Selling Your Home - What Can Go Wrong With Pricing and Loans

So, you're selling your home (house, townhouse, condo, apartment, land, lot, farm, ranch, etc.), what can go wrong? The sad fact is that a lot of things can go wrong. However, don't despair, there are almost as many solutions as problems. In this article, we look at problems related to pricing and a buyer's inability to get a loan.

Price Negotiation

A problem that shows up all too frequently during contract negotiations is that the seller has left no room to negotiate the price. If the seller shows no flexibility, they are apt to chase buyers away. Mad.

The solution is simple and obvious, price your property a little higher than you feel you have to get. It needs to be a reasonable market price for your home, but you can start at the top of the market. Then, if your buyer wants to negotiate price, you have built in wiggle room.

Price isn't the only thing that matters to buyers. Settlement and move in times are important, too. This is especially true if the move involves a new employment situation, a new school district, etc. If you can be flexible on those points, that can tip the choice to your property over a competing home.

Another sticky wicket during contract negotiations is encountered when buyers ask sellers to pay all, or some, of the buyers' closing costs. Often, sellers' knee jerk reaction is, "Why should I pay his closing costs? Mine have never been paid by the seller."

Whoa! Don't worry about what the buyer is getting out of it. Look at what you're getting. Is your bottom line what you want it to be? Close to it? Maybe you should consider paying all, or most, of what the buyer requested.

No matter what the proposal is during contract negotiations, don't freeze into a negative position. Think big picture. Think bottom line. Your bottom line.

The Buyer Can't Perform

Everything was going along swimingly and then you get a call. The buyer can't qualify for a loan to buy your home.

Check to be sure the buyer has approached a lender who will make loans to people with less than perfect credit. If that doesn't work, write it off as a mistake. The next time someone wants to write a contract offer, make sure they have a letter from the lender saying they're qualified to buy your house.

The key to selling your home is to stay calm. There will be hiccups and bumps, but don't let them overwhelm you. Typically, the buyer really wants the property. Work with them and a solution can usually be found.

by Raynor James

Negotiating A Mortgage Loan

You have found the perfect home. You are ready to move – yesterday. But you have no idea how to go about in the mortgage world. All home owners learn their way through this maze and you are no exception. Take the time to learn – it is well worth the effort you put into it.

To begin, find out what your credit rating is. There are three credit bureaus in the U.S.A. You are entitled to one free credit report per year and either of the bureaus can provide you with your score. Your credit score will give you a lot of information and it may even help you discover if someone has used your credit or your name without you knowing about it.

Once you know your credit score, then you are in a position to negotiate with your lender. While the interest rate may not be negotiable, several other items relating to your loan may be. You must know what to ask for in the negotiation stage. Remember, to go into escrow to buy a house, you will have points or costs that you must pay toward the loan. Points are actually a charge that the lenders use toward the cost of borrowing the money they will need to finance your loan. Each point equals 1% of total amount you are going to borrow. If you borrow $125,000 and your lender is asking you to pay three points, your total cost to borrow the money is $3,750.00. Ask about lowering the points by a quarter or a half.

In some mortgage loan transactions there are still institutions that charge for their attorney’s legal work on the loan. Point out that some of the other lenders you have talked to no longer charge for this service and ask for a break on the lawyer’s fees. There are document preparation fees and there are the advertisements of other lenders across town. Use the competitive price system to your advantage. Saving a few hundred dollars in up-front escrow costs are a few hundred dollars you might need to put in that skylight that would look great in your new den.

Learn how the mortgage loan industry works; learn its lingo. When you know what the person on the other side of the desk is talking about, then the terms and phrases that they pull out of their hat are not so scary and you can converse and ask questions with confidence.

Fill out your application and begin to get quotes from three or four different lenders. Sometimes, looking at the bottom line is helpful. However, knowing what the escrow costs are and what the long-term mortgage rate is will help you make an important decision: do you want to pay more up front in order to get a better long-term rate or would you prefer to pay less up front and pay a little more each month? Examine the various offers and make sure you know what each charge is for and what it means. If they are professionals in the business, the lender will not mind helping you to understand – they want the other business that you might have for them in the future.

Once you have the quotes and you understand what the programs and costs mean, then you are in a position to choose the lender you prefer. Let the lender know that you have gotten other quotes and start asking them to work with you in the places where the other lenders quote might look better.

There are several laws that you also need to be aware of as you begin to search for a loan. The first one is the Equal Credit Opportunity Act. Another is the Fair Housing Act. Both of these prohibit lenders and sellers from discriminating against any buyer/borrower and they make it illegal to charge more for their services to people of a different backgrounds, belief systems, nationalities, etc. These laws are designed to protect you, the buyer and borrower. You need to know your rights as you begin this process.

Even if you have credit problems, there are still ways to negotiate loans. You might need to explain the circumstances of late pay situation, especially if it was due to the loss of a job or an illness. It is especially important to point out to lenders when you have fixed the situation and show them the plan you have in place now to avoid future situations of the same nature.

You need to learn something about interest rates and the different types of interest rates available. Some interest rates appeal because of their stability while others appeal because of their flexibility. Can you work with the flexibility of an adjustable-rate mortgage or do you feel more comfortable with a fixed-rate loan? Those are questions you need to ask and examine with your financial advisor and your lender.

Once you have your questions answered, pursue the dream for purchasing your home for yourself and your family.

Credit Scores and Your Home Loan

Credit scores are a critical component for lenders trying to approve home loan borrowers. Multiple studies by the Federal Home Loan Mortgage Corporation (usually called Freddie Mac) have shown that credit scores are some of the best indicators for a borrower's long term performance. So, what exactly does your credit report show?

The basic information in your report identifies you and is updated as you apply to various lenders. This information includes your name, date of birth, social security number, address, and job history.

Your credit report also shows the lines of credit that you've previously established, such as car loans, home mortgages, and credit cards. Each line of credit shows the date that it was opened, what you currently owe, a history of payment, and how much you're allowed to borrow. These credit accounts basically show a likelihood of spreading yourself too thin financially. Although it's good to have some of these items in your report (otherwise, you wouldn't have a credit history), it can actually hurt you to have too many accounts currently opened. So, if you have more than, say, three or four credit cards, it would be beneficial for you to close some of the accounts that you don't use. Credit counselors can help you determine ways to improve your credit and can give you advice about such strategies.

A report also gives a history of everyone who has accessed it, including you. When you access your own credit report (which you should do periodically in order to check for errors), that's considered a voluntary inquiry. The report also shows involuntary inquiries, which is when lenders request your report for getting you approved. Lenders only order a copy of your credit report if you apply to them for a loan, and you have to give them authorization to do this. When you have five or more lender inquiries in a year or so, this can raise red flags for lenders. Having too many inquiries suggests that you may be requesting a lot of money that you don't have - maybe you've maxed out credit cards, or you've recently bought a lot of items that you can't really afford. So, keep this history in mind when you apply for loans.

The last information on credit reports shows whether you have overdue items such as foreclosures, bankruptcies, property liens, or legal suits. This kind of kind of information goes on public records due to collection agencies, and it can major damage to a borrower's ability to get approved for future loans. In fact, this fourth section can cause the most harm on the entire credit report for borrowers.

If you have questions about your credit report - or questions about how to improve your credit report - be sure to talk with a credit counselor. If you're considering buying a home, the earlier you start on building your credit report, the better your chances will be of getting the home loan you need.

How to Modify Your Home Loan: It's Not That Difficult

Millions of homeowners across the country are wondering how to modify a loan. To most homeowners it seems like one big mystery, but in reality it's quite the opposite. Modifying your loan isn't easy, but lenders and banks aren't accepting and denying applications based on some secret formula: They are looking at how big of a risk you are.

It's true that lenders are picky about who they give loan modifications to, but if you were in the same position you would be the same way. Your lender needs some sort of evidence that continuing to finance your home is in their best interest. A lender may be lending you money, but they are still a business.

The first step on how to modify a loan is this: Find out what your lender's requirements for modification are. You may be tempted to jump right in, but having a general idea as to whether you'll be approved initially or not beforehand can save you a headache. Next, if you're not confident, try to make an appointment with a representative under the Home Affordable Modification Program. These consultations are free and these representatives can even help you negotiate modification terms with your lender.

Approach your lender with any documentation you can gather on your income: pay stubs and bank statements are both great (if not required) proof of your income. You will need to provide expense documents as well, such as any bills. Also show your lender your income tax documentation for the previous year. Any proof of your past, current, and possible future financial status is going to help you plead your case of financial hardship.

Besides the actual documents your lender is going to want to see, you are going to have to write a hardship letter to send in along with your application. The hardship letter is not only a place for you to explain why you're in the situation in now, but you can also state what your plans are to get out of it. The lender looks for proof of your intent in your hardship letter, so it is a huge crucial point in your negotiations. Your hardship letter needs to be formal and to the point. Don't hop around what has happened or what you want. Lenders don't have all day to read a whole length of a letter or a sad story. They want the facts and only the facts.

It's no big mystery how lenders work and how to modify a loan. Get all of the documents listed above and present them to your lender. If they do not initially approve your loan modification application, ask why. If it seems like you should be qualified, the reason is probably something you can work out.