- Sacramento Real Estate Adventures - Your Sacramento Real Estate and mortgage blog!

Many residents in Sacramento and Elk Grove have tried in recent months to modify their mortgage with their lender.

When they are not able to get their mortgage modification approved themselves, Sacramento residents often turn to a "professional" who specializes in loan modifications.

Well... As we all know, during our historic real estate market in Sacramento, a lot of shady characters came out of the woodwork and took advantage of many helpless homeowners.

In fact, just last month we had someone contact us to get our advice. These poor people gave a local Mortgage Modification Company $5000 to get their loan modified. Unfortunately, the Consumer spoke very little English and did not do their due dilligence and they got ripped off!

Would you believe that the Mortgage Modifcation Company came back and are trying to get additional funds from the Consumer? The Sacramento Mortgage Modification Company is asking the Consumer to pay them rent now.... FOR THE HOUSE THEY STILL OWN! I just couldn't believe it!

I guess the Sacramento Mortgage Modification Company thought since the consumer took the bait before... They would try to milk more money out of them! It is just horrible that there are people like this in our world. I feel it is everyone's duty to report these issues so we can help prevent it from happening to someone else.

HUD announced Friday that they, along with the Loan Modification Scam Prevention Network, have created a new website for consumers to report these types of incidents.

If you know someone who is a victim of a loan modification scam... make sure to visit www.preventloanscams.org and report the incident!

I also wanted to remind you that it is against the law for ANY Mortgage Modification Company (even if they are lawyers) to collect ANYfunds upfront BEFORE they negotiate your loan modification.

Don't rely on their advice... PROTECT YOURSELF!

This Elk Grove Mortgage Gal has come to appreciate the new Good Faith Estimate 2010... But it may not be why you think!

My biggest beef with the the new Good Faith Estimate 2010? It's not an all inclusive document Borrowers can use to make a decision! That is what a Good Faith Estimate is supposed to do... right? One document a Borrower can reference to understand what type of loan they are getting... at what rate and payment... and for which terms. It should also show them what their down payment is, how much closing costs will be, how much credit they are getting from the Seller, and how much money they need to bring to the closing table.

Unfortunately the new version of this form has moved in the opposite direction of this goal... But it has benefited our business.

Here are two ways...

1. It forces Clients to look beyond rates and make a decision based on who they think will be honest and get the job done!
Our conversations at our initial meetings are going from clients drilling us about interest rates... to showing them why they need an expert who can help them navigate through this challenging real estate market. If not, they risk loosing their dream Sacramento home or investment property!

This has been our message since we started our Elk Grove Mortgage Business, but now that the there's real estate related news coverage almost every night... Clients are often sold before they ever get to our office.

2. I also love the fact that client's interest rate no longer has anything to do with our commission check! 
Before the Good Faith Estimate 2010, we would mark up the interest rate and make what is called rebate. Now we make an upfront flat fee that has nothing to do with the Client's interest rate. Clients can choose to take the wholesale interest rate or mark up the interest rate in order to benefit from the rebate to pay for some of their closing costs.

I should mention, the paragraph above applies just to Mortgage Brokers. Mortgage Banks don't have to tell the Consumer if they are marking up the rate and earning rebate. 

Some Clients don't take our advice when we tell them it's time to lock in their interest rate. They risk a change in their monthly mortgage payment and/or their ability to qualify for the loan by not locking in their interest rate. 

The great thing is interest rates for Mortgage Brokers is no longer tied to the our paychecks! This means if the client thinks they know more than we do about interest rates and feels like gambling... We don't have to gamble with our paycheck.

Instead of complaining about what is wrong with the Good Faith Estimate 2010 form... I am trying to focus on what is good about this new change!

If you would like to schedule an interview with us, please call us at (916) 687-6868 to schedule an appointment!

Have you noticed the number of ex-loan officers that are now loan modification specialists? It is just ridiculous!

Maybe I am being too harsh... but how come an ex-loan officer who could not make it in the mortgage biz (that might be a little too mean)... all of a sudden has the legal and tax background to help distressed homeowners make a good decision about doing a loan modification.

Maybe the sticking point is... "a good decision". 

Now I have to put a disclaimer here ... not all ex-loan officers are the bad seeds...

Here is my 2 cents:

Why would I want to make a decision that could ultimately create a tax or legal consquence for my family and base my decision on advice from an ex-loan officer?

My answer... I wouldn't!

I recently ran into a ex-loan officer from our area.  Based on conversations with him in the past, I would put him in the shady loan officer category.  He started off in the loan business in 2004-05 time frame with 0 experience in the field.  He was pulling in 50k a month easy mostly doing refinances for people. I won't go into the details ... just know he was a real winner!

We ran into this guy recently after hearing through the grapevine he was back to "flipping burgers".  Well turns out the the McDonald's gig (I am embellishing here)  did not work out for him and he is now a Loan Modification Specialist. That is what inspired this blog post!

So let me get to my point....

Most people looking for a loan modification are in that situation because the terms of their loan adjusted, they have lost income, or some other major event has occurred where they are financially strapped.

A loan modification is not the cure-all-end-all for folks... so don't believe all of the advertising!

Many of these ex-shady loan officers are out promoting themselves as if they are the savior from heaven and will fix all of the homeowners problems. It just makes me sick!

We received a call this week from a gal who just handed over $2,000 to one of these companies so they would modify her loan.  Thank goodness she called us the next day to ask us if she had done the right thing. Within 15 minutes on the phone, we determined that she would default on her new loan modification within months because she just did not have the income she needed to survive. 

This company who "helped her", after some research, where a group of ex-loan officers. 

Thank goodness she was able to quickly call them back and get her money back because she was within the 3 day grace period. I felt bad for her because they played on her emotion of wanting to keep the house and all logic went out the window on her part frankly!

The bottom line???

If you are in a situation where you think you might need a short sale, loan modification, or might be forced to give a home back to the bank.. get some advice... REAL ADVICE.

Anyone who calls into our office in this situation, after an initial consultation with us (so we can see if we can assist by restructuring their mortgage debt), gets referred to a local attorney. 

This attorney is able to give them big picture tax and legal advice so the client can make an informed decison so they know what their next step should be.  If a loan modification is needed Jeb's team can assist them.  If it will not solve the problem... his team will be upfront and let the client know how they should proceed!

I would much rather have an attorney on my side going up against a big bank! Think about it... How is an ex-loan officer going to explain the legal and tax ramifications for the documents that need to be signed when doing a loan modification (or short sale for that matter).  

If you are in the Sacramento area and need to talk to someone you can TRUST who knows what they are talking about call Jeb at the Burton Law Group!

Jeb Burton
Burton Law Group
www.lawburton.com
916-570-2740

There are good companies out there so I don't want you to think I am painting a picture that all loan modification companies are crooks.  BUT get some legal advice first to make sure you understand what you are getting into at the very least!

Thanks for reading my little rant!  Have  a comment? I would love to read it!

7/17/09 UPDATE!: Watch this VIDEO>>
Several mortgage modification companies just got served with lawsuits from the California Attorney General...Justice!

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

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Photo by TheTruthAbout... at Flickr.com

That is right... your eyes are working!

This week we uncovered a new source of money that will assist First Time Home Buyers to get into a new home here in the Sacramento area!

With the suspension of the CALHFA's Down Payment Assistance Program (due to lack of funds), many folks in need have been put on hold to purchase a home.

We found a program this week that has $14,000,000 in funds available to assist Sacramento First Time Home Buyers to get into a home!

This program will allow the borrower to only put down 1/2% of their purchase price.  It will work for most homes located within the county of Sacramento!

If you were to purchase a home for $200,000... that means that you only need have $1000!  The great news is this money can be gifted by a family member!

There are income and property restrictions for this program and as I mentioned before there are limited funds available.   

Give us a call to discuss your options! It is the best thing going right now in regards to down payment assistance programs for the Sacramento area for the First Time Home Buyer. 

Don't get me wrong... there are 100% down programs still available, BUT there are location restrictions that limit the use of the program! 

Happy Hunting!

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

Subscribe to our Blog Feed

President Obama' s Making Home Affordable Program will attempt to assist homeowners refinance their up-side-down homes and encourage lenders to participate in loan modifications.

There are 3 steps to his plan...  
 
1. Assist responsible homeowners to refinance their undervalued homes.  

2. Help homeowners to modify their current mortgage in order to save it from foreclosure.
 
3. Support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.

Today I will be discussing option 1!

I was thrilled when I learned that the Obama Team was looking into allowing residents refinance their homes to take advantage of the low interest rates, even if they are upside-down in their home (their mortgage is more than the value of their home). I patiently waited for loan guidelines to come out so I could see how folks in the Sacramento area could benefit from the plan.

The US Department of Treasury recently posted program preliminary guidelines on their website www.financialstability.gov and claim that step one of their plan will provide the opportunity for up to 4 to 5 million responsible homeowners to refinance.

Here is my question... How many of those homeowners will live in California... specifically Sacramento?

As we all know, mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 90% of the value of their homes have a difficult time securing refinancing.

For example, if a borrower's home was worth $200,000, he or she would have limited refinancing options if he or she owed more than $180,000 (90% of current value). Yet millions of responsible homeowners who put money down and made their mortgage payments on time have, through no fault of their own, seen the value of their homes drop low enough to make them unable to take advantage of these lower rates.

Trust me... I want this program to work and I feel it could really help many folks out of a tough spot... but I just don't see how the numbers will add up for California... specifically Sacramento residents.

So what are Obama's Making Homes Affordable Plan rules and who will qualify?

You may be eligible if you:

1. The home in question must be owner occupied and be one - four units.
2. The loan on your home is owned or controlled by Fannie Mae or Freddie Mac.
3. You are current on your mortgage payments (current means that you haven't been more than 30-days late on your mortgage payment in the last 12 months.)
4. You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house. (Here is where California Residents are going to have issues.)
5. You have a stable income sufficient to support the new mortgage payments.

If you look at rules #1, #2, #3, and #5 are pretty straightforward.  You will obviously need to have stable income and good credit history in order to qualify.  That is nothing new in today's market!   

#4 is most likely going to be a deal breaker for many California Residents.... and here is why...

The best way I can explain this to you is by giving you an example...

Mr. and Mrs. Buyer purchased a home in 2005 for $400,000 and put 10% down.  This left them with a first mortgage in the amount of $320,000 and a second mortgage in the amount of $40,000. 

Mr. and Mrs. Buyer want to take advantage of the lower interest rates, but are unable to qualify for a traditional refinance because their home will now only appraise for $280,000 (30% reduction in value).

Now for folks not in California, Florida, and Michigan... you might think I am crazy for using this 30% figure for depreciation, but frankly that is a very conservative number for the Sacramento Area.  I am not saying that ALL areas in Sacramento are seeing this decline, BUT most are seeing much more than the 30% dip. Now back to my example...

In order to meet the requirement for Obama's new plan, Mr. and Mrs. Buyer would need to have an existing 1st mortgage of no more than $294,000 (105% of the value...max). That equates to no more than an approximate 16% reduction in value since they bought their home. This model for qualifying certainly was not designed for California residents who have seen their value drop, often times in half right before their eyes.

Let's say you are in one of the few areas in Sacramento that saw little depreciation...lucky you! You still have one more hurdle to jump through before you get your pen warmed up to sign your loan paperwork! 

If you have a second mortgage like Mr. and Mrs. Buyer, that lender would need to agree to subordinate their loan based on the current terms of the new refinance.  Am I loosing you yet???? Ok..Ok... let me explain what the heck that means! 

When Mr. and Mrs. Buyer purchased their home, the 2nd mortgage lender agreed to be in 2nd lien position on title based on the original 1st mortgage terms.  If Mr. and Mrs. Buyer could qualify for the new 1st mortgage refinance program and value was not an issue, they would need to get their current 2nd mortgage holder to agree to subordinate (keep their second lien position) based on the terms of the new 1st mortgage. 

Common sense says... Why wouldn't the 2nd mortgage holder agree to this?  Mr. and Mrs. Buyer will see an improvement to their overall cash flow because the improvement of the interest rate will equate to a reduced 1st mortgage payment. Well... Banks don't always seem to be using common sense these days!   

I would hope that most banks who are in 2nd lien position are going to go along with new subordination since it only strengthens their position in my opinion.  I would, however, expect it to take weeks in order for them to make that decision, based on their reduced staff and increased workload. 

My final thoughts...

I don't want to be among those who want to list the 14 reasons why these stimulus plans will not work. I want more than anything to find a way to pick our country up and dust ourselves off and get back to being great again! It is just that this particular plan does not seem to pencil out for most Sacramento residents.

Please also keep in mind that the information I am providing you is still in the infant stage and there are many more details to be released.

 I would love to hear your opinion on this matter... pop me a comment below!

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

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When rates dipped many folks took the opportunity to refinance their homes.  A few weeks back we saw underwriting departments desperately trying to come up for air as more files were piled on their desk. 

Some Banks had underwriting turn-times of 20 DAYS for a refinance loan file.  This means once you submitted your loan for review, it would take their underwriting department 20 days to look at the file! Normally it is no more than 10 days and that was your worst case scenario. 

Although Banks put a purchase loan transaction as a priority to a refinance, the sheer volume of loan files has buried understaffed Banks.  Remember that not only have Banks been shutting their doors, but they have been laying off staff for the last couple of years. So when the flood gates opened, it is near to impossible to keep up.

What should you expect?? Funding delays!! Sometimes as much as two to three weeks (yep, I said weeks).  For the most part this wont be the issue however, I caution you not to be surprised if it happens. 

In addition to being understaffed, many of these Banks are underfunded.  There is only so much funding line capacity!  If there was a more liquid credit market, these lines could easily be increased to handle this bulge.  However, we do not have that luxury at this time. 

A smart mortgage professional locked their loans for as long as the Bank would allow. But I am sure there are still folks who think that 30 days is enough. I would suspect those "mortgage professionals" are sweating bullets at this point, since their client's loan is stuck in the funding department with only a couple days left on their interest rate lock.

Luckily, we are seeing Banks be forgiving and offering rate extensions for free since it is their staff holding up the show.

You may not be impacted at all by this flood of business to our market.  But just in case it comes up, I wanted you to be prepared for it!

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

Subscribe to our Blog Feed

"I would like to know what is on my credit report so I can clean it up if necessary so I can buy a home in Sacramento this year. I want to pull my own reports so it doesn't lower my score since I am not within 45 days of closing. So what I want to know is which reports matter and do lenders use the FICO score still or do they take into consideration the PLUS and other score that the other bureaus offer?"

Thanks for your help.

It is great that you are thinking ahead!

I personally would not worry about getting your credit pulled ---once--- by a mortgage professional. It takes several pulls on your credit in order to affect your score. As long as you work with someone you trust, and your credit is pulled once, you will be just fine.

If you would like to pull your credit on your own you can do so at https://www.annualcreditreport.com! Please note you can only pull your credit through this website once a year.

All Banks we work with will look at your FICO scores. As I am sure you know, there are 3 credit bureaus that will provide you a score. So Bank's will usually use the one right in the middle to determine if you will qualify for your mortgage.

We work with all of our Clients that have credit challenges.  We use a software program that allows us to determine what your creidt score would be if slight changes were made. Many times just the slightest changes can make the biggest differences in regards to your FICO scores.

Here are some general guidelines on how your credit score is determined:

35% of your score is determined by your payment history.
Did you pay your bills on time and are you current on all of your tradelines (accounts)?

30% of your score is based on the amount of money you owe vs. your available credit.
Keeping your credit cards balances and other loan balances around 50% of the available credit is a good way of improving your score.

15% of your FICO score comes from the length of your credit history.
Keep in mind that even if you no longer use a credit card for example.. Still keep the account open so that you can benefit from the account history.

10% of your FICO is based on your overall mix of your credit.
This means how many types of credit do you have (car loans, credit cards. or mortgages). The more types of loans you've have, the better! Being too heavy in the credit card area could hurt you. This does not mean that you should run out and aplly for credit! 

10% of your FICO score is based on new credit that has been setup in that last 12 months.
Opening new accounts can hurt you, so keep that in mind this year.

That should get you started.. But I would think about talking to a local mortgage professional for more detailed advice. There is more to qualifying for a loan than your credit! If you are planning to buy in the next 12 months, it would make sense a professional go over your entire scenario. This way if other changes are needed, you will know to work on them as well!

Give me a call if you have any further questions! Good luck!

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

Subscribe to our Blog Feed

Has Fannie Mae pulled their head out of their... sand box?

What if I told you Fannie Mae is offering special financing if you buy one of their bank owned homes?  Would you believe me?  Well you should because it is true!

Why does this benefit you?  Well frankly... the terms of their offered financing is pretty darn sweet!

The benefits of their HomePath program include:

• Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
• You may qualify even if your credit is less than perfect
• Available to both owner occupiers and investors
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
• No mortgage insurance
• No appraisal fees
• FREE home warranty is included with the purchase.

I recently wrote a blog about another local Sacramento Agency that is offering a similar incentive if you buy one of their bank owned homes.  Read the blog now >> 

BUT the catch is they only have 2 or so homes available in the Sacramento Area to purchase.

Here is the best part about this program... There are over 250 homes available in the Sacramento area right now that qualify for this program!

Here are some other homes available in the Sacramento Area:

Elk Grove... 46 homes available!
Citrus Heights... 21 homes available
Rancho Cordova... 16 homes available!
Fair Oaks... 4 homes available
Carnichael... 14 homes available!
and so on...

Here is some more specific information about their guidelines:

97% (3% down) for owner occupied financing with NO MORTGAGE INSURANCE!

Why is this such a big deal?
A typical FHA loan with an equivalent down payment (3.5% down) would require 1.75% of the loan amount to be paid upfront for a mortgage insurance premium. Then on top of your monthly payment (PITI), you would be charged .55% (of the loan amount) every year for ongoing mortgage insurance.

Let me break this down so I don't throw too much loan lingo your way.. Here is an example mortgage insurance fees for an FHA loan of $200,000...

$200,000 x 1.75 = $3500 You would be charged this amount at closing or you could roll this into a loan on a traditional FHA loan program for the upfront mortgage insurance premium.

$200,000 x .55 / 12 months = $91.67 This means $91.67 would be added to your payment every month for mortgage insurance.

With this special financing offered by Fannie Mae you could put .5% LESS down than a FHA loan and you do no pay ANY MORTGAGE INSURANCE!  This really is a sweet deal!

Do you feel like a little more sugar today? Wait until you see what they will do for an investor!

90% (10% down) for non owner occupied properties with NO MORTGAGE INSURANCE!
If you are looking for an investment home in Sacramento, you know that you will get a better return on your investment if you have less money in the deal.  Right now with typical financing (actually offered by Fannie Mae for non-Fannie Mae owned homes), you should expect to put down at least 25%.

Wow! So for example if you purchased a home for $150,000 (not owned by Fannie Mae), you would need to put down $37,500 plus closing costs.  If you buy a home owned by Fannie Mae, you only have to put $15,000 plus closing costs. If that does not help you"sharpen your pencil" I am not sure what will!  This is a really big deal!

They even offer a renovation program that allows you to finance light renovations upfront and add it to the loan amount.  So if you find a Sacramento Fannie Mae owned home that maybe has some vandalism issues (which many do), you can probably get a discount for the home and finance in the repairs that are needed to bring it back to livable condition!

It is so nice to be able to report some good news to folks.  It really has been a drag having to shovel through the bad news to try and find something good to report as far as guideline changes go!

Here is a link to search for homes in your area >>

We can offer this special loan program... so just give us a call and we can discuss this opportunity further!

Happy Hunting!

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

Subscribe to our Blog Feed

Can I get a hallelujah?

As of March 1, 2009 Fannie Mae will increase their current restriction of a max of 4 financed properties BACK to 10!

YOU HEARD ME RIGHT!!!!!!!!!

Ahhhhhh...  They finally came to their senses!

Here is an exert from their announcement that came out today!

Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery (duhhhh!) and Fannie Mae's continued support for investor borrowers is consistent with its mission to provide stability, liquidity, and affordability to the nation's housing system.

Fannie Mae is updating the policy that pertains to multiple mortgages to the same borrower. Fannie Mae's current policy limits the number of one- to four-unit financed properties in which the borrower may have an individual or joint ownership interest to four financed properties when the mortgage being delivered to Fannie Mae is secured by an investment property or second home.

The limitation on the number of mortgages currently being financed applies to the total number of properties financed, not just the number of mortgages sold to Fannie Mae. Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements as outlined in this Announcement.

The new guidelines include a 720 minimum credit score... OK we can do that!

 ... and 20% down for 1 units and 25% down for 2-4 units!... No problem!

Here some more rules...

• The borrower cannot have any history of bankruptcy or foreclosure within the past seven years.
• The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.
• Rental income on the subject investment property must be fully documented.
  (Rental income from other properties owned by the borrower must be supported by two years' federal income tax returns) I am not sure how they will deal with purchases that were made after your tax return was prepared though...
• The borrower must complete and sign Form 4506 Request for Copy of Tax Return or 4506-T Request for Transcript of Tax Return (we have all clients sign this upfront ...so no worries)
• The borrower must have reserves for the subject property and for other properties currently owned by the borrower. (will need 6 months reserves for each PITI payment in the bank)

These are all very doable!  I think Fannie Mae must have read my rant about how they are picking on Investors !

I can't wait to call the Lender that has one my files for the last 45 days!  They have been stringing me and my Client along!I have had to bite my tongue because I had no other options. For those who know me... this has been rough.  Especially because the guy pretty much told me he could care less about my file and I could wait. That dog just does not hunt!

You can imagine the satisfation I will feel when I rank this file first thing Monday morning!  It is a refinance file so I don't have a time contraint and the client will get a better loan elsewhere.

I can't remember the last time I was so darn happy about a guideline change!  I going to crack open that bottle of champagne in the fridge and we are celebrating tonight! No really .. I am!

THANK YOU THANK YOU THANK YOU THANK YOU!  This had been the number 1 pain in my side for months!

So all you investors out there who have been on the sidelines... it is time to get back in the game.  Dust off those calculators and get out in the streets and look at some real estate!

What a great way to end the week!

 Here is a link to the press release >>

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

Subscribe to our Blog Feed

It seems like the perfect match... You have a Seller who is offering a home for a set price and a Buyer who is willing to pay it!

That should be the end of the story right?  NOT ALWAYS!

REO homes (homes now owned by the bank that have been foreclosed on) are dominating the market and take up a large percentage of the properties being bought and sold right now in Sacramento.

This circumstance, along with tightening credit requirements, has created a unique set of circumstances for pretty much anyone involved in the real estate market right now.Banks are facing huge losses to their bottom line right now. Not only from the losses on the homes being taken back, but those REO inventory homes on their books directly affect how much money they can lend to borrowers.

Because of this, the majority of banks are trying to position their properties to be "the next house to sell" by dropping the listing price way below others in the same area. This certainly gets attention for their listing, but also contributes to the decline in our market place here in the Sacramento area. Some areas within Sacramento are seeing a 5% decline in value every month.

This technique is great news for Investors and First Time Home Buyers that are seeing affordable home prices that we haven't seen in years... BUT is wreaking havoc for non-REO sellers such as private parties or builders.

This competition with REO (Bank Owned) listings is horrible news for private party sellers and already heavily hit home builders. They are now having to compete with REO values to not only attract the attention of the homebuyer looking for the best value, but also meet the lender's tougher scrutiny of value before the loan can be funded. Banks are often asking for multiple appraisals (in addition to their internal evaluation or AVM) and are requiring more and more recent comps.

Also, another factor complicating the evaluation dilemma is on May 1^stthe Home Valuation Code of Conduct (or HVCC) goes into affect. The assignment of the appraisal will now go to a clearing house of appraisers where the individual performing the appraisal is completely left to chance, not necessarily performance.

Read our Blog regarding the new Home Valuation Code of Conduct >>

So now that you are in contract.. we have to check the value with an appraisal!

This can prove to be a challenge as new bank owned homes come on the market every day!  Homes are also being sold every day and the lag time between when the appraisal was completed (comparable properties determined)and the final review and approval by the Underwriter can be weeks.

Having such movement in the Sacramento Market, especially in the under $200,000 price range, is like trying to hit a moving target in regards to getting a solid appraised value. 

There have been circumstances where at the last hour the Underwriter decided that we needed to use a comparable property that had closed just a couple days previously.  This forced the purchase price down and everyone had to go back to the drawing board at the last minute to renegotiate!

Here is what happened:

Assume for this discussion the following: sales price is $200,000, the Buyer will obtain an 80 percent loan ($160,000), and provide a down payment for the difference between the loan amount and the sales price ($40,000). If the house appraises at $200,000 or more, the lender will be able to make an 80 percent loan.

However, if the house only appraises at $180,000, the Lender/Bank will only allow a loan amount of $144,000 (i.e. 80 percent of the appraised value). In order to buy the house for the full contract price, the Buyer will have to come up with another $20,000.

So the moral of the story is to make sure that the house you listed for sale or the home you will be buying is priced correctly!  Have your Real Estate Agent run a comparable market analysis on the home BEFORE you write the offer so you know if it is even in the ball park!

The only other advice I can give you is to trust your Realtor!  This is what they do for a living and will know right away if there is an issue with the purchase price!

This blog by:

Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com

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