The Analytics on Appraisals
The Analytics on Appraisals
What is an Appraisal?
An appraisal is a document provided by an appraiser (the person who conducts the appraisal report) that provides a professional estimate of the value of your home.
Appraisals are conducted by a third-party appraiser who is completely objective in their process. Appraisers do not work in favor of the lender nor the borrower. They simply conduct the appraisal and produce their findings.
Appraisals are most often conducted two ways. The first way an appraiser can conduct an appraisal is by noting comparables. Comparables, or comps for short, are properties within the neighborhood of the home you’re buying that are similar to yours. The appraiser will use the values of the similar properties nearby to determine the value of your home. The second way is by estimating how much it would cost to replace your home should it burn down or be otherwise destroyed. The appraisal will compile all of the findings of the appraiser including:
- Comparisons with homes near the subject property
- Notes about the real estate market in the area as a whole, including the ages of the homes and the average selling prices of the homes nearby
- Notes about the appearance of the inside, outside, and surrounding area of your home
- Notes about any visibly unfavorable characteristics about the home like cracked concrete or damaged windows
- Pictures of everything that adds value to the home including, bedrooms, appliances, and fixtures
Why Lenders Need Appraisals
Lenders do not want to dish out more than the actual market value of the subject property. An appraiser’s goal is to determine that value. With this figure, the lender knows how much the property will sell for if you default on your loan. They also know how much they can lend to you without taking a loss if you default.
For example: If the subject property is appraised at $150,000 – that’s how much it will sell for on the open market. If your lender gives you a loan of $175,000 and you default on your loan, they now have to try to sell the home at a higher amount than what its appraised for, which can be difficult. If they end up selling the home for the actual market value, they’ve just lost $25,000. It is for this reason that lenders usually give a loan amount that is at or under the appraised value.
Why Borrower’s Need Appraisals
Appraisals are usually buyer paid and can be paid for at closing or during the application process. If you’ve signed a contract to buy a new home for $200,000 and the appraisal comes back valuing the home at $150,000, you should negotiate with your lender to lower the loan amount because you’re paying more for the home than it’s actually worth.
Overall, appraisals are a measure of protection. They ensure that neither party is lending or spending too much during the purchase process of a home.
When doing your research, always be sure to cite great sources! Check out the sources for this article below!
WHITNEY RUSH, VALLEY WEST MORTGAGE
What is Personal Mortgage Insurance (PMI)?
While the housing market continues to stabilize across the United States, there’s no guarantee that everyone in need of home financing will have a large down payment. However, you shouldn’t let that stop you from obtaining the mortgage you need for the home you love.
If you can still offer a down payment on your dream home, yet less than 20 percent of the appraisal value of the home, you will be required to obtain personal mortgage insurance (PMI). Personal – or private – mortgage insurance is a policy that protects the lender in the event of a client’s default.
PMI differs from government mortgage insurance in that not everyone will be required to obtain a PMI; however, it can’t hurt to sign up for it regardless. Private companies facilitate PMI’s and act as the beneficiary, while you (the borrower) pays the premium. The rates for a PMI vary depending on how much you borrow and how much you are able to offer as a down payment. Typically, rates for a PMI don’t reach above 2 percent. For example, say you buy a $200,000 house and are able to make a 15 percent down payment. You have to borrow $170,000, with a PMI rate of 0.56 percent. If you multiply your loan amount by the premium (0.0056), that makes your annual premium $952, or a monthly payment of $79.33.
If you are a borrower that needs to obtain or is interested in a PMI, please contact us for further questions and details.
Mortgage Rates Are on the Rise!
We said it would happen and soon. Average rates have just passed 5%
What we don't know is how far or how fast this Mortgage Rate rise will be. Recent positive indicators for the economy have caused rates to rise. Mortgage Rates parallel Long-Terms Bond Rates and those always rise on positive economic news. It is more important than ever to have your Refinance or Purchase file in the hands of a competent Mortgage Professional! At Valley West Mortgage, we keep a very close watch on rates for our clients. While rates are clearly on the rise, they still have their ups and downs. We watch all of the rate change indicators for potential changes so we can lock rates at the best possible advantage for our clients.
The key to being ready to lock is having a complete file which is ready in every respect. With our clients help, and help from our Realtors on Puchase files, we do everything within our control to make sure that your file is complete, as quickly as possible. In this way, we won't miss any opportunity to secure the best terms possible! Give us a call today so we can help you to succeed even in this unstable market. Remember, Las Vegas is still one of the best buying opportunities in the entire country regardless of current rate fluctuations.
Call (702) 696-9900 or (888) 931-0007 and let Valley West Mortgage get you ready to close!
It Really is Better to Buy than Rent in Las Vegas!
On the upside...
A study was published today by Trulia, a major Real Estate watch site, and Las Vegas is #2 behind only Miami as the best place to buy rather than rent. I'm sure that this will be on most of our Local News stations by this evening. They love to cover the latest Las Vegas Real Estate news.
As we have said before, this is the best opportunity in years to buy a home in Las Vegas! Currently, rates have been fluctuating quite a bit due to market uncertainty. For the past two weeks, rates have finished slightly highger. Don't wait for home prices to "drop a little more" and then find yourself out of position because rates have gone up too much.
Call our professional staff and get the ball rolling today! That way, you will already have provided everything needed in order for us to lock your rate as soon as you have an accepted offer on a property.
Call (702) 696-9900 or (888) 931-0007 and let Valley West Mortgage get you ready to close!
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FHA - Mortgage Insurance Premium Update...
Implementation of the new plan is delayed until October 1st.
After announcing last week that it was lowering upfront insurance premiums
from 2.25% to 1.0% on Sept. 7, the Federal Housing Administration said it’s pushing back implementation until October.
“Based on industry feedback and our desire to have this change implemented successfully in the marketplace, FHA will make the premium fee changes on all new case numbers effective October 4, 2010,” said Vicki Bott, Deputy Assistant Secretary for the Housing and Urban Development.
For details on the upcoming changes, see our earlier post, "Congress has passed H.R. 5981 – FHA Mortgage Insurance Changes…" Posted on August 5th, 2010
Congress has passed H.R. 5981 - FHA Mortgage Insurance Changes...
This bill gives FHA the authority to adjust its annual mortgage insurance premiums.
While there is both good news and bad news for FHA mortgage applicants, this premium restructuring will help to keep FHA stable in the long run. The up-front mortgage insurance has been lowered considerably. This will mean a smaller bite out of consumer wallets in order to close the loan they have applied for. With todays stricter underwriting to qualify, there is less risk of default by new mortgage holders so this move makes sense. Now for the trade-off...
On the other side of the equation, the cost of the monthly amount of mortgage insurance will increase. This could be interpreted as FHA reserves being replenished at a slower rate than before passage of this bill. With the more stable underwriting lowering the risks, consumers can save some of that money that was needed just to close their loan. You will still end up spending that money but, it will be as a slightly higher monthly payment amount. While this is a fair trade off for many, some folks who are right at the limit for the maximum monthly payment they can qualify for, will have to find a way to lower their loan amount to offset the impact of the higher monthly mortgage insurance premium. This change will be effective for all FHA loan applications started on or after September 7th, 2010. While President Obama has not officially signed the bill into law, no veto is expected.
If you are considering Strategic Default - Don't!
Lenders are starting to crack down on "Strategic Defaults".
Fannie Mae has announced stiffer penalties to consider if you decide to walk away from a mortgage that you can afford to pay. Starting in the fall, Fannie Mae will disqualify borrowers for a period of seven years if they choose to default on their mortgage even though they have the ability to pay. Fannie Mae also plans to take such borrowers to court to recover loan losses resulting from this type of default.
There is a bill working it's way through Congress that would also prevent you from getting an FHA insured mortgage if you have previously "walked away" from a mortgage. Since it makes sense that you would be viewed by Lenders as a higher risk after taking this action, I think we can expect this bill to pass. We have blogged before about the possibilities of a Short-pay Refi or a Short sale so if you are considering Strategic Default it is time to review other avenues. USA Today has a more in depth article on Strategic Default which will fill you in on the upcoming changes. Click here to read the USA Today article.
Alan Greenspan, Former Federal Reserve Chairman on Rates...
Last week, Greenspan wrote an Op-Ed for the Wall Street Journal in which he warns of an inevitable rise in interest rates.
Here is a link to the WSJ's online excerpt for non-subscribers. The second paragraph should be more than enough to tell you that rates will rise and not only that, they MUST rise. To read the entire piece, take advantage of the subscriber link at the end of the excerpt.
So what does this mean to those who want to want to buy or refinance a home?
Rates are not likely to go any lower and home prices are still low. All indicators are pointing to taking action now or missing out! If you are currently in an ARM Loan, you need to refinance now into a fixed rate mortgage. If you are buying and you have been waiting for better rates or better prices, it's time to make a decision!
To get started now, give our professional staff at Valley West Mortgage a call at (888) 931-0007.