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Avoid Choosing Wrong Loan Officer

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | March 17th, 2017

A finding by J.D. Power that 21 percent of homebuyers regret their choice of a lender -- the dismayed first-time buyers were a shocking 27 percent -- is probably misplaced.

It’s far more likely that displeased purchasers were not happy with their particular loan officers, as opposed to the companies they work for. But it shouldn’t really matter who’s to blame for their unhappiness.

What is important, especially to future buyers, is that unhappy borrowers made an average of nine negative comments in the research firm’s annual mortgage satisfaction study.

That in itself is regrettable. But this significant minority might have been able to avoid many of their issues if they had been more careful in picking who they worked with for financing in the first place.

Whether dealing with a loan officer who works for a lender that actually fund its own loans, or a broker who works for himself and deals with more than one lender, you should expect him to be responsive, according to the Consumer Financial Protection Bureau, the federal watchdog agency that grew out of the recent financial crisis.

If he’s not, suggests Sue Woodard of Vantage Productions, a Minnesota sales and marketing firm that supports professional development in the mortgage field, you should have no qualms about jettisoning him and going elsewhere.

If you are wedded to a particular company, ask for the manager and tell him you want to deal with someone else. But if you’re not, than “leave and leave quickly,” Woodard says. “There are too many good people out there willing to do it right, so run and run fast. It just frustrates me to death that on something so important, people don’t pick up and move on.”

Being responsive is a key trait. But according to a recent survey of some 800 companies by Insellerate, a provider of support services for the marketing and sale of mortgages, it took an average of 12 hours for loan officers to answer a client’s query. But that’s just among those who responded. A whopping 57 percent never responded at all, the survey found. And 60 percent of those who did respond failed to follow up with a second call.

Woodard says you should expect prompt responses to your requests for information “right out of the gate.” If there’s some kind of crisis, the reply should be immediate. Otherwise, 24 hours is acceptable.

You also should be provided with a clear analysis of the different loan options that are available, along with an understanding of how they impact you financially, both initially and over time. Even more importantly, you should expect that the choices be explained in a way you can understand.

Choosing a mortgage is possibly the biggest financial decision you will ever make, so if you ask for a simple explanation and you don’t get it, ask again and again until you are certain you understand.

It’s also wise to make sure what you choose is suitable to your lifestyle and financial picture. Many loan officers qualify people for the biggest mortgage they can afford. But while there’s nothing wrong with that, you may not be comfortable forking over that amount every month.

You want to match your monthly payment -- not just principal and interest, but also homeowner’s insurance, taxes and homeowners’ association fees -- to how much you can afford to pay. Stretching a bit, perhaps, but not to the point where you are living hand-to-mouth.

Loan officers can’t predict whether interest rates will rise or fall. But they should be able to tell you where the market has been going in recent weeks. More importantly, you should be given general advice on whether to lock in your rate, and when, or let the rate float with the market.

You also should be given a method to easily and quickly check on the status of your application. That is, where it stands with underwriting, what papers are needed and which ones are still missing. Better yet, says Woodward, your loan officer should update you regularly and routinely during the sometimes-lengthy process.

On the flip side, if you fail to send a piece of requested information, you should expect the officer to hound you for it, or at least be persistent in asking for exactly what the underwriters need to approve your loan.

“They aren’t trying to make your life miserable or harass you,” says Woodard. “But if they ask for six things and just one is missing, your application can’t move on.”

Finally, if you’ve chosen wisely and your loan closes, don’t expect your loan officer to go away. A good one will be in contact during the transaction. But a great one will stay in touch long after, asking for repeat business, referrals and letters of recommendation.

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How to Read Floor Plans

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | March 10th, 2017

More and more builders are doing away with expensive model homes, instead using artists’ conceptions to show buyers the completed house’s exterior, along with detailed floor plans of the interior. In light of this trend, it has become incumbent upon would-be buyers to learn how to “read” what they are being shown.

Floor plans, or the far more detailed drawings called blueprints, have a language all their own. With dozens of symbols and lines going hither and yon, they are your road map to exactly how the house you are considering will “live” once you are in it.

A plan tells you the house’s size, circulation pattern, room layout and the locations of doors, windows and stairs. Although it offers only a static two-dimensional view of the property, it reveals enough information so that a practiced eye can picture how the house works -- or doesn’t.

Typically, the rooms are labeled so it’s easy to see how they are supposed to function. But sometimes designers get a little too tricky -- labeling, for example, an extra bedroom as an office or den. Of course, turning what is essentially square footage inside four walls into something more special than a simple bedroom costs extra. But the plan rarely tells you that.

You would know that if you were touring a model home: You’d see that the room in question contained built-in bookcases and special lighting, and that those features were upgrades. But without a sample house to behold, prospects are left to visualize for themselves.

Here’s a very basic tutorial on how to read a floor plan.

Start at the front door. Sometimes difficult to find, especially on apartments that span an entire floor or share the floor with only one or two other units, the entry point allows you to “walk” into the house with your eyes. From there, you can see how you can move from room to room.

As you enter, try to get a feel for how the plan plays out. One important element to look for is a corridor that creates a view from the front of the house straight to the back. Now roam from room to room. In each room, look at the window and door placement. These key design elements can enhance or limit a room’s usefulness.

You should see figures in each room that tell you their size. Sometimes, the plan will say something like “12 by 12” or “10 by 10.” In other cases, a number is shown beside each wall.

When yours truly built his house 15 years ago, he found a plan he liked, but failed to pay attention to the little numbers. Now, he and his bride of nearly 34 years live in a house that is far too large for just two people. (We love the place -- the Missus vows to never leave -- but it is much bigger than we need.)

The moral here is to pay attention to the numbers. The house may be large overall, but each room may be small -- perhaps too small. If you can’t visualize the size of a room, go home, take out a tape measure and mark off the dimensions to get an idea of the actual space.

With blueprints, the architectural symbols would tell whether the windows are single- or double-hung, meaning they either open from the bottom up (single hung) or also open from the top down (double). Floor plans aren’t as detailed, so you’ll have to refer to the builder’s list of standard and upgraded features.

Pay attention to the window placement, as they affect both light and views. And make sure you understand how the doors open and close. Typically, a door is drawn as a straight line protruding out from the wall with an arc connecting that line to the wall. The arc indicates the direction the door opens. Make sure doors open in a way that minimizes floor space lost.

If a door is drawn as a line between two walls, it is a sliding door. If the line doesn’t reach to another wall, it is a pocket door that slides into the wall. Bi-fold doors are shown as two arcs that don’t connect; French doors are shown as two larger arcs that do connect.

In some cases, the builder will show furniture to help you imagine how the space might be furnished. But it won’t tell you the size of the furniture, so yours may be too big for the same wall. Of course, there’s no law saying you have to put your couch where the builder does.

The fireplace is another design feature to look for. It is shown as a rectangle sticking out from the wall. Fireplaces are great, but again, they take away from usable space because you can’t put furniture against them like you can a plain wall.

Drawn as a series of parallel lines with an arrow indicating their direction, stairs also eat up a significant amount of floor space. So look for their placement.

In the kitchen, the symbols are often self-explanatory. Ditto for the bathrooms. But pay attention to their placement and how they relate to each other. Again, it might be a good idea mark off these spaces when you go home to see how they work in real life.

The plan may or may not tell you the height of the ceilings, but many houses these days are built with extra-high, two-story ceilings. In these spaces, the lower floor will show a dashed line, while the upper floor will be labeled something like “open to below.”

Bear these floor plan-reading tips in mind, and you’ll be well on your way to making an informed decision.

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Occupancy Can Be Touchy

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | March 3rd, 2017

To the surprise of some homebuyers, the day they are able to take occupancy of their new digs does not always coincide with the closing.

An occupancy date is always a negotiable item, just like price. Traditionally, in most markets, occupancy takes place simultaneously with settlement. You sign the papers, and the place is yours.

But that’s not always the case. In agent Judi Barrett’s Idabel, Oklahoma, market, for example, it’s not uncommon for buyers to allow sellers seven to 10 days, post-closing, to remove all their belongings. But in Chicago, it’s unheard of to agree to delayed possession, reports agent Jennifer Allan-Hagedorn.

In the Los Angeles area, Beverly Hills agent James Engel says sellers need to be out three days prior to closing so buyers can do their final walk-through. In the Denver market, sellers expect three extra days after the closing to move out. Just up the interstate in northern Colorado, reports Loveland agent Rob Proctor, possession takes place at closing.

Negotiating when the keys change hands can sometimes be a sticking point -- more challenging than haggling over any other item in the contract. And with good reason.

From the buyer’s point of view: What if something happens to the house between the closing and the time the sellers actually leave? Will the seller, who is now a tenant, be required to repair it? Or will the buyer, who’s now the owner? What if the buyer does move out but leaves his junk behind? Or worse, what if he trashes the place because you drove too hard a bargain?

Will the seller-tenant have to pay rent, and how much? What if, for some reason, the seller decides to extend beyond the agreed-upon move out date? What if the seller never moves out?

Ideally, buyers would like the house to be totally empty a day or two prior to closing so they can do a final inspection of the place and spot any damage that had previously been strategically covered up by a rug or hidden behind a box. Or damage that was caused when the sellers moved out.

But on the seller’s side: What if they move out and then closing’s delayed? Or their new home isn’t ready and they have nowhere to go? Or the buyer changes his mind?

What if the buyer has some last-minute glitch in obtaining financing, and the deal falls through altogether? It is not unheard of for lenders to come up with some deal-breaker at the last minute. And it’s not uncommon for buyers to make some big-ticket purchases prior to closing that lowers their credit score or pushes them beyond the required debt-to-income ratio.

And what happens if the buyer’s sale of his previous home runs into problems, and he can’t get the money he needs from that house to complete the purchase?

It’s a complicated issue, for sure. But there are ways to figure it all out.

For starters, agents suggest that sellers alert would-be buyers in their listings that they need “X” amount of days beyond closing to pack up and move out. That way, if a buyer has a problem with that, he can either move on to another listing or counter that requirement in his offer.

If the parties agree that the seller will remain post-closing, they should state in the contract the exact number of days he will stay. Also, when the seller becomes a tenant, he should pay rent on a per diem basis. The amount is negotiable: Sometimes it’s a token $100 a day. But in other instances, the daily rent is calculated at 1/30th of the buyer’s mortgage payment.

The contract should also specify who pays for any damages post-closing. What if the movers damage a staircase handrail? What if a mover carrying a heavy box trips and breaks his ankle? Or, heaven forbid, what if there’s a fire?

Since the seller is no longer the owner, his homeowner’s insurance won’t cover the cost of these or a myriad other possibilities. So the buyer should make certain his new policy will, even if he hasn’t taken occupancy. If so, that the seller-tenant will cover the buyer-owner’s deductible should also be part of the contract.

To protect themselves even further, buyers should require their sellers to set aside a certain amount of their proceeds in escrow at closing to cover damages or extra days beyond the specified move-out day. How much? Also negotiable. But realize that if there is any kind of dispute and the seller will not permit the settlement agent to release the funds, you are likely to end up in court to seek redress.

Another suggestion: If there is a garage, or perhaps a storage building somewhere on the property, the buyer can allow the seller to use it as a transition area where he can store some of his belongings for a few days after closing. That way, the buyer can move into the main house right away, and the seller can come back after he moves out to get the rest of his stuff.

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