How does Escrow work?
When you put money in escrow it is held by the escrow agent who works for both the lender and the borrower. The agent’s role is to carry out the instructions spelled out in the loan documents which typically state the escrow agent is to release funds to pay for property taxes and insurance. The escrow agent will then release these funds as your taxes and insurance premiums come due. Escrow, in the real estate industry, can be involved in anything from multimillion-dollar building projects to the purchase of small, single family home.

When is Escrow used?
When your mortgage closes, your lender will usually require you to open an escrow account to cover property taxes and homeowner’s insurance. You’ll make an initial deposit, followed by payments to the account every month (for convenience and to better ensure that the payments are made on time, usually these are added to your regular mortgage payment).

What is the purpose of Escrow?
The idea of Escrow is to protect the lender by ensuring that you pay your taxes and insurance on time. If you default on your property tax, for example, your county can put a tax lien on the property, which would make it difficult for the lender to sell the property if they ever repossessed it. Or if your property burns down and you’ve neglected to pay the insurance, the lender would be left with no collateral (no property).

How do you benefit from Escrow?
Escrow can benefit borrowers by helping them spread insurance and tax expenses evenly over the year. For example, assume your yearly property taxes are two payments of $1,000 each, and your insurance is $400 annually. If you paid these directly, it would mean three large payments a year ($1000, $1000, and $400); your escrow costs, however, would be a manageable $200 a month. This will allow you to more easily fit these expenses into manageable payments.

How do your Escrow payments work?
Your escrow account will have a built-in cushion so, if you miss a payment, the lender will still be able to pay your accounts on time. However, federal law prohibits lenders from requiring more than two months expenses in escrow. And because your tax and insurance costs may change slightly from year to year, the lender may review and recalculate your escrow payments annually.

Can Escrow be waived?
In most states, the money you place in an escrow account earns no interest for you. For that reason, many borrowers prefer to pay their taxes and insurance directly. Lenders may agree to this if your down payment is more than 20 percent, although some may raise your interest rate slightly to compensate. Some borrowers, however, are required to have them — chiefly borrowers who put less than 20 percent down and those with government-backed mortgages such as those backed by the Federal Housing Administration or Department of Veterans Affairs.

Once you agree to use an escrow account to manage your tax and insurance payments, it is difficult to cancel it, so make sure you fully understand the terms before your mortgage closes. Your real estate agent can answer any questions you have regarding the process so don’t be afraid to ask him…he’s being paid to help you.

This has been Real Estate Rob putting you on the Inside Track to home ownership.

      1. Size

Condos can range from single bedroom and up.  Just like a single family home, you’ll find that they come in all shapes and sizes.  In general, condos tend to be smaller than single family homes because they are often built in areas where there is a need to maximize space or where real estate prices are already high.  In addition, condos usually don’t have their own backyards.

Externally, you may have potentially dozens of units to either side - above or below you. It’s important to consider your long-term plans when purchasing a condo. Special attention should be given to space so that you don’t end up raising a big family in a condo that’s built for a bachelor.

2. Price

Condos represent a potentially less expensive way to find yourself centrally located in major urban areas and business districts. If you want to live in an area where you might not otherwise be able to afford to purchase a single family home, then a condo may be a viable option.  Applying for a mortgage when purchasing a condo is no different than the process for a single family residence.  Just make sure to review a record of sales for similar units in the complex.  This information will be useful when you make an offer on the condo.

3. Association

There are different conditions that exist with the purchase of any condo to consider.  While you may own the condo, the land is owned by an association that maintains the complex.  As you are responsible for the interior of the home, the association is responsible for the exterior.  You contribute to that responsibility through an association fee.  The association fee is usually non-deductible and in addition to what you pay in your monthly mortgage payment. It  is important to take it into consideration when purchasing a condominium. 

4. Neighbors

Essentially living in a condo is almost like living in an apartment that you own.  It’s important to note that, just like an apartment complex, you’ll have neighbors to consider.  It’s always smart to take the time to meet some of the neighbors in the complex before making an offer.  Consider what age group seems to be prevalent and the type of neighbors you are surrounding yourself with. There is no landlord to handle disputes and issues between neighbors.

5. Maintenance and Improvements

Compared to a single family home, the maintenance in a condo can be minimal. Externally a majority of the maintenance is taken care of by the association. Any additions or improvements requiring construction within the condominium will more than likely need to be approved by the association.

6.Common Areas

Just like an apartment complex, a condo may often come with many amenities such as exercise room, pool, common lounge areas, etc.  These amenities are owned and maintained by the condominium association and are to be shared with the other neighbors.  As such, you are required to follow and obey the set rules associated with the use of the commonly referred to as CCR’s which you will be provided with when you purchase the condo. 

In many ways, condominiums take the best of living in an apartment complex and combine that with the joys of home ownership. However, you should always make sure that you do your due diligence in deciding whether a condominium is right for you and your family.

This has been Real Estate Rob putting you on the Inside Track to home ownership.

A wise man once said “Nothing worth doing is ever easy”. If you expect to find your dream home by taking a walk around your block, spotting the perfect house, signing on the dotted line and moving in the very next day, you’re probably on the short road to disappointment.

Finding the right home at the right price takes work, lots of it. Buying a home is the single largest and most important purchase most people undertake in their lifetimes.

This is where setting expectations comes into the home buying process.

It’s extremely important to know what you want, and to have a realistic idea of how to get there. The average home buyer takes anywhere from three to six months of diligent searching, negotiation, and financial positioning to walk away with a set of keys.

Some of the things to think about:

If you’re someone who knows how to do home repair, or has friends or relatives who’ll give you a deal on the work they do, you may be willing to settle for a property in less than perfect condition. Many foreclosures fall into disrepair because their former owners couldn’t maintain the property. If you can’t make your mortgage payment month to month, you’re probably not putting money into keeping up the lawn or fixing that leaky roof.  If you expect the home you move into to be in pristine condition, odds are you’re going to be looking a little longer.

In the current financial market, home loans are going to be harder to come by, especially if you have a poor credit history or nothing to put towards a down payment. Save as much towards your down payment as you reasonably can, and pay off as much outstanding debt as you can manage. If you can only do one but not the other, paying off debts in a timely fashion
improves your credit score, giving you more favorable rates on your mortgage, and takes pressure off finding the cash to make those mortgage payments once you are in your new home. If you expect a lender to give you the money to move into a new house with no proof of a job, a shaky credit history, and no money for a down payment, odds are you’re going to be turned down.

For the prepared home shopper, the inventory of available property is at its highest level in decades. If you expect to spend some time making phone calls, driving around neighborhoods and making choices about whether you want the house with the cracked chimney within walking distance of the great school, or the great price for the home that means a longer commute, now is one of the best times in recent memory to buy a home.

This has been Real Estate Rob putting you on the Inside Track to home ownership.

Planning on moving? If so, unless you have a clear plan of attack, it can be a very difficult and frustrating process. If, however, you do have a well thought–out and organized plan, and allow plenty of time from beginning to end, the move will not only go smoothly, but will allow you to still stay focused on non–move related tasks such as work, your children, etc. without missing a beat.

By applying this 1-month planning schedule to help you organize your move, you will have peace of mind during the process and will be enjoying your new home before you know it.

Four Weeks before Move

• Notify contacts:
  1. Notify the post office, magazines, credit card companies and friends and family of your change of address. The U. S. Postal Service offers a kit to make this process easier.
  2. Contact utilities (gas, water, electricity, telephone, cable company) to schedule disconnection of services on the day following your move. You’ll want to have utilities on while you’re still in the house. Call the utilities in your new town to arrange for service to start the day before your move so that you have service when you arrive at your new home. And don’t forget to arrange for an expert, if necessary, to install fixtures upon their arrival at your new home.
  3. Search for reputable moving company. There are many out there to choose from and this site will help you choose the best.
• Start Packing seldom used things:
  1. If packing yourself, start packing seldom–used things like fancy dishes and glasses, specialty cookware, non–essential clothing, art, photos, and decorative items. Be sure to mark each box with the type of items and the room that they belong in.
  2. As you pack, remember to keep each box light enough to be handled by any of the members of your family––not just the strongest person. Heavier items go in smaller boxes, lighter items in larger boxes.
• Plan for a garage sale:
  1. If you are planning a garage sale, pick a date at least a week before the move, and advertise it locally. This is an excellent way to part with many of those items just hanging around in the closet – and you’ll feel great once the clutter is out of your life.
  2. Think about teaming up with neighbors who want to sell some of their old belongings, and plan a neighborhood garage/yard sale.

Three Weeks before Move

• Start serious packing:
  1. Prepare a floor plan of your new home. This will allow the movers to quickly place large furniture items where they need to go without your direction.
  2. Take inventory of your everyday household goods, such as radios, pots, pans and small appliances. Decide which items you will discard, sell at garage sale, or put in storage.
  3. Start your serious packing. Label the contents of all boxes, and pack carefully. As best you can, box essential items together, and write “Open First/Load Last” on these boxes. When you move into your new home, you’ll be able to easily identify these boxes and get to important items like pots and pans, dishes, silverware, alarm clocks, bedding, pillows, towels, cherished toys and essential items for babies or children.
  4. Plan your food purchases to have as little as possible in the freezer or refrigerator by the time you move. Use up all frozen items, and buy only what you’ll eat in the next three weeks, because you can’t ship them.
  5. Unless already cleaned, arrange to clean your new home, or plan to clean it yourself as close to move–in as possible. Since the home will probably be unoccupied by this time, make sure the cleaning is thorough and covers all those nooks and crannies usually blocked by furniture or appliances.
  6. Contact your children’s schools, and arrange for records to be forwarded to your new school district.
  7. Make new bank safety deposit box arrangements in your new hometown. Make arrangements to safely transfer items from your old safe deposit box to your new one.
  8. Hold a garage sale now.
  9. Start an inventory list of everything you are packing. Add to the list over the next couple of weeks and be prepared to provide to moving company once they begin loading your items onto the truck.

Two Weeks Before Move

1. Check with your insurance company to cancel current coverage or transfer coverage to your new home.
2. Make arrangements for transporting your pets, because movers can’t take them in the van. Many people choose to transfer these themselves.
3. Meet with your bank to change account status.
4. Transfer all current prescriptions to a drug store in your new town.
5. Cancel any delivery services such as newspapers. Consider starting a subscription to the newspaper in your new town.
6. Depending upon the distance you will be moving, have your automobile serviced if you’re traveling by car.

One Week before Move

1. Mow your lawn for the last time. Dispose of toxic or flammable items that can’t be moved. Drain the gas and oil from gas-powered tools such as lawn mowers and snow blowers; movers will not take them if full.
2. Double check to make sure arrangements have been made to disconnect and service your major appliances being moved.
3. Pack your “trip kit” of necessary items that should go in your car and not the moving van: your checkbook, cash or travelers checks, medications, essential toiletries, flashlight, toilet paper, pet food, spare glasses or contact lenses, baby or child care items, toys and car games for children and your notebook with moving information.
4. If you have young children, arrange for a baby-sitter to watch them on moving day. Since you’ll have your hands full, the extra attention from a sitter will distract the child’s attention from the turmoil of a move. Arrange for a baby–sitter to be available when you arrive at your new home with young children. This is often overlooked by many parents and can cause chaos on move–in day.
5. Pack your own suitcase of clothes for the move. Put your “open first/load last” boxes in a separate place so the mover can identify them.
6. Pay all outstanding bills. Be sure to indicate your new address on payment receipts and invoices.
7. Remove any fixtures (stove, refrigerator, washing machine, etc.) you are taking with you and replace (if specified in your home–selling contract).

One To Two Days before Move

1. Empty and defrost your refrigerator and freezer, clean both with a disinfectant and let them air out. Put baking soda inside to keep them fresh.
2. Arrange for payment to the moving company. Find out your moving company’s accepted methods of payment, terms, and its policy for inspecting your belongings when they arrive to determine if anything was broken.
3. Empty your safety deposit box. Plan to take important papers, jewelry, cherished family photos, irreplaceable items and vital computer files with you.
4. Write directions to your new home for the van operator, provide the new phone number and include phone numbers where you can be reached in transit– either a cell phone or friends, old neighbors, a place of business or relatives with whom you’ll be in contact. You’ll never be out of touch for long, should an emergency arise. Leave your forwarding address and phone number for your home’s new occupants.
5. If your old house will be sitting vacant, notify police and neighbors.

Moving Day

1. Remove linens from the beds and pack in an “open first” box.
2. When the movers arrive, review all details and paperwork. Provide van operator with your inventory list and accompany them when they verify list. Verify the delivery plans including the travel route, final destination address, contact phone numbers, etc.
3. If there is time, give the home a final cleaning, or arrange in advance for someone to perform this service the day after moving out.

Move–In Day

1. If you arrive before the movers, take some time to tidy up your home (dusting shelves, etc.) so the movers can unpack items directly onto clean shelves.
2. Unpack your car.
3. Review your floor plan to refresh your memory about where you want furniture and appliances placed.
4. Check to make sure the utilities have been connected, and follow up on any delays.
5. Confine your pets to an out-of-the-way room to help keep them from running away or getting unduly agitated by all the activity.
6. Plan to be present when the moving van arrives. Be prepared to pay the mover before unloading. One person should check the inventory sheets as items are unloaded to account for all items that were moved. A second person should direct the movers on where to place items.
7. Once all items are unloaded, unpack only what you need for the first day or two. Focus on creating a comfortable environment for your family before everything is unpacked by ensuring all essentials are put away first and available for use. Give yourself at least two weeks to unpack and organize everything else.

And finally, welcome to your new home. We wish you and your family happiness and success at your new location.

This has been Real Estate Rob putting you on the Inside Track to home ownership. ]]> http://blog.consumerresourcenet.com/?feed=rss2&p=42 http://blog.consumerresourcenet.com/?p=36 http://blog.consumerresourcenet.com/?p=36#comments Fri, 05 Sep 2008 16:42:34 +0000 bpick_admin http://blog.consumerresourcenet.com/?p=36 This is Real Estate Rob putting you on the Inside Track to home ownership.]]> A few days before President Bush signed the “Housing and Economic Recovery Act of 2008,” California Governor Arnold Schwarzenegger launched the “Community Stabilization Home Loan Program” to help first-time homebuyers purchase homes in communities hardest hit by the foreclosure crisis. Under this program, which will be run by the California Housing Finance Agency (“CHFA”), first-time homebuyers can obtain below-market interest rate loans to purchase foreclosed homes in certain areas.

CHFA estimates that the program will help many Californians to purchase their first home. If you want to take advantage of this program, you need to act quickly because the program will be offered only until the $200 million in financing is allocated.

To find out whether this program is available in your area, ask your real estate agent for details.

Press Release: http://gov.ca.gov/index.php?/press-release/10245/

Video Blog: http://gov.ca.gov/index.php?/videoblog/10265/

This has been Real Estate Rob putting you on the Inside Track to home ownership.

Affordable Housing Programs

The legislation calls for a creation of a permanent Housing Trust Fund (funded primarily by Fannie Mae (Federal National Mortgage Association) – FNMA and Freddie Mac (Federal Home Loan Mortgage Corporation – FHLMC)).
One of the mandated purposes of the Housing Trust Fund is to provide grants to States “to increase homeownership for extremely low- and very low-income families.”

Emergency Assistance for the Redevelopment of Abandoned & Foreclosed Homes

The legislation allows the U.S. Treasury to appropriate $4 billion for assistance to States and units of local government for the redevelopment of abandoned and foreclosed homes.
One of the eligible uses of the amounts made available under this provision is to “establish financing mechanisms for purchase and redevelopment of foreclosed upon homes and residential properties, including such mechanisms as soft-seconds, loan loss reserves, and shared-equity loans for low- and moderate- income homebuyers.”

Keep an eye out for special housing programs that will become available in your area as the funds appropriated under these provisions are allocated to the States and local governments.

This has been Real Estate Rob putting you on the Inside Track to home ownership.

Up to $7,500 Refundable Tax Credit for First-time Homebuyers!

If you’ve been thinking about owning a home, there is no better time than right now. Not only is the foreclosure inventory at its highest in decades, which is driving home prices down even further, but also the federal government recently passed legislation that is simply too good to pass up.

On July 30 of this year, President Bush signed the “Housing and Economic Recovery Act of 2008,” which provides for a special tax credit for first-time homebuyers. (By the way, you’re considered a first-time homebuyer if you didn’t own a home in the past 3 years – so you could be eligible for this tax credit even if you are really a “second-time” homebuyer!) You need to act now, though, because you must purchase a home before July 1, 2009 in order to qualify for the tax credit.

Here’s how it works:

• Under the legislation, a first-time homebuyer (again, this includes anyone who hasn’t owned a home in the past 3 years) is eligible to receive a tax credit of 10% of the home price, up to $7,500, for homes purchased on or after April 9, 2008 and before July 1, 2009. Keep in mind that there is a phase-out of the credit based on modified adjusted gross income (“MAGI”). The tax credit may be reduced if your MAGI is over $75,000 ($150,000 if a joint return).
• The housing tax credit is delivered through your federal income tax return that you file. The best news is that it’s a “refundable” credit, meaning you will receive a tax refund check if you have no tax liability (as opposed to the tax credit being disallowed and carried over to the future years if you have no tax liability to offset).
• The housing tax credit is also a “repayable” credit. This means that you are required to repay 1/15^th of the tax credit amount ($500 per year if your tax credit was the maximum $7,500) over the next 15 years. In this way it works much like an interest-free loan. It should also be noted that the repayment amount is limited to the gain (if any) if you sell the house. For example, if there is no gain when you sell the house, you don’t have to repay the balance of tax credit you received. If you really want to know, you also don’t have to repay the balance if you die.

To find out more about these programs, ask your real estate agent or tax advisor for details.

This has been Real Estate Rob putting you on the Inside Track to home ownership. ]]> http://blog.consumerresourcenet.com/?feed=rss2&p=30 http://blog.consumerresourcenet.com/?p=24 http://blog.consumerresourcenet.com/?p=24#comments Fri, 15 Aug 2008 16:51:34 +0000 bpick_admin http://blog.consumerresourcenet.com/?p=24 This is Real Estate Rob putting you on the Inside Track to home ownership.]]> Finding a home in itself is a daunting task but the added stress of determining what the best mortgage is for the home is a headache in itself – but a necessary one. Especially for first-time home buyers, this is particulary freightening but it doesn’t have to be so if you’re prepared and have done a little homework. Buying a home should be an enjoyable expericence and can be if you are prepared. It’s like anything in life; if you’re knowledgeable about the topic you have confidence. And when you’re confident, it’s easier to have fun.

Step 1: Fix Your Credit

The first step should be fixing your own credit. This will allow you to qualify for a lower interest rate. Obtain copies of your credit report and clean up any discrepancies. Allow a few months for everything to be cleaned up. While you are waiting, get rid of as many bills as you can. This allows you to borrow more money, and, better yet, it frees up more money for you so that you know you won’t be “house poor” when you move into your new house.
Meanwhile, if you haven’t already, subscribe to a foreclosure listing service and begin looking at the homes to give you a good idea of what’s out there. With foreclosures you may even be able to get one below market value. They can be excellent opportunities.

Step 2: Get Pre-approved for a Loan

Many first-time borrowers start looking for a house before they are financial preapproved. Prequalified is different than being preapproved. Pre-qualification is where a lender tells you how much money you probably can borrow based on how much money you make, how much debt you already have and how much cash you have for the down payment.
Preapproval is a much more rigorous process and involves actually applying for a loan. You need to submit tax returns, pay stubs and other information. The lender verifies the information and checks your credit. If all goes well, the lender agrees in writing to make the loan.
This is an important step you should take first, as not only will you know what you can afford, you will be taken more seriously when you make an offer on a house.

Step 3: Look Into First-Time Buyer Programs

Most states and even cities offer first time home buyer programs and it is up to you to find them. Don’t expect your Realtor or lender to do it for you. Also, if you are a Veteran, the Dept. of Veterans Affairs will send you information on buying a house with little or no down payment and help you get a guaranty loan that will save you money. In addition, there are agencies like Fannie Mae and the FHA with excellent programs to help responsible first-time home buyers.

Step 4: Borrow within Your Means

Many people take out the biggest loan they possibly can because the lending company says they can afford it. You know what you can afford more than the lending company and it is your responsibility to not overextend yourself. When you do the math for the payments on the house, don’t forget to account for property taxes and insurance. Plus, you will be paying a water bill for the first time and your electricity bill will probably be higher, too.
Knowing exactly how much you can afford could save you from foreclosure.

Step 5: Shop Around

Shop around for rates and terms; this falls in line with getting preapproved. Many times, Realtors will pick out a lender for you and you get caught up in the process and don’t shop around.
Beware of subprime loans which are more profitable, so less ethical mortgage brokers may push them.
Educate yourself on knowing what your prevailing interest rates are for someone with your credit. A comprehensive listing of prevailing rates and fees can be found on the internet through sites such as www.bankrate.com.
And don’t forget about applying for a loan from your own bank. Even people with a few dings on their credit can often qualify for better loans offered by private-sector lenders.

Step 6: Avoid Junk Fees

Be aware of junk fees that lenders add on to mortgages. Some may be legitimate, some may be inflated and others are fluff. A lender may charge $250 for a credit check that cost them $15. Try to negotiate with them and see if you can get these fees reduced. If they won’t, then go to another lender with their estimate and see if they can beat it. Just like when you negotiate for the price of a car you can do the same when negotiating for a loan. If a fee is higher than your last estimate, ask about the interest rate, the points charged to get that rate, any other fees the lender charges, and whether the lender will reduce their fees.
Note that you will have to pay some junk fees when it comes time to sign the loan, but you should have them reduced as much as possible and will feel better that you did the best you could.
Unfortunately, the federal government has done little to prevent junk fees.

Step 7: Prepare for Fees

Closing day can be nerve racking enough, so be prepared to come up with even more money. You’ll also be expected to write a check for a number of expenses, which typically include attorney’s fees, taxes, title insurance, prepaid homeowners insurance, points and other lenders’ fees. Your lender or Realtor will have a legally required Good Faith Estimate of what that is going to be and can help you prepare for the amount.

Step 8: Set Money Aside for Emergencies

And lastly, don’t forget that you will need some money to move and to have your utilities turned on. Although it is not part of the mortgage process, be prepared for an emergency, like a broken dishwasher. Being prepared will help you feel more secure with your new house so that you can actually enjoy being a new home owner. You can also look into getting basic home warranty insurance to cover appliances and your home’s systems.

Happy home hunting and “Get on the Inside Track.”

This has been Real Estate Rob putting you on the Inside Track to home ownership.