Chance Gates' Blog

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Is now a good time to buy a foreclosure?

This is a very common question from both real estate professionals and prospective buyers. Obviously, because local market conditions vary, the answer is different from market to market. But there are questions that buyers in any market should be asking before they make an offer on a property in foreclosure.

What’s the first step buyers need to take?

Require buyers you work with to be preapproved for a loan before you help them shop for a foreclosure. If they’re thinking of buying a foreclosure as an investment or second home, they need to understand that financing the home will be more difficult and more expensive than financing a primary residence. Lenders typically charge higher interest rates and require a larger down payment for investment or second homes.

How can you tell a bad foreclosure from a good one?

Certainly there are great deals in many markets for both investors and buyers looking for a primary residence. But making a sound deal can be tricky. Buyers need to be wary of unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit, and possibly a second or third mortgage. Any or all of these financial obligations could become your clients’ responsibility when they purchase a property in foreclosure. Unless the property goes through a foreclosure auction and becomes a bank-owned REO, the outstanding foreclosure liens and fees could be simply transferred to the new owner—your clients. Don’t let them fall into the same financial trap as the previous owner.

If I’m a qualifying borrower, can I appeal to banks for better loan terms?

Lenders are drowning in defaults—particularly in hard-hit real estate markets such as Arizona, California, Florida, Michigan, Nevada, and Ohio—so they may be motivated to cut a deal. If your clients have a good credit score, many banks will offer them a below-market-rate loan on a bank-owned home. Unlike paying down with points, this doesn’t cost anything in fees, and it gives them the ability to spend more for the home.

What are the costs of buying a foreclosure?

It takes money to make money. The best opportunities are for buyers with cash. If your clients are planning to rent out the property or even resell it for a quick profit, make sure they consider the carrying costs, including sales commissions, marketing costs, vacancies, taxes, insurance, and maintenance costs. Once you’ve calculated all the expenses, add on another 10 percent to 15 percent. If they don’t build in a “surprise fund,” your clients might be the next foreclosure statistic.

How does choice of neighborhood affect foreclosure investments?

Clients looking for a good investment should generally avoid neighborhoods overrun with foreclosures, particularly newer subdivisions in overbuilt exurban areas. Investors will be tempted to buy foreclosures in these areas because they offer the steepest discounts—but they also carry the most risk of further depreciation. Look in well established neighborhoods with good schools and transportation. If you’re in a market where prices are still falling, encourage your clients to factor falling prices into any offer they submit on a foreclosed property.

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As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most Northwest Nevada neighborhoods. I can be reached by email @ chance@ballard-company.comhttp://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates .  If you are behind on your house payment and looking for a loan modification, go to making homes affordable For a free copy of my report   “5 Steps For Reno/Sparks Homeowners To Prevent Foreclosures” go to my about page http://chancegates.com/about and ask for more information on preventing foreclosures. or   to request a modification.  If the modification fails, contact your local real estate professional to help short sale your home.  To make sure there is no deficiency judgment a homeowner might find it necessary to hire an attorney.

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Banks and mortgage servicers are taking more time to foreclose on defaulting home owners–a process that can take up to 2 years now, USA Today reports.
A backlog in foreclosures has occurred within a number of the nation’s banks, triggered by the large number of home owners defaulting on loans, a lengthy review process for loan modifications, and recent lawsuits that have accused banks of improperly filing foreclosure documents .
Meanwhile, defaulting home owners are being allowed to stay in their homes longer. In December 2010, the average borrower in foreclosure went 507 days without making a mortgage payment, according to LPS Applied Analytics. (Prior to the housing crash, the norm was considered 250 days in default.)
Diane Pendley, managing director of Fitch Ratings, estimates that delinquent borrowers stay in their homes an average of 19 to 20 months before they’re evicted. She expects that average to grow to 22 to 23 months by the end of the year–the longest on record.
The delays in the foreclosure process are expected to lead to less inventory of foreclosed homes for sale and higher prices for these homes, in some markets, experts note. However, the longer wait also means foreclosures could weigh on the real estate market much longer, they say.
Source: “Home Loans in Default Drag On,” USA Today (Feb. 21, 2011)

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most Northwest Nevada neighborhoods. I can be reached by email @ chance@ballard-company.comhttp://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates .  If you are behind on your house payment and looking for a loan modification, go to making homes affordable For a free copy of my report   “5 Steps For Reno/Sparks Homeowners To Prevent Foreclosures” go to my about page http://chancegates.com/about and ask for more information on preventing foreclosures. or   to request a modification.  If the modification fails, contact your local real estate professional to help short sale your home.  To make sure there is no deficiency judgment a homeowner might find it necessary to hire an attorney.

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As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most Northwest Nevada neighborhoods. I can be reached by email @ chance@ballard-company.comhttp://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates .  If you are behind on your house payment and looking for a loan modification, go to making homes affordable For a free copy of my report   “5 Steps For Reno/Sparks Homeowners To Prevent Foreclosures” go to my about page http://chancegates.com/about and ask for more information on preventing foreclosures. or   to request a modification.  If the modification fails, contact your local real estate professional to help short sale your home.  To make sure there is no deficiency judgment a homeowner might find it necessary to hire an attorney.

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A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.

Why is the number of short sales rising?

Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.

A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most Northwest Nevada neighborhoods. I can be reached by email @ chance@ballard-company.comhttp://www.myspace.com/chancegates . You can also follow me at http://www.twitter.com/chancegates . If you are behind on your house payment and looking for a loan modification, go to making homes affordable For a free copy of my blog titled “5 Steps For Reno/Sparks Homeowners To Prevent Foreclosures” go to my about page http://chancegates.com/about and ask for more information on preventing foreclosures. or to request a modification. If the modification fails, contact your local real estate professional to help short sale your home. To make sure there is no deficiency judgment a homeowner might find it necessary to hire an attorney.

By Pamela Yip

RISMEDIA, December 24, 2010—(MCT)—If you’ve been through a foreclosure, you may wonder if there is hope for you to become a homeowner again.

“It doesn’t mean you’ll never be a homeowner again,” said Linda Davis-Demas, director of housing at Consumer Credit Counseling Service of Greater Dallas.

But you’ll need to examine what caused you to fall behind on your mortgage and take steps to fix the problem.

“You have to look at what were the reasons you didn’t make the payment,” said Davis-Demas. “Was it budgeting? You can modify that type of behavior.”

A foreclosure is a major hit to your credit history and stays on your credit report for seven years.

“Foreclosure is one of the FICO seven deadlies,” said credit expert John Ulzheimer, referring to the dominant FICO credit score. “It’s considered a major derogatory item, regardless of the back story”—whether it’s a job loss, rate reset, underemployment or other reasons.

Your credit score will also suffer “the minute the foreclosure process begins,” said Ulzheimer, founder of 2StepCredit.com, a credit education website.

“It doesn’t have to be completed for it to be very damaging,” he said. “The damage will vary based on your scores, but it can damage the score as much as 200 points, especially if your scores are very strong to begin with.”

So, after a foreclosure, your priority has to be rebuilding your credit. You’ll have some time to do so, because mortgage giants Fannie Mae and Freddie Mac impose strict rules on how long it will take before you’re eligible for another mortgage.

For example, borrowers with a prior foreclosure and extenuating circumstances—such as a job loss, divorce or medical issues—must wait three years before they can qualify for a Fannie Mae-backed loan, said spokeswoman Amy Bonitatibus. For all other borrowers the waiting period is seven years.

At Freddie Mac, those who can prove extenuating circumstances must wait three years before applying for a new mortgage; everyone else must wait five years. But that will change in February, when the waiting period for those whose foreclosure was caused by their own financial mismanagement will increase to seven years.

Fannie Mae and Freddie Mac also have strict rules on the credit score and the size of the down payment required of borrowers with a prior foreclosure.

Here’s what you need to do to rebuild your credit to qualify again for a mortgage:

PAY YOUR BILLS ON TIME: The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time.

“Stability is the key,” said Craig Jarrell, president of the Dallas region of IberiaBank Mortgage Co. “Have you demonstrated that you are now capable of owning a home and paying the bills, and have recovered from whatever circumstance caused the original foreclosure?”

REVIEW CREDIT REPORT: You’re entitled to a free credit report once every 12 months from each of the three national credit bureaus—Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies.

To get your free credit report, go to http://www.annualcreditreport.com. Go to only this website, not ones with similar-sounding names.

“Make sure it is about you and only you,” said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. “If you find errors, dispute them. If you discover old debts, it will weigh in your favor to satisfy them. Paid late looks better than not paid at all. Make sure that debts older than seven years have rotated off your report, as these could be dragging your score down unnecessarily.”

CHECK YOUR MORTGAGE: You want to be sure that you don’t still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren’t enough to cover what’s owed on the mortgage, which would leave you owing the difference.

“Make sure there is a zero balance reflected, and if you are responsible for a shortfall, make arrangements to repay the remaining balance,” Cunningham said.

Many lenders are willing to settle that “deficiency judgment” for less than what’s owed because “it’s better than getting no money at all,” Jarrell said.

APPLY FOR CREDIT: In particular, apply for different varieties of credit.

“Credit scoring models value having different types of credit,” Cunningham said. “Having some revolving accounts, typically credit cards, and some installment fixed-payment loans, such as a car payment, can improve your score.”

But don’t apply for too much credit at once.

“This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you,” Cunningham said. “Further, too many credit inquiries can have a negative impact on your credit score.”

DON’T FALL PREY: Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job—after paying a fee for the service.

“The truth is, that no one can remove accurate negative information from your credit report,” according to the Federal Trade Commission. “It’s illegal.”

Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.

When it comes to repairing your credit, there are no quick fixes, the experts say. What lenders want to see is responsible financial behavior over time.

“Know that time is your friend, as the further you move away from the financial distress, the less negative impact it has,” Cunningham said. “Follow with responsible behavior with your new credit, and you’ll soon have a solid credit file.”

HOW TO HELP YOUR MORTGAGE CHANCES:
If you’ve been through a foreclosure, there’s still hope for you to become a homeowner again. Here are tips to make lenders want to take a chance on you:

—Save for a down payment.
—Clean up your credit. Pay off or pay down your debts and establish a record of consistent on-time bill payments.
—Get your credit score as high as possible.
—Show stability in your job.
—Monitor your credit report to ensure that your old loan shows up as closed and that you still don’t owe anything else on it.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most Northwest Nevada neighborhoods. I can be reached by email @ chance@ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates .  If you are behind on your house payment and looking for a loan modification, go to making homes affordable to request a modification.  If the modification fails, contact your local real estate professional to help short sale your home.  To make sure there is no deficiency judgment a homeowner might find it necessary to hire an attorney. For a free copy of my blog titled  “5 Steps For Reno/Sparks Homeowners To Prevent Foreclosures” go to my about page
Source: Dallas Morning News research

– Establish that you would be better off with a modification than with refinancing: In general, borrowers should seek refinancing rather than a modification if they can do so at a significantly lower rate at a reasonable cost. However, you can’t refinance advantageously if you are behind in your payments, have little or no equity in your property, or don’t qualify for a refinance for other reasons such as a low FICO credit score or inability to document adequate income.

– Deliver the information the servicer requires, in the form the servicer specifies: The loan servicer is the company to which you make your mortgage payments. It will be the one you deal with on your modification. The most important part of the process is to place in the hands of the servicer all the information about you that the servicer needs to make a decision. While this information is pretty much the same for all servicers, each has its own questionnaire that it expects to be used.

To help you with this, I have compiled the information required by each of the major servicers and how to get their questionnaire in “Mortgage Servicer Information” on my Web site.

Make sure the information you provide is correct: Having the right form is one thing, but filling it out correctly is something else. A questionnaire with obvious errors may fall to the bottom of the pile, or it may lead the servicer to conclude that you do not qualify for a loan modification when, in fact, you do. Being accurate is a challenge for some borrowers because most questionnaires are not borrower-friendly. In the future, I will write about some of the sources of help available

Make sure your information does not get lost in the shuffle: Most servicers prefer to receive documents by fax, although some also provide mailing addresses. I am told fax is more reliable. A few servicers, including Chase and Wells Fargo, want borrowers to call them before submitting detailed data, and thus provide only telephone numbers for contact. They evidently prefer to have their own staff participate with the borrower in compiling the information.

The principal danger of delivering documents by fax is that they will get mixed up with those of other borrowers. To prevent that, place your name and mortgage account number at the top of every page you fax.

– Determine whether you are eligible for special modification programs: Servicers are under a lot of pressure and they might overlook your eligibility for specific programs. Borrowers who took subprime adjustable-rate mortgages after Jan. 1, 2005, that have interest rates scheduled to reset before July 31, 2010, may be eligible for a modification under the “fast track solution” adopted voluntarily by servicers last year. Borrowers with housing expenses that exceed 31 percent of their gross before-tax income may be eligible for a modification under the government’s recent Making Home Affordable program.

If you have good reason to believe that you are eligible under either program, add a statement to that effect in your hardship letter. (My Web site also has an article that looks more closely at the eligibility requirements for these programs.)

– Nudge the servicer as needed: The process of modifying mortgages is slow and error prone. A firm that two years ago may have had two people modifying mortgages today may have 200, most of them newly trained. Development of computer systems has lagged and much of the work is done manually.

So you may need to nudge. If the servicer’s stated policy is to reply within 21 days, call on day 21 if you haven’t heard back. If they give you a quick denial on the grounds of ineligibility and you believe that’s wrong, let them know it is wrong — in a nice way. Remember that getting a modification is not a negotiation, and you have no place else to go.

Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania. He can be contacted through his Web site, http://www.mtgprofessor.com.

© 2009, Jack Guttentag

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most Northwest Nevada neighborhoods. I can be reached by email @ chance@ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates .  If you are behind on your house payment and looking for a loan modification, go to making homes affordable to request a modification.  If the modification fails, contact your local real estate professional to help short sale your home.  To make sure there is no deficiency judgment a homeowner might find it necessary to hire an attorney. For a free copy of my blog titled  “5 Steps For Reno/Sparks Homeowners To Prevent Foreclosures” go to my about page http://chancegates.com/about and ask for more information on preventing foreclosures.

An Energy Efficient Mortgage (EEM) is a mortgage that credits a home’s energy efficiency in the mortgage itself. EEMs give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.

To get an EEM a borrower typically has to have a home energy rater conduct a home energy rating before financing is approved. This rating verifies for the lender that the home is energy-efficient.

EEMs are typically used to purchase a new home that is already energy efficient such as an ENERGY STAR qualified home. The term EEM is commonly used to refer to all types of energy mortgages including Energy Improvement Mortgages (EIMs), which are used to purchase existing homes that will have energy efficiency improvements made to them. EIMs allow borrowers to include the cost of energy-efficiency improvements to an existing home in the mortgage without increasing the down payment. EIMs allow the borrower to use the money saved in utility bills to finance energy improvements. Both EEMs and EIMs typically require a home energy rating to provide the lender with the estimated monthly energy savings and the value of the energy efficiency measures — known as the Energy Savings Value.

EEMs (and EIMs) are sponsored by federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac). Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs.

Conventional Energy Efficient Mortgages

Conventional EEMs can be offered by lenders who sell their loans to Fannie Mae and Freddie Mac. Conventional EEMs increase the purchasing power of buying an energy efficient home by allowing the lender to increase the borrower’s income by a dollar amount equal to the estimated energy savings. The Fannie Mae loan also adjusts the value of the home to reflect the value of the energy efficiency measures. For more information about Fannie Mae’s EEM you can call 1-800-7FANNIE (732-6643). Visit Fannie Mae’s web site to find a Fannie Mae-approved lender in your state. A PowerPoint presentation is available with more information about Freddie Mac’s EEM .

FHA Energy Efficient Mortgages

The mortgage loan amount for an FHA EEM can be increased by the cost of effective energy improvements. The maximum amount of the portion of the EEM for energy efficient improvements is the lesser of 5% of:

• the value of the property, or
• 115% of the median area price of a single family dwelling, or
• 150% of the conforming Freddie Mac limit.

For more information on FHA EEM loan limits refer to FHA Mortgagee Letter 2009-18. No additional down payment is required, and the FHA loan limits won’t interfere with the process of obtaining the EEM. FHA EEMs are available for site-built as well as for manufactured homes. Applications for an FHA EEM may be submitted to the local HUD Field Office through an FHA-approved lending institution. HUD has a searchable list of approved lenders . Information about the FHA EEM can be found on FHA’s web site . Additional information is available from HUD’s Office of Single Family Housing by calling (800) 569-4287. There is also a fact sheet about FHA’s EEM (70KB). The Systems Building Research Alliance website has information about FHA EEMs for ENERGY STAR qualified manufactured homes.

VA Energy Efficient Mortgages

The Veteran’s Administration (VA) EEM is available to qualified military personnel, reservists and veterans for energy improvements when purchasing an existing home. The VA EEM caps energy improvements at $3,000–$6,000. Borrowers should ask their lender about a VA EEM at the beginning of the lending process. More information about VA EEMs can be obtained from the Web site for the U.S. Department of Veteran’s Affairs or by calling (800) 827-1000. Chapter 7 of VA Pamphlet 26-7 (Revised) (1.5MB) contains lender guidance on the VA EEM.

To learn more about EEMs contact Fannie Mae, Freddie Mac, the FHA or the VA. Additional information about writing energy-efficient mortgages can be found on the Web sites for the U.S. Department of Housing and Urban Development (HUD) and the Residential Energy Services Network (RESNET) .

ENERGY STAR Mortgages

An ENERGY STAR mortgage pilot program is underway to demonstrate that financing can be a useful tool for enhancing the success of investing in energy-efficient homes by lowering borrowing costs, as well as demonstrating the importance of utilizing a network of qualified energy auditors and contractors to ensure that cost-effective energy efficiency improvements are realized.

By incorporating the costs of energy efficiency improvements into the loan itself, an ENERGY STAR mortgage allows borrowers to pay for those investments over the life of their loan and deduct the interest from their federal and state income taxes. One of the key benefits of an ENERGY STAR mortgage is that a borrower can finance and make energy-saving improvements to their homes without paying more for financing than they would for a typical mortgage. Participating lenders also offer borrowers an additional financial benefit above and beyond the value of the home energy savings, such as discounted mortgage rates, reduced loan fees, or assistance with closing costs.

Read more at http://www.energystar.gov

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most of Northwest Nevada neighborhoods. I can be reached by email @ chance at ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates

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RISMEDIA, September 8, 2010–Real estate professionals know that a short sale transaction can take months for it to be approved and closed.

The reality is that short sales usually take three to four times as much as a regular sale to finally get to the closing. From the time the Realtor actually gets the property under contract to the time the lender approves, it could take anywhere from 30 days to six months, depending on how fast the borrower provides critical information for lender and Investor approval.

Even then, you still have one more variable to account for which is the buyer waiting for all this time to get the contract approved by the lender. For this, setting the expectations is a key factor in any short-sale transaction.

Buyers Expectations
Buyers who make an offer on a short-sale property need to know that lenders have to “reverse underwrite” a short-sale and make sure that they are allowing the sale to happen close to market value. I say “reverse underwrite” because instead of determining affordability, they will look for “un-affordability.”

They will check the seller’s financials to verify that they can’t afford the house anymore and consequently, they will order a price opinion from a broker or certified appraiser, commonly known as BPO (Broker’s Price Opinion) to make sure the house is being sold close to market value. If the offer is too low compared to what is owed, it will make more financial sense to the Lender to just foreclose the property and re-sell it as an REO (Bank-Owned Property). All this will happen while the buyer is still waiting for a response so it is very important to set the expectations correctly from the beginning to avoid losing the buyer close to the end of the process.

Seller’s Expectations
On the other hand, it is important to also educate the Seller and set the expectations with them from the beginning. They need to understand that the Lender takes its time responding, but when they do, they usually give a 72-hour timeframe to respond or provide the missing documentation. If the documentation is not provided within the specified timeframe, it usually ends up in a closed file and countless work-hours lost. Another common situation that is happening very often is borrowers being served with foreclosure paperwork from either the lender or homeowner’s association while the short-sale is being processed. It is crucial to let them know that this might happen so that they are prepared for it and receive the documents knowing that they are in the best hands. Foreclosure and short-sale are parallel processes and one does not cancel the other. Sometimes a short-sale might delay a final sale date, but it will definitely not stop the Lender from starting the foreclosure proceedings.

Closing the Short Sale
Short sale success comes from educating not only the seller but also the buyer and everybody else involved in the transaction. Setting the right expectations is the most crucial part of a short sale. There are many hours involved in processing a short sale and the last thing you want is a seller or buyer walking away because the expectations were not set correctly.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  Please feel free to use my back door to the MLS and search house available in the Reno/Sparks and all Northwest Nevada neighborhoods.  I can be reached by email @  chance at ballard-company.com or http://www.myspace.com/chancegates

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By Paige Tepping

RISMEDIA, August 26, 2010–You wouldn’t buy a house without shopping around first, right? Then why would you commit to the loan you use to buy that house without making sure you’re getting the best deal possible? From the experts at LendingTree, here are six reasons why it’s essential to take a few minutes to browse before you borrow:

1. To get the best interest rate possible
Over the life of a $200,000, 30-year fixed rate loan, a one-tenth of a point difference in interest rate could save or cost you thousands of dollars.

2. To pay lower loan fees
Once your loan application is accepted, the lender will get back to you with a good-faith estimate (GFE), including an itemized list of all the costs associated with the loan. If there are any parts of the GFE that you don’t understand, don’t be afraid to ask the lender to explain each fee that is listed.

3. To avoid a prepayment penalty
In these transient times, it seems no one stays in their home long enough to pay down their mortgage the old fashioned way: in monthly increments over a period of decades. So you’ll want to be clear on whether the terms of your loan include a penalty if you pay off your mortgage early—either because you move or refinance.

4. To find a lender you feel comfortable with
You don’t want any surprises popping up at closing time. Get a lender who is responsive to your questions and is willing to give you the details in writing.

5. To find a lender that specializes in your situation
Recent volatility in the mortgage markets means that people with bad credit or little money for a down payment might have to look a little harder to find a lender.

6. To get the rate lock period you want
Once you’ve found the lender offering the best mortgage rate and terms, you’ll want to get a written commitment, known as a “lock” that puts in writing that the lender will make the loan to you at that the specified interest rate. The length of the lock can vary from 30-90 days, but many lenders will charge a fee for a rate commitment of longer than a month. Negotiate the lock period that is right for you, depending on when you plan to close on your new home and if interest rates are expected to creep higher during that time.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  Please feel free to use my back door to the MLS and search house available in the Reno/Sparks and all Northwest Nevada neighborhoods.  I can be reached by email @  chance at ballard-company.com or http://www.myspace.com/chancegates

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