FREQUENTLY ASKED QUESTIONS
Can
you only sell the houses you have listed?
How
much money will I have to have?
What
are closing costs?
Can
the seller pay closing costs?
Should
I make a large down payment?
Is
owning or renting cheaper?
What
is A paper?
What
is B paper?
What
is First Time Buyer Money?
What
is a second?
What
is a "forgivable " second?
What
is LTV?
What
is pre-qualified ?
What
is pre-approved?
What
is a HUD home?
What
is the FHA?
What
is PMI and MIP?
Why
should I be preapproved?
What
is an appraisal?
What
is underwriting?
What
is the lowest down payment I can make?
What
is a 1031 Tax Exchange?
Do
I have to pay capital gains on my home sale?
Can
you only sell the houses you have listed?
No - I can sell any property in the state of
Missouri. I can help make your search easier. The internet has lots of
houses listed but most of the databases aren't up to date. I use the
St. Louis area Multiple Listing Service (MLS) It's the same
service that all of the area real estate companies use and its
information is very accurate and current. Based on our discussion of
your needs, I can set up a search and have it email properties to you
as soon as they are listed so you'll know about properties within an
hour of their availability. Let's make an appointment to get together.
Send me an email or
call me at 314-772-HOME (4663) (Back
to Top)
How
much money will I have to have?
Even if you choose
a 100% loan you should expect to have expenses of 2 1/2% of the price
of your home. These expenses are referred to as closing cost prepaids
and points. A 100% loan is a non-conforming product, you should
consult with your Realtor and loan officer to find the correct product
for you. (Back
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What
are closing costs?
Closing costs are
the fees that must be paid in order to originate your loan, insure
your deed, record and transfer title. (Back
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Can
the seller pay closing costs?
Usually yes
however you must be sure your loan product allows this. It is
important to clarify your underwriters rules before submitting an
offer. Each institution has rules governing allowed closing costs and
or concessions. (Back
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Should
I make a large down payment?
The answer to this
and other financial questions is peculiar to your circumstances. The
first thing to find out is does your credit allow you options.
If your credit allows a lower down payment you must decide if it is
the best use of your funds. If you will need money in the near future
for furnishings or home maintenance a large down payment may be
unwise. If you need a safe investment vehicle you may wish to have a
large down payment on the other hand a sophisticated investor my
wish to invest in higher returns. (Back
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Is
owning or renting cheaper?
Owning. U.S. tax
code has been designed to promote home ownership. Home owners receive
credits for interest paid toward the purchase of a home and usually
become eligible for other deductions not available to those who cannot
itemize. It is also true that landlords build profit into rent so
buying is at least that much cheaper than rent. Over time real estate
appreciates some times at varying rates but traditionally at around
ten percent per year. The difference between what you owe and the
worth of your home is referred to as equity. Tax deductions,
discounted shelter and equity all make owning the wiser choice. (Back
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What
is A paper?
A paper is a term
used by underwriters to refer to a loan which meets the parameters set
by Fannie Mae/Freddie Mac for loans those organizations will buy or
purchase. Also referred to as conforming, A paper says the borrower
has adequate credit, income and job history for a given loan. (Back
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What
is B paper?
B paper on
nonconforming is a loan which does not meet the requirements set out
by Fannie Mae. At least one factor has caused the loan to be
unacceptable. The borrower may be borrowing a large percentage of his
income, his credit score may be low or his income erratic or poorly
documented. These loans have higher rates and more fees than A paper.
If you believe you are eligible for a conforming loan and are not
being offered one see another lender. (Back
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What
is First Time Buyer Money?
In Missouri first
time buyer money is known as MHDC. MHDC is a grant program where
persons within the income limits can get a lower rate or a grant to
buy a home. For more info go to MHDC's
website. (Back
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What
is a second?
When a buyers down
payment and loan are less than the purchase price the seller may
finance a portion of the purchase. The lenders loan is in first place
and the sellers in second. In the event of a foreclosure the lender in
first place receives payment of its full debt while the second place
lender receives the remaining funds. If the house is sold or
refinanced the second must be paid in full. (Back
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What
is a "forgivable" second?
While any loan may
be discounted or forgiven during its life, a "forgivable
second" is an agreement by the buyer and seller prior to closing
that the note held by the seller will not be paid. The buyer, seller
and usually mortgage broker collude together to hide the true level of
risk from the primary lender. A more concise term for this practice
would be fraud. While the seller carry-back or second is an
appropriate practice, this scenario is not. (Back
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What
is LTV?
LTV is an
abbreviation for Loan to Value. The LTV is the percentage of a
properties value that the lender is willing to finance. The higher the
ltv the lower the down payment. FHA loans are typically 97ltv, (Back
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What
is pre-qualified?
A
pre-qualification is a statement by a loan officer that a person
appears qualified based on the answers to some questions. None of the
information has been verified and neither buyer nor seller should rely
on this statement. (Back
to Top)
What
is pre-approved?
A buyer can be
pre-approved after they have applied for a loan and had a credit
report run. A pre-approval will have some exceptions, the fewer the
exceptions the stronger the preapproval. Remember the preapproval is
only as good as the institution issuing it. (Back
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What
is a HUD home?
The Federal
Housing Administration guarantees many first time home buyers
loans. In St. Louis loans up to $149,000 may be guaranteed. If
the buyers of these homes default the FHA may buy the home from the
bank and than resell it through HUD. Thus it is a HUD home. In St.
Louis all HUD homes are available through any realtor. Special rules
apply. (Back
to Top)
What
is the FHA?
An agency of the U.S. Department of Housing and
Urban Development (HUD). Its main activity is the insuring of
residential mortgage loans made by private lenders. The FHA sets
standards for construction and underwriting but does not lend money or
plan or construct housing.
FHA loans have inspection requirements that often
scare sellers but their requirements are rarely stricter than a St.
Louis area municipality. (Back
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What is PMI and MIP?
Loans that have a higher than 80 ltv will require
the buyer to carry insurance to guarantee their loan. In the event
that you pay off 20% of your loan or have 20% do to appreciation PMI
should be retired. FHA normally requires a refinance in order to
retire MIP. This is one advantage of a conventional loan over a
government loan. (Back
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Why should I be
pre-approved?
Pre-approval has many benefits. The buyer is
assured of his/her purchasing power and only shops within that range.
The agents involved and the seller are all assured of the buyers
serious intent. This assurance of ability and intent makes the
preapproved buyer a more desirable than someone who has not put forth
the effort. Not being preapproved can cost the buyer thousands in
negotiating. (Back
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What is an appraisal?
An appraisal is a written justification of
the price paid for a property, primarily based on an analysis of
comparable sales of similar homes nearby. Ordering the appraisal is
one of the good faith efforts required in the contract of the
buyer. Delayed payment for the appraisal is one of the most common
delays in closing and may place the buyer in default. (Back
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What is underwriting?
Underwriting is the process of reviewing a loan
package after the loan officer has prepared it and the home has
been appraised. When underwriting is complete the lender should issue
a commitment. (Back
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What is the lowest down
payment I can make?
There are a lot of factors to consider. A buyer who
is qualified can get into a property with no money down. Whether this
is the best choice is a matter that should be considered. (Back
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What is a 1031 Tax Exchange?
For comprehensive information on 1031's see the IRS
site or confer with a licensed 1031 agent. (Back
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In laymen's terms a 1031 transfer allows a person
to transfer the equity of a rental property into a new investment. The
previous property may have been partially or wholly depreciated but
the seller will not suffer capital gains tax as long as all of
the equity is transferred. Often the new property is refinanced after
the transfer freeing up the investors capital for further investments.
(Back to
Top)
Do I have to pay capital gains
on my home sale?
The following was excerpted from the IRS website. Click
here for more info.
Gain. If you have a gain from the sale of your main home,
you may be able to exclude up to $250,000 of the gain from your income
($500,000 on a joint return in most cases). Any gain not excluded is
taxable.
Loss. You cannot deduct a loss from the sale of your main
home. (Back
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If you have other questions, please contact me at
314-772-4663.
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