necessary installation appointments as close to your move-in day (or even before, if you're us!) will help ease the transition from one home to the other - especially if you have kids. And don't forget to change your address with Netflix and any other similar services to avoid any interruptions.

2. Find doggy daycare options Animals don't always adjust to moves so easily. If you need to place them somewhere to minimize the trauma during the actual move and initial unpacking, you'll want to do the research and make the arrangements in advance.

3. Pack a box of essentials… And take it with you. Bring anything you think you'll need for the first night in your home, and then a few extras in case there's a holdup with your moving truck and your stuff doesn't arrive for a few days. If worse comes to worse and your moving truck doesn't arrive as expected, you want to make sure you have the things you need to get you through at least a few days. Things like:

•  A couple of outfits for everyone for a few days - and don't forget pajamas! 
• Towels and toiletries - soap, shampoo, toothbrushes, etc. 
• Blankets and pillows 
• Medications for every member of the family - don't forget about any pet meds you have, too 
• A first aid kit 
• Jewelry and other precious items 
• Chargers 
• Toilet paper and paper towels - you'll be glad you remembered 
• Paper plates and plastic cups and silverware 
• Dog food and bowls 
• Dog leashes and beds 
• Checkbooks and credit cards 
• Important papers including taxes, passports, social security cards, etc.

You may also want to bring a cooler filled with sandwich fixings and bottled water, plus some snacks like protein bars and peanut butter and crackers. It might be a day or two before you're able to get to the market, and eating delivery pizza for every meal is going to get old pretty quickly. Classroom Freebies Too

4. Think about the kids A simple deck of cards or a new coloring book and crayons can be lifesavers if you have small kids who are getting bored with all that box carrying.

5. Do your due diligence when it comes to movers Going with any old mover without checking them out first could end up being a disaster. If you're not loading up a truck and driving your things to your new house yourself, you'll want to take a few precautions. "Get quotes from at least three moving companies, and make sure they do in-home assessments so your quote is as accurate as possible," said HGTV. "Talk to family and friends for recommendations, or get free moving quotes from websites like Relocation.com." You'll also want to research them online. Sites like Consumer Affairs and MovingScam.com are a good place to start. Finally, don't forget that moving expenses are tax deductible. "Obtain an IRS Change of Address form, Form 8822, by calling (800) 829-1040 or visiting the IRS website. You will be able to download and print form 8822 and most other IRS tax forms; e.g., Form 3903 to help deduct moving expenses," said HGTV.

6. Sign up on Nextdoor Nextdoor is a great way to network in your new neighborhood for things like babysitters and handymen and garage sales and the aforementioned doggy day care. Signing up when you're moving in will also alert neighbors who may become new friends.

7. Leave the clicker! If it's attached to the visor in your car, you may forget and take it with you.

8. Change the locks You never know who out there could have a copy of your house key. It's a good idea to change the locks before you move in so you don't have to worry that the cousin of the friend of the girlfriend of the guy who used to live in your house has an easy way in. Always Ready Locksmith

9. Call a cleaning service Most people clean before they move out, thankfully, but it might not be up to your standards. Plus, there's just something about moving into a freshly cleaned place. If your realty company didn't already take care of a move-in cleaning, you're going to want to.

10. Find a doctor and dentist If someone gets sick or needs medical attention in your new neighborhood, you want to make sure you know where to take them without having to Google the nearest random doctor. This is another place Nextdoor will come in handy.

Source: Realty Times | Jaymi Naciri

UNDERSTANDING ADVERSE POSSESSION

There is an ancient legal concept in the law known as "adverse possession." If we go back to our history books, this is also known as "squatters rights."

The theory of the doctrine of adverse possession is that the person who holds or uses property adversely against the rightful owner should ultimately be entitled to clear title. But not every possession of land will turn into fee simple ownership. As the name of the doctrine implies, the possession must be adverse, hostile, actual, notorious, exclusive, continuous and under claim of right. 

Needless to say, these sound like highly complex legal concepts, and to some extent they are. 

However, in the words of one judge, "the person claiming the property by adverse possession must unfurl his flag on the land and keep it flying so that the owner may see, if he wishes, that an enemy has invaded his domain and planted the flag of conquest."

Thus, the person claiming by adverse possession must do something to alert the true owner that a stranger has taken occupancy.

The first thing any property owner concerned about losing (or gaining) property because of adverse possession should do is to talk to a lawyer. Although the legal concepts for adverse possession are fairly universal throughout the country, different states have different time requirements before adverse possession will kick in. For example, in the District of Columbia, the elements of adverse possession (i.e. open, notorious and hostile use of real property) must have been in existence for a period of 15 years. In the Commonwealth of Virginia, the period of adversity is also 15 years, while in Maryland the law requires 20 years for a successful claim.

It should be noted that these time limitations do not require that the same owner hold the property for the entire length of time. If, for example, owner A has owned the property for 8 years and then sold to owner B, the courts will allow the times to be added together. So long as the current owner of the property can claim that for the statutory period, he or she has met the elements of adverse possession, the Courts will grant title to that portion of property to the adverse claimant. This is called "tacking". 

However, a recent case in the District of Columbia has significantly watered down the concept of tacking.

Keep in mind that the burden of proof is on the claimant to meet the tests for adverse possession. In order to actually get title to the land in question, the claimant will have to file a complaint in court in what is known as "an action for quiet title." Needless to say, this is both time-consuming and expensive, and many homeowners -- especially neighbors -- will be reluctant to get involved in a hostile piece of litigation.

The Courts are generally reluctant to remove property from one owner, and will require strict -- and clear -- evidence that all of the various elements of adverse possession have been met.

Thus, if you are a property owner and are concerned that your neighbor may be in the process of claiming a portion of your property, there is one easy way to stop this.

You can avoid your neighbor's successful claim of adverse possession by removing one of the legal elements required for this claim -- namely adversity. Send your neighbor a letter, certified, return receipt requested, telling them that you recognize they are on your land and for a limited period of time you are going to permit them to keep the shed on your property or whatever it is they are doing on your land.. According to one judge, "If the use by me of my neighbor's land is, on its face, permitted by my neighbor as a matter of neighborly accommodation, the use is not adverse or hostile."

Put a copy of the letter and the return receipt among your valuable papers, and periodically -- perhaps every five years -- you may want to renew the permission to your neighbor.

And don't forget to inform your buyers of this arrangement if you ever sell your house.

Source: Realty Times | Benny L. Kass

Cosigning on Your Kid's Mortgage: Some Questions to Ask Yourself

If your child is looking to buy a house and can't qualify on their own, you may have thought about consigning on a loan. "It can be a brutal world out there, and you want to help someone you care about. That's a perfectly reasonable argument," said US News.

But have you examined the potential consequences of this action? Your good intentions could end up costing you, so you might want to ask yourself a few key questions before you sit down at the closing table.

What's the plan?

It's a good idea to examine the goals here - both yours and the recipient of your kindness. Is this house a long-term investment that will be on your credit for a long time? A short-term thing that's only intended to help establish credit for your child? A moneymaking venture that could pay off for both of you after you flip the house? Knowing the plan can help you make the best decision.

Is your child responsible?

What have you observed about your son or daughter's financial responsibility. Do they have a lot of outstanding credit they're not managing well? Do they regularly borrow money without paying it back? Do they buy a lot of unnecessary items instead of being more prudent with their money and establishing some solid savings? These could all be red flags. 

What is your financial commitment?If your child needs a cosigner, does that also mean they need help with the down payment? If your money is going to be tied up in this home purchase, you'll want to establish ground rules from the beginning. Is it a gift or a loan? If it's a loan, what are the terms? What if he or she defaults? If your name is on the mortgage, the responsibility to pay may fall to you.

GO Banking Rates

How important is your credit to you?

Your credit is going to take a bit of a hit with the addition of a new mortgage.

"The loan appears on your credit report, and the monthly loan payment factors into your debt-to-income ratio - regardless of whether the primary applicant makes the payment each month. Because you're liable for this balance in the event of default, being a cosigner can decrease your ability to get new credit," said Money Crashers. "But this isn't the only consequence of a higher debt-to-income ratio. Cosigning a loan can also lower your credit score because the amounts you owe makes up 30% of your FICO score. Thus, the more debt you have, the lower your credit score. Ideally, your debt-to-income ratio should be no higher than 36%, as your credit score will drop as your debt approaches or exceeds this percentage." But the real danger is, again, in the possibility of your child defaulting on the loan.

"The bank wants to have someone on the hook in case a loan is not repaid; if you cosign a loan, you're that person who is on the hook," said GO Banking Rates. "So if your child doesn't make his loan payments, you will be expected to do so - or risk suffering the impact of a defaulted loan on your credit score."

Will two mortgages be a hardship?

Cosigning for a loved one could prevent you from doing the things you want to do, like buying a new house for yourself, refinancing, or even buying a car. "One potential downside for parents is that the mortgage will show up on their credit as an outstanding loan obligation, which could complicate refinancing or buying another home in the future," said US News.

There may also be additional impacts to your finances you hadn't considered. "You should consult a financial advisorfirst to make sure you can comfortably afford to help without jeopardizing your financial security," they said. "You may also want to consult your tax preparer about potential tax implications, and, depending on the circumstances, ask a lawyer how to structure the legal paperwork in case your child divorces a spouse or defaults on the loan. Nobody plans on things going awry with real estate transactions, but it can happen, so it's best to be prepared."

How's your relationship?

"Another important risk to consider with a cosigned loan is the effect it could have on your relationship with your child," said GO Banking Rates. "Animosity can result from late payments or, even worse, defaulting on the loan."

Clear Mirror Healing

What's your goal?

If you're simply looking to lend a hand, well, first of all, that's super nice of you. Homeownership is still the American dream, and helping someone else's come true is awesome. But, is putting your credit at risk really the best plan?

There may be much better ways to help, like:

Gift a down payment - just make sure you know the tax implications.

Put the house in your name and rent it to your child - if you have the financial wherewithal and the goal is simply to provide a safe place to live, this might be a better solution. You can always pass the home along at the later date by providing seller financing.

If you choose to go ahead with cosigning, take precautions. There are steps you can take to help protect yourself, like using the tools provided by the lender to set up alert when payments are due, overdue, and when they're posted, and setting up direct debit so payments are automatically made at the same time every month.

Source: Realty Times | Jaymi Naciri 08102016

A DANGER IN EVERY ROOM: COMMON HOUSEHOLD HAZARDS

Your home should be a sanctuary, the one place you and your family can take refuge in at the end of a long day or week. Cozy, comfortable, and safe, the house should be the oven in which fond memories are baked.

Unfortunately, everyday objects can turn your precious, safe haven into a house of horrors. Every day, people are injured and killed in their ordinary homes while doing ordinary things. Are knives, chemicals, and faulty electrical outlets putting your family in danger on a daily basis? Let’s take a tour of the American house’s deadliest hazards.

THE GARAGE: A NEST OF UNDESIRABLES

Garages often contain things people don’t want in their house: smelly equipment, heavy tools, and garbage cans. Not all of these undesirable things are simply unpleasant. Many can kill. Among the frequent offenders:

• Chemical hazards. Gasolines, antifreeze, and weedkiller are among the chemical dangers commonly kept in garage. When used appropriately by adults, these things are just fine. But children and animals are endangered by their presence.
• Power tools. Electric drills, lawnmowers, even chainsaws. Nasty things, in the wrong hands.  
• Garage doors. The technology is safer than it used to be, but automatic garage door accidents are still a threat.

Make sure your garage is safe. Lock up all chemicals and tools. Supervise your children when they use the garage door.

THE KITCHEN: A BANQUET OF BLADES

Kitchen equipment is often dangerous. Knives cut, stoves operate at extremely high heat, blenders and other mixers can cause severe personal injury in the wrong hands. Additionally, many food products are inedible when not prepared properly or safely stored—for instance many garlic lovers stuff cloves into their favorite olive oil and store it at room temperature, which can lead to botulism. Just because you think you’ve seen it at restaurants, it doesn’t mean you should try it at home.

Keep blades, chemicals, and other hazards locked away from children. Throw out old food. Read packaging directions and store things properly.

THE BATHROOM: CLEAN BUT LETHAL

Dangerous cleaning chemicals are often stored in bathrooms. Often, these chemicals are tucked away in low-lying cupboards, easily accessible to children and animals. Many mouthwashes and soaps smell good and could lead a child to think of sweet drinks.

The other major danger posed by bathroom conditions is the presence of both water and electricity. Light sockets, electrical outlets, and appliances should be kept as far from showers and sinks as possible.

THE BASEMENT: HAZARDS FROM BELOW

Basements are a lot like garages. People keep things they don’t want to see in them: power tools, chemicals, etc. And most of the same warnings apply, with one big addition—many people, especially the “man cave” types, keep guns, knives, traps and other extremely dangerous implements in their basements. Even more than anything else in this list, guns and other weapons must be kept absolutely safe. They should locked up securely and kept unloaded. Children should always be supervised when in basements containing these sorts of objects.

Source: Realty Times, Amy Patterson 08092016

HOW TO BEAT SELLERS' STRESS

Three things are certain in life: death, taxes ... and undue stress caused by moving. Whether or not you use the services of a Realtor to help you wade through the uncertain waters of the buy-and-sell process, moving is stressful, period. And there's not much you can do to avoid it. And we're not just talking about packing and paperwork. Moving is an emotional process. If your'e not calming down your nervous children, you're trying to reassure yourself that you'll meet people in your new neighborhood, that you bought the best house within your means, and that your kids' new schools will measure up.

It's easy to forget while we're dealing with all of these jitters that moving actually can represent an exciting adventure, a growth opportunity and the prospect of new beginnings. Once the dust settles after your move, you're entering one of the most memorable times of your life. With any luck, you've recruited a REALTOR® who's familiar with the obvious stresses as well as the insidious (and subsequently more detrimental) ones. Depending upon your relationship with your Realtor, you should be able to rely on him or her for more than just closing the deal. Your Realtor also should be able to calm your trepidations by giving you the support you need -- giving you the facts about that new school district, reassuring you that your jitters are perfectly normal, and giving you as much information about your new hometown as possible, increasing your familiarity with the previously unknown.

It's important to remember throughout the entire selling and buying process, however, to reserve time for yourself and your family. It's not a waste of time, but rather an insurance policy for your sanity and continued happiness. Stress is sneaky, as we've all discovered. It can eat away at us during what are supposed to be the happiest of times, because after all, any major change in life is stressful. If it's supressed, it can wreak havoc both emotionally and physically and spread throughout the family. And there's nothing worse than moving a grumpy family across the country. For the sake of your continued family unity, keep in mind the following stress-relieving measures:

First, remember that it's perfect normal to feel unsure of your decision right now. You've just made a major commitment, and all of us experience those last-second "What on earth did I just do" worries after signing contracts and making life-changing decisions. Instead of becoming overwhelmed with "what ifs" and dread, reframe this decision as a prime opportunity to begin your lives in a new environment. The old saying "When one door closes, another one opens" definitely applies here. Trust that your Realtor is looking out for your best interests, ask as many questions as you need to throughout the entire process (that's part of what your Realtor is paid for), and look forward to the adventure that lies ahead of you.

If you can, keep an emergency fund in case you run into any unexpected costs. One example: If your buyer comes forward after a home inspection is completed and requests a series of repairs prior to move-in, you'll be prepared. Chances are good that you won't necessarily agree with the buyer's requests, but at least you won't face the additional stress of being short the money for repairs if you plan ahead and save some extra cash (no set amount -- just as much as you can handle. A goal you might try to shoot for would be in the range of $2,500). It's probably in your best interests not to try to guess what the buyer will want to repair, and then fix it ahead of time. That's because buyers have a habit of isolating areas of your home that you never considered having repaired, and not even noticing the ones you expected them to pinpoint. So save yourself any expenses until you've determined their requests.

And while we're on the subject of finances, try to anticipate and prepare for the initial expenses you'll face upon move-in. Resign yourself to the fact that during the moving process, you're going to feel as if you're holding your wallet upside down, and everyone -- movers, contractors, buyer, etc. -- is sitting underneath, catching the windfall and demanding a larger share. Keep in mind that this is an investment for the good of your family, and that these costs are a one-time inevitability.

Remind yourself of why you're moving in the first place. A job transfer, or is it a voluntary choice? Obviously, whether or not you had some degree of control over the decision will affect your outlook. Regardless of your answer to that question, round up as much information as you can about your new hometown. What kinds of cultural offerings does the town/city offer? What are its landmarks and natural attractions? Research some possible day trips you might take with the family once you're settled. Is your new hometown near state borders, giving you the opportunity to explore different regions of the country without much effort?

Envision your new home. Where will you place the furniture? Remind yourself of the home's primary selling points. Will you have more space? More closets? A large backyard and/or swimming pool? What does your new streetlook like? Do a lot of young families reside there? If so, your children are likely to be reassured by that knowledge. As often as possible, try to picture yourself and your family fully adapted to your new environment.

Remember to have a little fun occasionally. You're still allowed, even if you feel as if you don't have a penny left to your name. Take the family out to dinner, to a movie or a picnic -- anything that gets all of you out of the house and away from boxes, paperwork, emotions and all of those pre-move concerns. Keep a regular "date" to get out together -- for example, every Friday night leading up to the move. Take your mind off your stress for a few hours, and remind yourself that your family members are experiencing many of the same emotions. Like misery, stress often loves company, so enjoy your time together and remember that this stress won't last forever. Regardless of what you're feeling now, the move will happen and everything will eventually fall into place. Journeying into the unknown is what makes life rewarding, so trust in your Realtor's expertise and in your family's resilience, and look forward to the journey ahead.

Source: Realty Times 08042016 

Buying Remains 36% Cheaper than Renting!

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers actually show that the range is an average of 5% less expensive in Orange County (CA) all the way up to 46% in Houston (TX), and 36% Nationwide! 

A recent study by GoBankingRates looked at the cost of renting vs. owing a home at the state level and concluded that in 36 states it is actually ‘a little’ or ‘a lot’ cheaper to own, represented by the two shades of blue in the map below.

One of the main reasons that owning a home has remained significantly cheaper than renting is the fact that interest rates have remained at or near historic lows. Freddie Mac reports that rates fell again last week to 3.43%.

Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.  

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many renters who would like to evaluate your ability to buy this year, meet with a local real estate professional who can help you find your dream home.

Source: Keeping Current Matters | The KCM Crew 08082016

What Does Home Mean to You?

 

No matter what shape or size your living space is, the concept and feeling of home can mean different things to different people. Whether it’s a certain scent or a favorite chair, the emotional reasons why we choose to buy our own home are, more often than not, the more powerful or compelling ones. Every year, The Joint Center for Housing Studies at Harvard University conducts a survey to find driving factors behind why Americans decide to buy a home. The top 4 reasons to own a home cited by participants of the survey were not financial.

1. It means having a good place to raise children & provide them with a good education

From the best neighborhoods to the best school districts, even those without children at the time of purchase may have this in the back of their mind as a major reason for choosing the location of the home that they purchase.

2. You have a physical structure where you & your family feel safe

It is no surprise that having a place to call home with the means for comfort and security is the number two reason.

3. It allows you to have more space for your family

Whether your family is expanding, or an older family member is moving in, having a home that fits your needs is a close third on the list.

4. It gives you control over what you do with your living space, like renovations and updates

Looking to actually try one of those complicated wall treatments that you saw on Pinterest? Tired of paying an additional pet deposit for your apartment building, or do you want to finally adopt that puppy or kitten you’ve seen online 100 times? Who’s to say that you can’t in your own home? The 5th reason on the list, is the #1 financial reason to buy a home as seen by respondents:

5. Owning a home is a good way to build up wealth that can be passed along to my family

Either way you are paying a mortgage. Why not lock in your housing expense now with an investment that will build equity that you can borrow against in the future?

Bottom Line

Whether you are a first time homebuyer or a move-up buyer who wants to start a new chapter in your life, now is a great time to reflect on the intangible factors that make a house a home.

Source: Keeping Current Matters | The KCM Crew 08032016