Rich Sweum

In Real Estate, timing is everything...and if you can time a purchase to coincide with the bottom of a cycle, more power to you! But buying on the "slide" is the absolute best time to buy, because appraisal limitations haven't caught up to the sliding home values...they use comparable sales from the last 6 months for the most part in affirming value of the home you are purchasing.

RIGHT NOW Snohomish County presents some amazing purchase opportunities!

If you are a first time homebuyer, now is the best time to get pre-qualified and get connected with a realtor who is a professional. We have Zero down loans with down payment assistance, VA loans, and great pricing on all our loan products.

If you need to sell before you buy your next house, the agents I work with have been very successful in getting their listings sold for 3 reasons

1) they are pro's;

2) they price their listings correctly

3) they understand how to use down payment assistance and FHA to their sellers advantage.

Get pre-approved today!

"Short Sales" will be more and more commonplace in the next 2 years and the number of Realtors that are qualified and skilled at negotiating with loss mitigation and REO departments of banks will benefit. Now more than ever, it is imperative that you work with a Realtor who is a career professional and a lender who is well versed in providing financing for these types of transactions.

There is a great deal of "Fiction" regarding short sales out there right now AND many folks running around claiming to be able to handle these scenarios. It is like someone who found a scalpel offering to take out your appendix saying, "I saw the procedure on the learning channel...I can do it, no problem!"

Call me or email me! I can connect you with a local Realtor who is well qualified to handle these transactions! www.RichSweum.com

Can you increase the appraised value of a property?

• Review the comparable sales used by your appraiser:
  Drive by the comparable sales shown in your appraisal and compare them to yours. Contact your Realtor® and get their opinion. You might be able to find sales the appraiser missed. There might be pending sales which will soon close. When pending sales close, they might influence the appraised value of your property.
• Check the measurements of your home:
  Double check the accuracy of the appraisal report regarding square footage, lot size, number of bedroom/bathrooms, etc.
• Find out if any of the comparable sales were sold under distress:
  A foreclosure or distress sale in your neighborhood can effect values. If you have evidence that a comparable sale was a distress sale, you might be able to get the appraiser to ignore that sale, or adjust your appraised value accordingly.
• Get another appraiser:
  Consider getting a second opinion--a new appraisal by a different appraiser. In this event, make sure you get an appraiser who is familiar with the neighborhood.

More recently, property values have been inflated by the process of "seller concessions," and this has not been taken into account by most appraisals. This is where a property appraised value supports a sale where the seller has "given" money to the buyer in the form of concessions for closing costs. 1% to 6% of the sales price might have included such consessions. This artificially supports higher values for homes, especially new construction where builders use these concessions but build them into the actual sales price of the home.

For more information, call Rich Sweum at (425) 297-4242 or go to www.RichSweum.com

How much does an appraisal cost?

The cost of an appraisal varies from less than $100 to an average $200 to $500 based upon the following factors.

• Type of appraisal: The most commonly used appraisal is called the Uniform Residential Appraisal Report (URAR). Some lenders may accept an abbreviated appraisal called the "Drive By Appraisal", which costs less than the URAR. Some loan programs only require an automated valuation, less than $100 cost. Most loan programs require a full appraisal.
• Type of property: Appraisals for single-family homes and condominiums usually cost less than appraisals for multi-unit properties.
• Value of property: Appraisals for higher-priced homes usually cost more than appraisals for lower-priced homes. If your home value is over $500,000, you can expect to pay more for your appraisal, usually less than $1000.
• Location of property: The cost of an appraisal is affected by geographic location and availability of appraisers. In areas where appraisers are few, or the properties are hard to access, appraisal costs increase. Appraisal fees are usually dictated by the local market.
• Use of property: Appraisals for income-producing properties, for example, usually cost more than appraisals for non-income-producing properties. Rental property appraisals include a rent survey and the property's income statement. Appraisal fees vary widely based on use of property. Rentals or non-owner occupied properties may require a rental survey to be included in the appraisal report. There is usually an added charge for this.
• Type of loan: FHA, VA and Conventional loan appraisals also vary in price.

However, multifamily (2-4 plexs) can cost upwards of $800, and commercial appraisals can cost much more depending on the property and purpose.

For estate settlement appraisals, all interested parties should get independent appraisals of the same type to establish fair value.

For more information on appraisals of residential real estate, call Rich Sweum at (425) 297-4242 or go to www.RichSweum.com

Why is an appraisal required?

You might have read that WAMU is currently under investigation by Federal authorities for pressuring appraisers to "inflate" values of properties for purchases and refinances. The appraisal is a protection to a lender and a borrower. It is what it is. If a buyer is paying for a home with entirely their own funds, it doesn't matter what a home appraises for. Most of the time, buyers are also "borrowers" and lenders will only lend on property whose value is firmly established.

In most makets, sales have slowed to a trickle, and the effect is fewer and fewer comparable sales to support actual value of homes.

An appraiser is typically a state-licensed individual trained to render expert opinions concerning property values.

Authorized by Congress, The Appraisal Foundation sets minimum standards for licensed appraisers. The Foundation is the parent organization of the Appraiser Qualifications Board (AQB). States are required to implement appraiser certification requirements which are at least as rigorous as those issued by the AQB.Certified General Appraiser and Certified Residential Appraiser.

The AQB has issued criteria for the Certified General Appraiser and Certified Residential Appraiser. Each has education, experience, examination and continuing education requirements. Consider working with either a Certified General or Certified Residential Appraiser.

The appraiser considers three approaches to value when arriving at an opinion:

1) sales comparison approach (formerly the market data comparison approach),

2) cost approach and income capitalization approach. When evaluating single-family, owner-occupied properties,

3) the sales comparison approach is most heavily weighted by an appraiser. This approach compares the subject property with other similar properties in the vicinity which have sold or are for sale. Real estate professionals also rely heavily on this approach.

Real estate agents approximate the appraisal process by conducting a Comparative Market Analysis (CMA), using the sales comparison approach to value. The accuracy of the agent's appraisal depends on the experience and skill of the agent. The CMA is not an officially recognized appraisal.

Most lenders will not lend money without an acceptable appraisal. You can be sure you are getting an expert appraisal when the appraiser is licensed or certified and is governed by the Competency Provision of the Code of Ethics of the Uniform Standards of Professional Appraisal Practice (USPAP), proclaimed by the Appraisal Foundation.

For more information on how an appraisal might impact the refinance or sale of your property, call Rich Sweum at (425) 297-4242 OR go to www.RichSweum.com.

What is Private Mortgage Insurance (PMI)?

Over the last 5 years, when 2nd mortgages became more popular because of low rates and rapid appreciation, PMI, or MI, lost favor. NOW, banks don't want to be left holding the bag in 2nd position if the property depreciates...so lenders are opting to make "one loan" financing more common. There are a number of choices on how to pay MI: lender paid, borrower paid monthly, upfront borrower paid, upfront lender paid, financed into the loan amount, or a combination of the methods. To find out more, send Rich Sweum an email from his website, www.RichSweum.com

PMI is normally required when you buy a home with less than 20 percent down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. This insurance protection is provided by private mortgage insurance companies to protect the lender. It enables lenders to offer loans with lower down payments. In effect, mortgage insurance pays the lender a certain percentage of your original purchase price to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you would need to make a 20 percent down payment in order to buy a home.

The cost of PMI increases as your down payment decreases. Example: The cost of PMI on a 10 percent down payment is less than the cost of PMI on a 5 percent down payment. Your PMI premium is normally added to your monthly mortgage payment.

Cancelling your PMI:

Federal law requires PMI to be cancelled under certain circumstances, and Fannie Mae guidelines provide for cancellation of PMI in additional situations if the loan is owned by Fannie Mae. In general, PMI for a loan originated on or after July 29, 1999, which is secured by the borrower's one-family principal residence or second home will be cancelled at the borrower's request when the loan-to-value ratio (LTV) reaches 80 percent based on the value of the home at loan origination. In order to cancel PMI under the rules of July 29, 1999, the borrower must have a good payment history and the property value must not have declined.

PMI on mortgages owned by Fannie Mae can also be cancelled at the borrower's request when the LTV reaches 75 percent based on the current value of the home as established by a new appraisal, provided that the borrower has a good payment history and that the loan is at least two years old.

If the borrower does not request PMI cancellation, the PMI servicer must automatically cancel PMI on these loans when the LTV is scheduled to reach 78 percent, based on the value of the home at loan origination, provided that the loan is current at that time. For loans originated before July 29, 1999, which are secured by the borrower's principal residence or second home and that are owned by Fannie Mae, PMI will generally be cancelled at the midpoint of the loan term, provided that payments at that time are current.

Should I pay points? Does a zero point loan with no fees really exist?

There are many things to consider; most of the time, it it better to take a middle of the road approach when selecting a rate/fee structure. To help determine the best course of action for your situation, consult a licensed mortgage consultant that is both a banker and skilled at brokering loans, go to my website and ask for a quick quote! www.RichSweum.com

The best way to decide whether you should pay points or not is to perform a break-even analysis. This is done as follows:

1. 1. Calculate the cost of the points. Example: 2 points on a $100,000 loan is $2,000.
2. 2. Calculate the monthly savings on the loan as a result of obtaining a lower interest rate. Example: $50 per month
3. 3. Divide the cost of the points by the monthly savings to come up with the number of months to break even. In the above example, this number is 40 months. If you plan to keep the home for longer than the break-even number of months, then it makes sense to pay points, otherwise it does not.
4. 4. The above calculation does not take into account the tax advantages of points. When you are buying a home the points you pay are tax-deductible, so you realize some savings immediately. On the other hand, when you get a lower payment, your tax deduction reduces! This makes it a little difficult to calculate the break-even time taking taxes into account. In the case of a purchase, taxes definitely reduce the break-even time. However, in the case of a refinance, the points are NOT tax-deductible, but have to be amortized over the life of the loan. This results in few tax benefits or none at all, so there is little or no effect on the time to break even.

If none of the above makes sense, consider this simple rule of thumb: If you plan to stay in the home for less than 3 years, do not pay points. If you plan to stay in the home for more than 5 years, pay 1 to 2 points. If you plan to stay in the home for between 3 and 5 years, it does not make a significant difference whether you pay points or not!

Don't trust your home financing to a saleman that may not have even graduated from high school. Contact me as soon as possible, Rich Sweum, a licensed mortgage consultant. www.RichSweum.com

Should I refinance?

The most common reason for refinancing is to save money. Saving money through refinancing can be achieved in two ways:

1. By obtaining a lower interest rate that causes one's monthly mortgage payment to be reduced.
2. By reducing the term of the loan, thus saving money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total interest paid durring the life of the loan can be reduced significantly.

People also refinance to convert their adjustable loan to a fixed loan. The main reason for doing this is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments.

A third reason why homeowners refinance is to consolidate debts and replace high-rate loans with a low-rate mortgage. The loans being consolidated may include second mortgages, credit lines, student loans, credit cards, etc. In many cases, debt consolidation results in tax savings, since consumer loans are not tax deductible, while a mortgage loan is usually tax deductible.

The answer to the question, "Should I refinance?" is a complex one, since every situation is different and no two homeowners are in the exact same situation. The conventional wisdom of refinancing only when you can save 2 percent on your rate is problematic. If you are refinancing to lower your monthly payments, the following calculation is more appropriate compared to the 2 percent rule:

1. Calculate the total cost of the refinance--example: $2,000
2. Calculate the monthly savings--example: $100/month
3. Divide the result in 1 by the result in 2--in this case 2000/100 = 20 months. This shows the break-even time period. If you plan to live in the home for longer than this period of time, it likely makes sense to refinance.

Sometimes, you do not have a choice--you are forced to refinance. This happens when you have a loan with a balloon payment and no conversion option. In this case it is best to refinance a few months before the balloon payment is due.

One residential and one commercial investment opportunity. These won't last long. Not investor bailouts, legitimate opps!

Email me from my website for details.

www.RichSweum.com

I have access to 3 "pre-foreclosure" rental / investment opportunities in North Everett for qualified borrowers. Email if interested in more details.

Go to my website for my contact information: http://www.richsweum.com/