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What Are the Ups and Downs of Appraisals in the Mortgage Process?




One vital part of the mortgage loan process is the appraisal. An appraisal is something the bank orders on your behalf to verify the information about the property. It’s like a 17- to 24-page storybook about the home you are buying. It will give all the characteristics and compare it to recently sold homes in your area. This will do a few things for you:


1. Protect you from a bad investment.

2. Keep the lender from lending more than the home is worth.
Lenders rely heavily on appraisals. They take up about ⅓ of the mortgage process. Homes can come in lower than the asking price, and it’s becoming more common as property values increase and inventory declines.


"Lenders rely heavily on appraisals."

People are offering sometimes more than what the home has been listed for, but for lenders, they are still only going to lend on the lower of the sales price or the apprasied value of the home. If the appraisal came in a little below the contracted sales price, you as the buyer would have to pay the difference from the appraised valueand the purchase price if the seller was not willing to accept the current appraised value.

One of the biggest things we see when it comes to appraisals is repairs needed on the home. Government loans are very strict with any health and safety issues, and appraisers are trained to find them. Keep in mind these are strictly health and safety concerns, not cosmetic issues. It’s not something you should feel bad about asking a seller to fix. You don’t want to buy a house where your health or your family's safety will be in danger.

If the seller isn’t willing to make repairs, we have a few options. There are some programs we can add into the loan for the cost of rehab. You could also ask for repairs at closing or cancel the contract. You would still be able to get your earnest money deposit back due to the appraisal contingency in your contract.

If you have any questions for me, don’t hesitate to reach out. I would love to hear from you via phone or email. Talk to you soon!

Everything You Need to Know About USDA Mortgages




USDA mortgages offer 100% financing for low-to-moderate income families so they can get into a home they can afford with little to no money out of pocket. Here are a few things you should know about the USDA loan program:

1. Who qualifies and why?

USDA loans have geographical restrictions, as well as income limitations that vary county by county. For example, in Lake County, a family of one to four people cannot make more than $75,850. That number goes up as the number of people in the family increases, and it’s going to be a different requirement in each county.

There are some exceptions to the income limit. If your client makes more money than the income limit suggests, please reach out to us. As many of the baby boomers are getting older, we may be taking our parents into our homes. If you’re applying for a USDA loan, any expenses that go into the care of the aging parents can be a deduction for the income.

Another expense to take into consideration is childcare. As the mother of a two-year-old and a six-year-old, I pay astronomical amounts in childcare every month. Child care expenses can be deducted from the USDA income limit.

As for geographical restrictions, those can be found on the USDA’s website. Simply enter the property address and the site will determine if it is in an eligible area. Traditionally, eligible areas are rural. However, in Claremont, we have a population of more than 20,000, which usually doesn’t work with the USDA’s guidelines but the area is still considered rural in character. All of Lake County Florida is still USDA eligible.

2. What are the minimum program requirements?

There are no down payment requirements. However, the USDA does have the most strict debt-to-income ratio requirements of any loan program. After all, the whole purpose of this program is to get low-to-moderate income families into homes they can afford. They don’t want people to be house rich and dirt poor.

"The USDA mortgage helps low income families get into homes they can afford."

That said, they are the least strict with credit score requirements. Ideally, you should have a score of at least 620, but credit scores are not actually required. If you have nontraditional credit, such as documentation that you have paid rent, that’s all you need. They are very open-minded when it comes to credit.

3. What are the coming changes to this program and when will they take affect?

Right now, the USDA charges a 2.75% mortgage insurance fee. Anyone using the program pays that fee. Since the USDA offers a down payment below 20%, you also have to make a monthly PMI, or private mortgage insurance, payment. PMI protects the lender should the borrower default, and that payment is usually 0.5%.

However, one of the best changes in our industry is coming soon. In October of 2016, they are lowering the upfront mortgage insurance fee to 1% and the monthly PMI fee to 0.35%. This huge change allows more people to get into the program at a lower cost!

If you have any questions, please don’t hesitate to reach out to me. I would be happy to help you!