Equity, PMIs and LTVs
First lets define the word "equity" which is really just the shorten form of "home equity". Home equity is essentially the amount of ownership that is in a property. Basically its what the property is worth in the current market value minus the mortgage value. Its virtually rare to get 100% financing, but for this example lets say you purchased a home for $200,000 and took out a mortgage for $200,000, your home equity would effectively be $0.00 or 0%. This is why its imperative to get a great deal on a home. Any property bought below current market value is instant equity. There are many things to consider. Its clear that as you pay down your mortgage, your home equity will increase. This inverse relationship would be simple enough but you are also impacted by the market. This could go both ways and the market is affected by several factors. Whatever the reason may be, the market is never stagnant. That being said, your property value and or home equity are never stagnant. It may change nominally over the years or may not. LTV or Loan to value is an acronym you want to be familiar with. If you are looking to have PMI (private mortgage insurance) removed, the banks traditionally want to see a LTV lower than 80% or so (see your lender for details). This is a less risky loan for the lender to hold which would be the considering factor to remove the PMI. So if you bought that home for $200,000 and borrowed $200,000, mathematically, this ration would have to be less than 80%. either your home appreciates to be worth more than $250,000 and you still owe $200,000 (200,000/250,000 = 80%) or your house is worth $200,000 but the note is paid down to… Continue Reading
Cover Those Shoes or Boots Before Entering
Home can be both near dilapidated or a thing of modern beauty. This speaks to the several industries of service people that enter another person's home. No one that enters your home should disrespect you by leaving their shoes or boots on. This doesn't pertain to vacant homes on the verge of falling down, but this is speaking to the homeowner who is refinancing or getting a home equity loan and require an appraisal. Pilgrim Colonial appraisers will almost always wear shoe covers. Especially during the winter time its important for us to ensure your home is the way we left it. In a day where service is seemly becoming more cursory, we take a moment to "take our shoes off" so-to-speak and value our time with you.
The Brevity of An Appraiser’s Inspection – Just the Beginning
Pilgrim Colonial Appraisers take pride in chatting with the home owner or realtor to get to learn more about the property. Building rapport goes a long way with us. Often times we hear how we spent longer than any prior appraiser. Appraisers do appear to be brief because their inspection isn't exhaustive. Its misconception to compare an appraiser to a home inspector. Although an appraiser tends to review similar traits about the home, the appraiser is focusing on quality and condition of the home while verifying what public data is listed on a home. Home inspectors get into specifics such as looking into your walls for the type of insulation. It is also a misconception to think that the appraiser only spent 1 hour or less on the job. That inspection time is only the beginning. Typically an appraiser does prior field work on a home gathering several sources of data about the home and location. After an inspection is done, the appraiser has to go to work finding suitable comparables to compare your home to. Some superior and some inferior. An exact match would be ideal, but in the real world appraisers do what is called bracketing. By bracketing, they gather both a high and a low (particular) aspect of your home. Adjustments are made to formulate an opinion of value. Alongside with some macro and micro market data, the appraiser considers all these sources to create a report that is sent to your lender. Some appraisers can spend an entire workday on one appraisal. Give them the benefit of the doubt. Although they were not in your home for several hours, a detailed report is crafted for your lender.
Selling or Refinancing with FHA?
FHA is a wonderful program for first-time home owners. Essentially, they are really in the home owner's corner when it comes to your home. The U.S. Department of Housing and Urban Development uses the FHA Single Family Housing Policy Handbook 4000.1(latest edition to date) and sets guidelines as to what is required for a home to be eligible for an FHA transaction (whether sale or refinancing). Here are somethings to be mindful of when working with FHA. Ex1. I am selling my house and one offer is from a buyer that has FHA financing and another is conventional. Is one better than the other? The only real difference from your buyers is the FHA requirements. Both means of financing (assumed they are pre-qualified) are going to be able to process the transaction. The concerns may be with FHA though, if for say you have peeling paint, missing hand railings, No GFI electrical outlets in the bathrooms or kitchens, or broken windows. That is not an exhaustive list but it illustrates some items an appraiser will have to ensure are up to "FHA code" before financing eligibility. If your home is older and you want to avoid these things, remember that FHA just wants to confirm the house is safe. You may want to bring your home up to their standard anyhow as it will allow for more buyers to compete for your home. Ex2. The appraiser who came out to my house for my appraisal sent the lender a list of a few items that needed to be fixed. Now my lending is delayed. Is there anyway to expedite this? When you are working with FHA financing, you do need your home to adhere to the policy handbook. It is very often hind-sight that we wish we remedied the damages/repairs prior… Continue Reading
