Chicago's North Shore - North and Northwest Suburbs Real Estate Archive

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How to Prepare for the Loan Process

by Allyson Hoffman

 Are you ready to buy your dream house in Chicago's North Shore? Are you familiar with all of the information you will need to provide? The lender will ask you to complete a loan application, which will require a great deal of personal and financial information. First time buyers will definitely need to brush up on everything that is expected of them, and even seasoned buyers could use a refresher so that there are no surprises.

1) Your residence history
• Your previous addresses for the past two years
• The length of time you’ve lived at each address
• If you currently rent, your landlord’s name and addresses (for past 12 months)

2) Your employment history
• The names and addresses of all your employers for the past two years
• The dates you worked at each place of employment
• If there have been any gaps in your employment, explain why

3) All outstanding loans and credit cards
• The creditor’s name(s) and address(es)
• Your account number(s)
• The current total balance you owe and the months left to pay
• The amount of the monthly payment

4) Savings, checking or investment accounts
• The names and addresses for each financial institution
• Your account numbers • The current balance or value

5) Real estate you currently own
• The property address(es)
• The estimated market value
• The outstanding loan balance
• The amount of your monthly payment (including taxes, insurance, homeowner’s association dues)
• The amount of your rental income (if applicable)

6) Personal property you own                                                                                                                                                                                                                                                                                                    • The net cash value of your life insurance
 • The make, year and value of your automobile(s)
 • The value of your furniture, jewelry and other personal property

Without the right help from an experienced real estate agent, you can become overwhelmed quickly. Contact me today to see how I can help you prepare to buy your new home!

Image courtesy of www.gotcredit.com/Flickr.com

 

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Have You Considered Alternative Financing?

by Allyson Hoffman

Some homebuyers are reporting that obtaining financing for a home has been getting more and more difficult. If you are finding it a challenge to qualify for a traditional mortgage, that doesn't mean your dream of owning a Chicago North Shore home has to end. With lending guidelines tighter than ever, many home buyers are looking to alternatives to traditional mortgages and fortunatly there are some options available!

 Here are a few ideas to consider if you are running into road blocks:

  • Borrow From Life Insurance: You may have a whole life or other insurance policy that increases in value over time. If you borrow against that cash value, you don’t have to go through standard loan qualification.  Be sure to check with your insurance company about the risks involved
  • Owner/Seller Financing: If the seller is an investor, or if the seller owns the property free and clear, they may offer owner or seller financing options to help move the property. You will still be responsible for principal, interest and scheduled payments through a promissory note, but you probably won’t go through the rigorous qualification process that a bank requires. Typically owner or seller financing also saves mortgage origination fees and other fees tacked on by most lenders.
  • Borrow From An IRA: If you have a self-directed IRA, then you know that you can use the IRA to invest in a number of assets, including mortgages. Although you can’t use your own IRA to buy your personal home, a family member or other investor can use a self-directed IRA as the investment vehicle for your property. Private investors often step in to help with acquisition loans, although you can expect to pay a higher rate for the initial loan.
  • Lease/Purchase Option: Many investment owners are willing to offer a lease/purchase option or rent to own agreement. You are able to rent the property for a specific term, usually with higher payments than the market rate; and your rents go toward the purchase or down payment of the property.

Do you have any tips to share on alternative financing or have you found other options than what is listed here? Contact me today, we'd love to know about other options that can help homebuyers!

Image courtesy of Pictures of Money/Flickr.com

 

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Your Credit is More Important Than Ever

by Allyson Hoffman

We are hearing that lenders want to make loans in Northern Illinois, but in distressed economy, could it be that only those with great credit will get approved?  While many Americans are struggling to make payments and hang on to their good credit scores, mortgage companies and other institutions are tightening their standards and credit qualifications more than ever before.

Most buyers are wanting to know how they can secure the rock bottom interest rates. The truth is, they may be reserved for top tier credit risks – borrowers who have scores of 720 and above. Your banker is also looking for thorough documentation of your income and assets. Keep in mind that from mortgages to car loans, your credit history and score matter more than they did

If you're buying a new home or refinancing the mortgage on your primary home, you'll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan (125% of a metro area's median home price, up to $729,750).

Fannie Mae and Freddie Mac will take a credit score of 620 if you have at least 25% equity in the property or a score of 660 with equity of less than 25%. Oh and that debt to income? Make sure it’s at 36% or less.

In addition to stellar credit history lenders look for:

•Proof of income – You’ll need to show pay stubs for the past 30 days and W-2 forms for the past two years, along with retirement-account and investment statements.
•Self-employment – Be prepared to give up  two years of tax returns and keep your fingers crossed. It’s become harder than ever for declared income borrowers to get mortgages and other lines of credit.
•Rental income - You can use only 75% of rental income to qualify for a mortgage, along with 30% equity in your former home.


Even if you are preapproved, you will be subject to a second or final approval – lenders will pull a second credit report before closing. If you have taken on any new debt, your deal may go right out the window. Home equity loans are tougher to get now as well. In most areas you'll be able to borrow no more than 80% of the appraised value – and that’s with your perfect credit score.

The bottom line – take good care of your credit. It can be very challenging in this recession but your credit history and credit score are more important than ever. Bad lending practices have resulted in tight standards that will give credit only to the top tier borrowers who have enough cash and income that they may not even need to borrow money in the first place.

Contact me today to learn how you can improve your credit and buy the perfect home for your family.

Image courtesy of www.gotcredit.com/Flickr.com 

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What If Your Mortgage is Sold?

by Allyson Hoffman

While it's not uncommon for mortgages to be sold, many homeowners are often surprised that this happens, especially when it happens to them.  Like other financial commodities, home loans are bought and sold on the free market like stocks and bonds. When a mortgage is sold to another financial institution, it means that the servicing rights to the loan have been transferred to a new lender. You will now send your payments to a new company that is obvious, but what else does this mean for you?

The important part is not to panic when you get the news. This transaction may be seamless or you might have problems with the new changes. As a potential home buyer or a current homeowner you should have an understanding of what has happened and what your rights are.

If this happens you will probably receive a statement when you got your mortgage that indication some level of likelihood that your loan might be sold during its life to another lender. If that does happen, then federal mandates require both the seller and the buyer of your paper to notify you of the pending sale and the closed sale.

Your current lender must notify you, in writing, at least fifteen days before your next payment is due. The lender is also required to give you complete contact information – company name, physical address, phone number and account manager of the new servicer.

The servicer buying your loan is required to provide this information to you as well. They are required to provide a direct link to a person you can speak to – not just an automated system.

This requirement protects you from mortgage scams directing you to send payments to an unknown entity via P.O. Box or wire and gives you the right to ask questions about the status of your loan and receive prompt answers. In addition, you are protected from any delinquency status for 60 days during the transition.

If you are behind in payments, your loan will likely stay put, as most aren't interested in purchasing problem loans. If you have an application in for loan modification, your loan will probably not be sold as well. However, if it is sold after you have started the loan modification process, be prepared to provide additional paperwork or even start over with the new lender.

Contact me if you have any questions about what happens when your mortgage is sold. I would be happy to help!

Image courtesy of www.gotcredit.com/Flickr.com

 

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Why is Having a Good Credit Score Important When Buying a Home

by Allyson Hoffman

Interested in buying a home in Chicago's North Shore? Lenders are telling us that they want to make loans, but in this difficult economy, those with the best credit will be approved.

While many Americans are struggling to make payments and hang on to their good credit scores, mortgage companies and other institutions are tightening their standards and credit qualifications more than ever before.

Those rock bottom interest rates? They are reserved for top tier credit risks – borrowers who have scores of 720 and above. Your banker is also looking for thorough documentation of your income and assets. Keep in mind that from mortgages to car loans, your credit history and score matter more than then they ever have in the past.

If you're buying a new home or refinancing the mortgage on your primary home, you'll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan (125% of a metro area's median home price, up to $729,750).

Fannie Mae and Freddie Mac will take a credit score of 620 if you have at least 25% equity in the property or a score of 660 with equity of less than 25%. Oh and that debt to income? Make sure it’s at 36% or less.

In addition to stellar credit history lenders look for:

  • Proof of income – You’ll need to show pay stubs for the past 30 days and W-2 forms for the past two years, along with retirement-account and investment statements.
  • Self-employment – Be prepared to give up  two years of tax returns and keep your fingers crossed. It’s become harder than ever for declared income borrowers to get mortgages and other lines of credit.
  • Rental income - You can use only 75% of rental income to qualify for a mortgage, along with 30% equity in your former home.

Even if you are preapproved, you will be subject to a second or final approval – lenders will pull a second credit report before closing. If you have taken on any new debt, your deal may go right out the window. Home equity loans are tougher to get now as well. In most areas you'll be able to borrow no more than 80% of the appraised value – and that’s with your perfect credit score.

The bottom line – take good care of your credit. It can be very challenging in this recession but your credit history and credit score are more important than ever. Bad lending practices have resulted in tight standards that will give credit only to the top tier borrowers who have enough cash and income that they may not even need to borrow money in the first place.

In this tight lending environment, credit is key. Have questions?  Contact me about ways  to improve your credit score to have the best home buying experience!

Photo courtesy www.gotcredit.com/Flickr.com

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Should You Renegotiate Your Mortgage?

by Allyson Hoffman

When the economy takes a hit, many homes in many neighborhoods are foreclosed upon. Many Northern Illinois homeowners are struggling to make the monthly mortgage payment.  Even with these tough times, the good news is that many lenders are more willing than to negotiate terms to help homeowners avoid foreclosure. By renegotiating their mortgage, homeowners may be able to get a lower finance rate as well as change your rate from a high fixed-rate mortgages or adjustable-rate.

Most lenders require that you have at least 10 percent equity in your home. You can easily check the value of your home on sites such as Zillow.com and I can provide you with a free and quick estimate of your North Shore home’s worth . In addition, most lenders typically will require that you have a credit score of at least 720 to qualify for good rates.free and quick estimate of your home’s worth  Lenders are aware of the many fiscal difficulties borrowers have in making their mortgage payments when hardships arise. However, they typically won't volunteer or advertise their help.

So if you are struggling to make your payments on time, it is vital that you take the initiative and contact your lender and give them a heads up on your current financial hardship before you miss payments.  Keep in mind that lenders have more incentive than ever to work with you. Plunging property values mean they’re recovering less now on foreclosures. Plus, many that received cash infusions from the  U.S. Treasury are under pressure to show that they’re responding to the housing crisis. 

Image courtesy of OpenClipartVectors/Pixabay.com

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Mortgage Money IS Available…For Now

by Allyson Hoffman

One comment that I hear from real estate agents and lay people alike is that “it’s hard to get a mortgage; so hard, in fact, that no one can get one”.  This is just NOT true!  In reality, lenders are lending at a healthy pace.  Interest rates continue to cooperate and there are many programs for customers.  It’s just that lenders, for the most part, only approve borrowers now that can demonstrate their ABILITY to repay (via income verification)   and their WILLINGNESS to repay (via credit scoring and automated underwriting systems).

That being said, as I look ahead, the mortgage product menu is looking a bit blurry:

Let’s start with FHA…rumors are stronger about increasing the minimum down payment from 3.5% to 5%…there is also talk of cutting back the allowable seller’s concession from 6% to 3%…but further, the maximum loan limit allowable under FHA was inflated to assist in the housing recovery and that is set to expire later this year. Predictions vary on the cut range, but I think a $100,000+ reduction is likely. Is the government trying to lessen demand for FHA insured financing? Seems like they are.

Well, what about Conventional loans? Conforming products (typically underwritten to FannieMae or FreddieMac guidelines) seem okay for now, assuming the GSEs stay in business. But, Jumbo loans (those in excess of the $729,250 amount for a one family home) are facing the 5% Risk Retention requirements being brought on by QRM Rules. How will lenders price loans where they need to set aside 5% of the loan amount in reserve?

At the same time, Jumbo lenders are starting to explore different options for qualification. I am hearing things like “average monthly deposits as support for income when tax returns might appear insufficient” and such. This looks like more aggressive lending beginning to reappear in the non-conforming world.

With inflation starting to heat up, and rates likely to move higher, look for lenders to start offering more adjustable rate mortgages to help people qualify.  It is the standard reaction when the hike in rates either scares buyers back to their apartments or puts unlocked loans which are in process in jeopardy of not remaining approved.

My advice stays the same.  Pigs get slaughtered.  If you can get a mortgage today, at these rates, and with these guidelines, TAKE IT.  Too many people will regret missing this wonderful opportunity that 2011 has presented them.

Article from KCM Blog

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Image courtesy of www.gotcredit.com/Flickr.com

Understanding Escrow

by Allyson Hoffman

Escrow is part of the process when you are  purchasing a Northern Illinois home.  Many first time homebuyers have many questions about the escrow process. Here is some information to make it a little easier to understand.

What is an escrow?
An escrow is an arrangement in which a disinterested third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. The escrow becomes the depository for all monies, instructions and documents pertaining to the purchase of your home.

How does the escrow process work?

The escrow is a depository for all monies, instructions and documents necessary for the purchase of the home, including  funds for the down payment, lender’s funds and documents for the new loan. The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with instructions; paying all bills as authorized;  closing the escrow only when all terms and conditions have been met; and, distributing the funds in accordance with instructions.

Do I need documentation?
Receipt of your deposit is generally included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your
local bank.

What information will I have to provide?
Typically you will be asked to complete a statement of identity as part of the necessary paperwork. Because many people have the same name, the statement of identity is to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.

How long is the escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. Typically an escrow often takes an average time of 30 to 45 days.

When does the escrow process end?

The day you actually close on your home, the escrow process ends. This is when all the funds are transferred where they need to be and all the documents are signed and you get the keys to your North Shore dream home!

Image courtesy of www.gotcredit.com/Flickr.com

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What is a Piggyback Loan?

by Allyson Hoffman

Have you ever heard of a “piggyback loan?' This is a home financing option where the property is purchased using more than one mortgage from two or more lenders.  While there are many variations, the piggyback loan which is also known as the 80-10-10 loan, can be typically defined as a 10 percent second mortgage coupled with a traditional 80 percent first lien and a 10 percent down payment.  This loan can be mixed in a variety of different ways to make up the difference between a conventional loan and almost any amount of down payment.

A piggyback loan is basically a second mortgage that they give you at the time of a home purchase or refinance.  These types of loans allow you, the home buyer, acquire or refinance a home with less than a 20 percent down payment or equity. One advantage to this style of loan is that the homebuyer isn’t required to carry private mortgage insurance.

Homebuyers can also use this piggyback loan as a source of funding for making a bigger downpayment on their new home. This can be to their advantage because private mortgage insurance can be quite expensive and it is not tax deductible.

 Image courtesy of www.gotcredit.com/Flickr.com 

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More Foreclosure Fallout

by Allyson Hoffman

Recently, another controversy in the mortgage industry has drawn attention. This time it is regarding the falsification of documents and affidavits used in foreclosure proceedings. With the nation’s top lenders freezing foreclosure activity while investigations continue, some of the newest victims are buyers and Realtors of distressed properties. Foreclosures create a significant book of business for home sales in hard hit areas – as much as 30% or more of the sales market.

Home sales this past summer hit the lowest levels in ten years, and in some markets, like Florida and Nevada, the active housing market is full of foreclosures. The uncertainty is also causing chaos for all home sales. Experts tell us that home prices could bump up slightly on the short term, but that a glut of foreclosed properties post-freeze will hurt the general status of the market in the long run.

While some markets are obviously hit harder than others, the moves by some of the nation’s largest lenders – Bank of America, Chase, Ally Financial and GMAC Mortgage is systemic, now affecting proceedings in all 50 states. Fannie Mae has responded by pulling foreclosed homes off the market and many title companies are refusing to issue title policies, making the homes unsellable.

Widespread investigations at either a state or national level will further paralyze a market that already shows few signs of life. Foreclosed home sales at least pump money into the market and generate real estate activity. The foreclosure inventory competes directly with new construction and if both inventories rise or stay unchanged, the construction industry will effectively shut down in some areas.

Mark Zandi, chief economist at Moody's Analytics, noted that today’s latest crisis is likely to have an impact for the next two years. "It'll probably push out the distressed sales into 2011 and 2012," he said. Delays of large foreclosure inventories will slow long term recovery.

Additional market uncertainty will keep more hesitant buyers on the fence as they wait to see what foreclosed homes might be coming back on the block. Prolonged delays in getting foreclosures moving again can also hurt long-term prices and futures as investors will look to other markets.

 

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Displaying blog entries 1-10 of 25

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview IL 60025
847-310-5300
Fax: 847-400-0881

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview, IL, 60025

(847) 310-5300
[email protected]

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