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What is the real estate agent's role in home buying?

From an informational standpoint, this may be one of the best times in history to be interested in buying a home. Mobile apps, word of mouth and the internet are among the many ways to see what houses are up for sale, what they cost and where they're located.

Yet despite these technological conveniences, many would argue that the real estate agent remains the best source of all. The home buying process has many players, from the buyer, to the seller, to the lender to the inspector to the appraiser. The real estate agent is the tie that binds them all together. Here's how:

Helps you find the right home

Nearly 2 million houses throughout the country are up for sale, according to the National Association of Realtors. That's a lot to choose from, each with its own specifications and distinctions that make it unique. A buyer’s agent specializes in helping you find not only a house, but the right house by asking you a variety of questions that can help narrow down your search. Many people who enter the home buying process don't know exactly what they want to buy but may have some preferences. A buyer’s agent will go over certain issues that can provide guidance.

Common questions include:

  • Where would you like to live - in the city, suburbs or rural neighborhood?

  • How many people will be in the house with you?

  • Is there a particular architectural style of house you like or prefer?

  • How important is the location to where you live in terms of your work commute?

  • Do you want a house that is move-in ready or a fixer-upper?

  • What price range do you want to stay within?

  • Have you been pre-approved?

The more information they have to go on, the easier it will be for them to show you houses that are to your liking and within your spending comfort zone.

Schedule showings

While many big-ticket items can be purchased entirely online - houses included - real estate remains something most people try before they buy. As such, your real estate agent will help you "test drive" a potential home by arranging appointments for you to see it in person. They may do this by getting in touch with the listing agent for the seller or finding out when the next open house is scheduled and coordinating with you to see what times work best.

Discuss your budget

If you plan on taking out a mortgage, conversation on money matters will largely be with your lender, but the real estate agent may also talk about finances with you. They do this to get a general idea of how much you're willing to spend and what is feasible based on your capability. This discussion can further guide them in terms of directing you to houses that you might be interested in buying, or at the very least seeing in person. Being pre-approved by your lender not only tells the real estate agent what price range of a home to show you but also you are a serious buyer.

Serve as a go-between

Generally speaking, sellers seek to maximize their property by getting the highest return for their investment; buyers aim to purchase as affordably as they can. The real estate agents involved help to find the middle-ground so everyone walks away happy. Once you make an offer, your real estate agent will take that number to the seller's agent to see what they think. They may come back with a counteroffer or accept the deal. Your agent may offer recommendations on what they think you should put forward based on their experience, what your budget is and the competition from other potential buyers.

Fill in the details

The biggest aspect of buying a home is, of course, the price. Today, the national median for existing homes is $295,300, based on the most recent figures available from the NAR.

But there is so much more than the list price to consider. There are also property taxes, closing costs, fees, and the history of the property, such as when it was built and the materials used for the basement or roof, for example. In this way, real estate agents are akin to detectives and fill in the gaps so you're more fully informed.

Attend the closing

There are many components to home buying, aside from the shopping process. Closing is among the biggest, which is where titles are reviewed, documents are signed, money changes hands, and the keys transfer from the seller to the buyer. Your real estate agent will be with you here to guide you through it all so nothing gets missed and the transaction is made official. Other attendees may include real estate attorney(s), the seller and their agent, a title company representative and the mortgage lender.

A real estate agent can make the home buying process go a whole lot smoother. Residential Mortgage Services looks forward to working with the one you choose.


Understanding Mortgages

6 ways to prepare for a VA mortgage

In addition to being a core component of the American fabric, the U.S. military - both active-duty members and veterans - represent a significant portion of the country's homeowners. According to the National Association of Realtors, homeowners on active duty have the youngest median age at 34 years old compared to 42 for their civilian counterparts. They're also far more likely to have a spouse, with roughly 75% married compared to 63% for non-military buyers. 

When soldiers past and present enter the housing market, they frequently do so through VA loans. Backed by the Department of Veterans Affairs, VA mortgages have helped men and women in the armed forces become homeowners more affordably.

Indeed, in 2018 - the most recent year for which data is available - 77% of active-duty military financed their properties with a VA loan. At nearly 60%, a majority of veterans used the same mortgage product, which was created in 1944 under the GI Bill of Rights during World War II. It's been through a number of iterations since, but it still boasts some of the same perks today that it did back then, with no down payments required, nor private mortgage insurance, among its signature highlights.

All this being said, the application process that determines eligibility is fairly rigorous. If you're an active member of the military or veteran and interested in buying a house for yourself or your family, here are a few ways you can prepare to successfully apply for a VA loan while rates are low:

1. Determine length of service

Just being in the Army, Navy, Air Force, Marines or Coast Guard isn't quite sufficient enough to be VA loan eligible; you need to have served for a few months. Generally speaking, length of service must be one of the following:

  • 90 consecutive days during wartime

  • 181 in peacetime

  • Six years of service in the National Guard or Reserves.

Meeting one or more of these criteria gives you authorization to apply for a VA loan. You may also be eligible if your wife or husband was killed or injured in the line of duty.

2. Get a certificate of eligibility

Otherwise known as a COE, a certificate of eligibility acts as written proof that you've met the initial qualifications needed to apply for a VA loan, such as length of service. A COE also helps both you and your mortgage provider determine the amount of money the Department of Veterans Affairs will insure.

There are several options to obtain a COE. You should be able to get one from your lender, real estate agent or if you go online to the VA's website at VA.gov. It should be available through the eBenefits portal.

3. Obtain Form DD-214

If you're retired from the military, you should have received a document called DD-214, which is more formally known as a certificate of release or discharge from active duty. Issued by the Department of Defense, a DD-214 corroborates that you have in fact served in the armed forces and that your time is completed. You should already have this document, but if you need a free copy, you again can go through the VA's eBenefits web portal.

4. Determine your debt-to-income ratio

DTI, or debt-to-income ratio, assesses what percentage of your monthly salary goes toward outstanding balances. It can be ascertained very quickly by doing some simple arithmetic.

All you do is add up what you spend on debt payments each month - for things like a car loan or and credit card debt - and divide that number by how much you earn in salary before taxes are taken out. So, if your monthly expenses add up to $2,500 and your gross income is $7,500, your DTI would be roughly 33%. The lower the percentage, the better. According to the Consumer Financial Protection Bureau, the ideal DTI is anything at or lower than 43%, but your mortgage lender can give you a more accurate figure based on your financial situation.

5. Ensure the house conforms to VA loan limits

Due primarily to robust demand in today's market, home prices are on the rise throughout the country. Indeed, based on the most recent statistics available from the NAR, the median cost for an existing home in January was $266,300, making it the 95th straight month that number rose on a year-over-year basis.

Currently, the conforming loan limit for VA loans is $484,350. Given the national median is well below this figure, you shouldn't have a problem finding a house with a selling price that is below the cap. The limit may be slightly higher in certain parts of the U.S. where asking prices are more expensive.

6. Get a pre-approval letter

Although pre-approval is not necessarily required to obtain a VA loan - or any other mortgage, for that matter - it's a great way to prepare for homeownership because it helps potential sellers see that you're serious about buying and have the requisite qualifications. It also provides you with a general idea of what houses are inside and outside your price range.

Some of the things you'll need for VA loan pre-approval are the same as for other home loan products. They include:

  • Identification (driver's license, Social Security card, etc.)
  • Two years' worth of tax returns (W-2 forms)
  • Hard copies of two most recent pay stubs
  • Credit report
  • Statement of funds (e.g. savings account, checking account, etc.)

Be mindful of the fact that pre-approval is not a formal authorization that you'll get VA loan. That happens when you're ready to make an offer on a potential home purchase.

If homeownership is your destination, a VA loan can provide an affordable pathway, whether you're a veteran or remain on duty. Best of luck on the journey to find the home you're looking for.


Helpful Tips

Prepare your home for the colder months:

As the weather becomes crisper, it is time to start preparing your home for the winter months. Taking time to winterize your home can increase the longevity of your appliances, keep your house running efficiently, and can even save you money.

Insulation:

  • Check your window and door frames for drafts, loose frames, or cracked panes. Caulk and use weather stripping as needed. Click here for a checklist from the Department of Energy to make sure your home is sealed top to bottom.

  • Install storm panes as needed.

  • Check the insulation and wrap pipes in unheated locations.

Circulation:

  • Reverse your ceiling fans so they turn clockwise. This will draw rising air down.

  • Change your furnace filters to ensure efficiency.

  • Make sure your furniture is not directly in front of vents so the warm air can circulate.

Home Interior:

  • Clean and prep your furnace, wood stove, fireplace and back up generator.

  • Prepare an “emergency” kit in case of power outages from storms with some key items:  food, water, battery operated radio, flashlights and batteries.

  • Clean clothes dryer vent pipe.

  • Clean showerheads, bathroom drains and vents.

  • Test your smoke and carbon monoxide detectors and change their batteries.

Home Exterior:

  • Clean, repair and store your grill, patio furniture and pool accessories.

  • Prepare lawn mowers, leaf blowers, weed whackers and other yard maintenance equipment for storage; don’t forget to drain fuel from all gas-operated equipment.

  • Close outdoor water valves and drain garden hoses.

  • Bring your plants inside before the temperature goes below 45 degrees.

  • Clean out your gutters.

Spend some time winterizing your home this Autumn so you can stay toasty warm during the winter months!


Understanding Mortgages

What role does a title company play when you're buying a home?

You may have heard the saying that no one gets to their current situation entirely on their own. The same goes for a home sale. Many "players" play a role in the process, starting with the seller, the lender and - of course - the buyer.

But there are several others involved in such a transaction, some of which aren't nearly as well understood as those just mentioned. Case in point: the title company. You've undoubtedly heard that such a thing exists, but you may not know precisely what one does.

They play a uniquely important role that is fundamental to homeownership and knowing that the property you purchase is on the level.

What does a title company do?

At the most basic level, a title company is charged with making sure a piece of real estate is indeed from the person or party you assume it to be from. It does this by performing its due diligence through a series of actions, some of which include conducting a title search, coordinating with legal entities or state regulatory agencies and checking to see if a title insurance policy exists on the property. Dotting the I's and crossing the T's in this regard provides reassurance to the buyer that the seller has the right to sell the property in the first place.

Imagine what it would be like if you were to move into your newly acquired property, when out of nowhere, someone raps on your door and says the house you bought was sold to you illegally. It would be an awful situation, and unfortunately, one that all too many people have been through. The verification processes title companies go through are for this very purpose.

In short, if someone were to ever make such a claim, you could point to your title - which is a legal document - as the reason they're incorrect.

How does a title search work?

The title search itself is among the most critical functions of a title company, because the findings can ultimately impact whether the transaction can go forward as it was initially intended or if adjustments or concessions may need to be made. Unpaid taxes, liens, lines of credit, second mortgages or assessments can all turn up in a title search.

The title company then summarizes the findings in a comprehensive report and may offer recommendations about how to proceed. The hope, of course, is that the search will turn up nothing, but if there is a red flag, the firm will be able to offer insight on what happens next. For example, if a balance remains on the previous mortgage, what's left of the cost will need to be paid off in full before the title can change hands. This is typically done during the closing process.

Another potential outcome of a title search is the presence of an easement, which is essentially an agreement - typically in writing - that specifies the property can be used for or in a certain way by someone else, be it an individual, family or group. That other party may need to be consulted to see what the circumstances of the easement are and whether the agreement can be amended now that the property is due to be under new ownership.

Ideally, these things would be brought up by the seller and the listing agent, but a title search ensures that nothing potentially compromising gets missed. Because there are so many aspects to buying a home, this type of verification can provide reassurance that nothing will be.

Where does title insurance get involved?

It's usually after the search that title insurance is issued. These policies are designed for the lender as well as the buyer to serve as a resource if a dispute ever arises related to ownership claims.

The insurance policy can establish that a claim to ownership is baseless. Or, in the off chance that what they espouse is true, title insurance can cover the financial costs that may result, such as legal fees or funds to buy a new home.

Generally speaking, two separate policies are issued for title insurance, one to the lender and the other to the buyer. Title insurance is usually obtained and paid for at closing and even though the lender owns one of the policies, the homeowner typically buys both. In some instances, the seller may buy it for the lender.

It's important to mention that an owner's title insurance policy is rarely mandatory; however, a lender's policy is, as it may be a precondition for the lender to offer you the mortgage to begin with. It gives the lender more reassurance that they'll be made financially whole if problems arise.

Does the title company conduct the closing?

Another function of the title company is to prepare the closing documents and conduct the closing. However, this is not true in all States. Many States allow attorneys or title companies to conduct closings while others require the documents be prepared by attorneys. In some cases, the use of independent escrow firms is also allowed. This may seem a bit confusing, but don’t worry, your lender knows which one to use to meet your State’s requirements.

If there is any portion of the homebuying process you're foggy about, Residential Mortgage Services will make it clear as day. Contact us today.


Understanding Mortgages

The Application Preparation Blog Series: Assets

The third and final piece to “the mortgage puzzle” is your assets. Assets are sources of money other than your employment income that you can use towards the down payment and closing costs on your new home. When your lender is reviewing your bank statements, they will look for other liquid assets as well as your employment income.

There are several different types of assets that buyers can choose to use. The most common is the money you have in your checking or savings accounts. Keeping funds in these types of accounts allow you to make deposits whenever necessary and it’s easy to access your money when needed. Because all funds being used towards a mortgage loan need to be verifiable, you should be careful about making any large out of the ordinary deposits. Lenders want to make sure you are not taking on additional debt to use towards the purchase of your home, maybe by borrowing money from a friend, so if they see an unusual deposit into your account, they will need to verify where it came from.

However, if you do want to receive help for a down payment, you can choose to utilize gift funds from a relative as an asset. If you have a family member who is willing to gift you money to help purchase a home, this is a great way to get started. It must be a true gift with no intention of being paid back.  If you do choose to take advantage of this option, your donor may want to consult with a tax advisor regarding possible tax implications. Another tip to help you save time when applying is to establish the gift funds in your account as early as you can to move the loan process along quicker, but make sure you have the proper documentation to evidence the transfer of funds.

Buyers can also choose to take advantage of any retirement funds they have saved. If you do decide to withdraw funds from your retirement there will usually be a tax associated with it, so make sure you are aware of that as well. Using your retirement account could change your plans for the future, but if drawing from other assets is not an option, the pros might outweigh the cons for this scenario. 

Buying a home is often a life milestone people save towards; it is always a good idea to be on the lookout for places in your life where you can save money. Every little thing can add up over time, so your future self will thank you for any spending you can cut back on now.

We hope this Application Preparation series has been helpful to you in getting ready for applying for your home mortgage loan. If you would like more information about mortgage specifics, you can browse through our Knowledge Center to familiarize yourself further with various mortgage terminology and helpful explanations. If you are ready to apply, you can click on the “apply online” button on our website or call a Loan Officer directly.


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