One of the first-time home buyers I’m currently working with just called me with a few excellent questions. She and her boyfriend have recently made an offer on their next home, with their agent which was accepted. They now have handsome stack of papers from the escrow company (as if the paperwork from the lender wasn’t enough) that caused some questions.
What is Escrow?
February 2, 2007 by Leave a Comment
My Second Home
February 1, 2007 by Leave a Comment
I often tell the story, when I’m meeting with first time homebuyers who are a bit discouraged with today’s home prices, about my first home. We were renting a nice apartment in Kent when a builder had left a flyer on our car promoting that if we could afford $X in rent, then we could afford $X of a brand new house! WOW! I couldn’t believe it…but my wheels were turning.
I began picking up the Homes & Land magazines and before you know it, we had landed with a real estate agent and were looking at homes…with that bright and shiny brand new home in our minds. In reality, we qualified for a 900 square foot older rambler with 3 bedrooms and 1 bathroom…and we pounced on it for about $65,000. In 1989, our interest rate was in the 11% range. My commute out of NE Tacoma to downtown Seattle was horrendous! Even back then.
We lived there about one year and we were experiencing a market similiar to what we have lately in our area. I began to panick that we would be "trapped" in that house forever. Although I was grateful to own a home, it was not where I wanted to raise our future family. My (then) husband and I discussed matters and agreed to wait 5 years to move. The next day, when he was at work, I bought a house…subject to his approval, of course! He wasn’t very happy when I called him at work to tell him what I had done. He forgave me when he learned that our house we had purchased a year ago was worth $90,000!
We bought our second home. This one was new construction in southwest 
Federal Way. The plat was marketed as "The Affordable Street of Dreams". This photo is not of our second home, but is in the neighborhood (Madrona Meadows…there were no Madrona trees in the plat…btw) and is similiar in size and age.
I thought I would provide you with the sales history on our former home in Madrona Meadows (these figures are not for the home in the photo):
- We purchased July 1990 for $124,495
- We sold in April 1993 for $134,900 (approx. 7.5% appreciation over 3 years)
- Sold again in July 2003 for $215,000 (approx. 9% appreciation in 10 years)
- Last sold in March 2006 for $303,000 (approx 14% appreciation in 3 years)
Owning a home can be the best savings plan a person can have. In 16 years, the property more than doubled in value (241%), provided income tax benefits, not to mention shelter! Back in 1990 when we purchased in Madrona Meadows, there was "bubble talk" as well and in our area, we have yet to see real estate take a nose dive. It may simmer or slow down a bit, I certainly would not recommend that potential buyers sit on sidelines waiting for that event. Our local economy is too strong for that to happen anytime soon. In addition, "first time" homes are great purchases because there will always be a market for them.
Before You Go to Your Signing Appointment
January 27, 2007 by 5 Comments
EDITOR’S NOTE: This post has been updated. Click here to read the most current version.
1. Bring a cashier’s check. A good lender will do everything in their power to provide escrow with instructions in a timely manner so that they can, in turn, give you the dollar amount required as soon as possible. Sometimes, you may only get a day or two of notice before escrow contacts you with this information. The reason this can occur so late in the process is because all the loan documents have to be prepared by the lender and are then delivered to the escrow company with our instructions. The escrow company then creates a HUD-1 Settlement Statement which determines exactly how much funds you need to bring to closing. When you are told the amount, you need to obtain a cashier’s check payable to the escrow company and bring it with you to the closing appointment. A personal check is a no-no. NOTE: If you are considering wiring funds to the escrow company, please contact them in advance to discuss this process.
2. Bring a copy of your Good Faith Estimate. You will want to compare it to the Estimated HUD-1 Settlement Statement that will be presented to you at the signing. Hopefully, the Escrow Officer has provided your Loan Originator a copy of the HUD in advance for them to review it prior to your appointment.
3. Bring your current driver’s license. The notary must see them for proof you are you! Some may require two forms of identity.
4. Bring anything else that the escrow company or lender request. Sometimes the lender may need you to bring follow up documentation to closing (such as originals, paystubs, etc.).
5. Bring directions to the escrow company. Be sure to get specific directions to the escrow company from the escrow company (or visit www.mapquest.com). Please be on time. Escrow companies are often very busy and generally on time.
6. Plan on your signing taking approximately 45 – 60 minutes. If you would like to have more time to read your documents, or to have an attorney review them for you, ask your lender in advance so they can accommodate having a copy of your loan documents available to you in advance. Your loan package is about an inch of paper. If you want to read it word for word, you should get a copy beforehand.
7. Sign your documents as your names appear. Sign your name within the County’s required borders for recordings. This avoids last minute corrections or delays in your closing. You may want to do some hand exercises before signing (just teasing—well, kind of).
If you have questions regarding your loan documents or program, please call your Loan Originator. Don’t be shy! The signer may not be familiar with your specific loan program.
After signing your documents, escrow sends the original required documents to the title company who, after reviewing, delivers them to the County. With our company, the funding department also reviews the loan documents and verifies all conditions are met.
At this point, the lender coordinates with the escrow company to release the funds and to record the documents on the scheduled day for closing. Typically either the escrow company or your real estate agent will contact you once your transaction has recorded.
Week in Review on Rain City Guide
January 26, 2007 by Leave a Comment
I am an Active Contributor on Seattle’s Rain City Guide blog. This site is packed full of information about real estate, homes, our local area, finance as well as industry and blogging tips and great interviews with fellow professionals. Here are a few recent post that may be of interest to you, the consumer.
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Your Private Information Is For Sale. I have mentioned this before on The Mortgage Porter and I feel it’s worth reposting. Credit bureaus are reselling your information when you have your credit report pulled.
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Who’s Client Is It Anyway is a post from Eileen Tefft regarding what can happen with site agents when a buyer looks at new constuction.
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Reba Haas posted the article: Copper thefts on the rise – a new threat to vacant homes for sale or rent.
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Don’t miss Dustin Luther’s 10 Great Interview Questions for Agents.
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Too Close to Home is another post by yours truly about borrowers trying to buy investment property as owner occupied to get a better interest rate.
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Buyer’s Remorse by real estate attorney Craig Blackmon addresses when a buyer may need the help of legal council.
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Last, but certainly not least…Agent FIRED! – Lender Fraud by Ardell DellaLoggia and all 84 post that follow is an absolute must read.
As I said…there are many other great post…these are just a few of the highlights!
Preapproval Letters Defined
January 19, 2007 by 10 Comments
The preapproval letter is a tool typically drafted by a loan originator to be used by a buyer’s real estate agent when presenting an offer on a property. The letter may be in the form of a certificate or be an actual letter on the lender’s letterhead. The preapproval letter is intended to assure the seller and the listing agent that the buyer has been buyer has been approved by the lender and therefore accepting an offer from this buyer, there should ideally not be any financing issues with the buyer.
When I prepare a preapproval letter, it usually contains the following (depending on the program):
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Effective date.
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The borrower’s names (who is approved for financing).
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The sales price and loan amounts they are approved for.
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The type of financing is confirmed (ex. Conventional, FHA, etc.)
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Credit has been reviewed.
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Employment and income has been confirmed.
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Down payment and closing cost have been verified.
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Any closing costs that are being requested to be paid for from the seller.
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Any item the preapproval is subject to (such as satisfactory appraisal, title, complete purchase and sale agreement, etc.).
If these items have not been actually verified with proper documentation, then a buyer has been prequalified—not preapproved. BIG DIFFERENCE. Being prequalified essentially means that a verbal interview has been conducted without providing all of the necessary supporting documents (pay stubs, W2s, bank statements—again, depending on the type documentation required for the specific loan “full doc” to “no doc”). In addition, a Good Faith Estimate does not constitute a preapproval, it does detail the proposed loan scenario.
The preapproval letter does not contain private information such as a buyer’s credit score or their additional assets. It is a sales tool for the buyer’s agent and if there are multiple offers presented on a home, having a strong preapproval letter is an advantage. This is one reason why it is crucial for buyers to become preapproved before they begin shopping for their next home. Many listings agents will not even consider an offer unless the buyer has been preapproved.
The preapproval letter is generally effective for 90 days a specific amount of days, typically when most lenders consider the credit report “expired”. Updating a preapproval letter is simply re-running the credit and possibly obtaining most recent income and asset documentation (paystubs and bank statements). On occasion, the buyer’s agent may request a revised preapproval letter if they are presenting an offer on a home that is priced for less than what the buyer is approved for and if they are asking for closing costs.
Real estate agents may also consider who the preapproval letter is from, and they may contact the lender to confirm the buyer is indeed prepproved and not just prequalified. Many agents will tell you that the preapproval letter is only worth the paper it’s printed on. This is also why it’s very important to be selective with lender you work with…it could possibly impact whether or not your offer is accepted on your next home.
If you’re considering purchasing a home located anywhere in Washington state and need a preapproval letter, I’m happy to help you!
EDITORS NOTE: This post has been updated since credit reports are no longer “valid” for 90 days with most lenders.
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