Buyer Representation

February 26th, 2015

Buyer Representation

What is it and why does the type of your representation matter?

How we practice real estate has changed quite a bit over the years. I often go meet with customers who don’t have a strong grasp of what agency means and why it is important to understand how it applies to them. I will define agency and discuss the different types of representation you are most likely to encounter. I want to also address why it is important to have agreements in place with the real estate professionals you work with from the beginning.

First, let’s start with the basic definition of agency and the types of representation.  Agency is a Fiduciary relationship between two parties in which one, the agent, is under the control of or is obligated to the other or client. This relationship is formally created through what you may know as the Buyer and Listing Agreements.  Many years ago Buyer agency did not exist and all real estate agents represented the Sellers. With Buyer representation, the agent represents the Buyer and only the Buyer and in Seller representation only the Seller’s interest are being promoted by their agent.

In the state of Virginia, a real estate agent should have an agreement in place prior to having conversations with Buyer and Sellers about specific properties.  Besides identifying the most qualified advocate to represent your best interests the agreement also outlines the behavior to expect from your agent and requirement for the agent to keep the Client’s information gained from the brokerage relationship confidential.

Agents representing Buyers and Sellers have 6 basic duties to their Clients which include loyalty, disclosure, confidentiality, obedience, accounting and reasonable care and diligence. Given this, how does dual agency fit into the equation you may ask? Dual agency occurs when one broker and agent represent both the Buyer and Seller. How does an agent promote the best interests of a Buyer and Seller at the same time? The short answer is, they cannot.   According to NVAR, the ability of the agent to represent either party “fully and exclusively” is limited.

So let me pose a question. In the purchase or sale of what is likely one of your single biggest investments, how do you want to be represented?  I, as a professional Realtor have given this question quite a bit of thought. I consider my choice a reflection of my commitment to my clients and choose not to participate in dual agency. My client’s best interests come first, always. In striving to treat my clients as I would like to be treated the choice was easy.

In conclusion, the real estate industry and the factors that influence our professional activity are in constant flux in response to the demands of our interesting economic times. If you have made the wise choice to hire a professional to guide you through your real estate transaction, make the choice count. For more information about what you may want to consider when you hire an agent to represent you in real estate ask me, Courtney Mautz, Realtor, dedicated to excellence. I am looking forward to talking with you.

Courtney holds her ABR or Accredited Buyer Representative designation with the National Association of Realtors.

 

How Much Home Can I Afford?

February 26th, 2015

How Much Home Can I Afford?

Debt to Income Ratio or DTI is a common term used in lending comparing a person’s monthly debt load to their monthly gross income.  The DTI ratio is used by lenders to determine if a home buyer can maintain the new payments on a property they wish to purchase. It is simply a way to measure the economic burden placed on a household.  DTI is used in purchase mortgages as well as most refinance transactions.

Calculating Income for a Mortgage

When a mortgage lender evaluates an applicants income there is a bit more to consider than can be found on the pay stub.  They calculate income a bit different than you may expect.  Bonus income is considered differently than salaried “regular” income.  They also give credit for some itemized deductions and specific guidelines apply to part-time work.

A W-2 employee who does not get bonused or itemize deductions is the simplest income calculation. For an employee who is paid twice a month the lender will typically look at the last two pay stubs to determine the monthly gross income.  If there are bonuses, then they will want to see a two year history.  They will average the bonuses over the two years and pro-rate the amount monthly.

For a self-employed borrower or applicant that owns a substantial amount of a business, the income calculations become more difficult.  The lender will still want a two year history and they are looking at the adjusted gross income from the federal tax returns.   It will then be adjusted for claimed depreciation and the sum of the two years will be divided by 24 months to arrive at a monthly household income.

Calculating Debt for a Mortgage

Calculating debt is less straight forward than calculating the income for a mortgage applicant.  Not all the debt you may see on a credit report must be considered in the calculation and some debt that does not appear on a credit report should be considered.  There are two types of debt,  front-end and back-end.  The front-end debt includes payments to credit card companies and student loans while the back-end debts are related to housing.

Monthly Front-End Debt: A lender will add your minimum monthly credit card payments and monthly car payments, personal loan payments, student loan payments, child support or alimony payments and any other monthly payment not on your credit report.  There can be exceptions when a student loan is deferred for at least 12 months or when less than 10 payments exist before a debt is satisfied. The sum is your monthly front-end debt.

Back-End Debt: Add monthy payments associated with housing to your PITI for instance your homeowners association fees.  For more info on how to calculate see my Blog What is PITI?

Your total monthly debt will be the sum of your Front-End and Back-End Debt.

Calculating your Debt to Income Ratio or DTI

To determine your DTI divide your monthly income by your monthly debts.  (Monthly Debt / Monthly Income) x 100 = DTI as a percentage

Mortgage guidelines fluctuate over time, lending products and companies but most have a limit on the maximum DTI ratio allowable for any given applicant.  Most lenders are looking for a DTI of 40% or less.  This may be exceeded in cases where the applicant displays strength in some other aspect of their application.  For example, a large down payment, exceptionally high credit scores and/or large amounts of cash reserves may affect the likelihood of approval.

In conclusion, the rules are constantly changing and meeting with a qualified lending professional is the best way to make sure your individual circumstances are considered properly.  If you are thinking about buying a home don’t wait to get a loan consultation.  Too often, potential home buyers will find a blemish on their credit that isn’t accurate or other negative factors affecting their ability to qualify for that mortgage they want.  Identifying a great Realtor and getting a lending consult early in the process is a great way to start your home buying process.

For more information about the home buying process contact Courtney for a complimentary consultation.

 The information contained in this post is for informational purposes only and does not replace a consultation with a qualified lending professional.

What is PITI?

February 26th, 2015

PITI: What is it?

Chances are whether you are a new buyer or just haven’t purchased in a while there will be some terms that you hear during your home purchase that you just don’t understand.  One very common term is PITI.  It used when qualifying Buyers for a mortgage.  It is an acronym that represents the sum of your monthly mortgage payment and stands for:

P = principle or the amount of your monthly payment that will be credited toward the principle balance on your home loan

I = interest or the amount of your monthly payment that will be credited toward interest on your home loan

T = taxes or your annual real estate tax bill, pro-rated to a monthly figure and may be escrowed

I = insurance or your annual homeowners insurance bill, pro-rated to a monthly figure and may be escrowed PLUS Mortgage insurance or (PMI) if applicable.

Another monthly cost that will also be factored in is Homeowner’s Association Fees or Dues.

PITI is then used in debt to income ratios to determine the ability of the borrower to repay.  It is often compared to monthly gross income and then included with all other debt and compared to monthly gross income.  The specific maximum values a lender will tolerate vary.

Mortgage servicers prefer to escrow but tax and insurance escrows may be waived in cases where the borrower has 20% equity.  In these cases the homeowner will be allowed to self-manage their annual real estate taxes and hazard insurance premiums.  In some cases, because the lender in incurring more risk when they don’t collect the escrows, a higher mortgage rate may be charged.

PITI can vary from lender to lender and from day to day as the mortgage interest rate assigned to any given loan changes daily.

For more information about the home buying process contact Courtney for a complimentary consultation.

 The information contained in this post is for informational purposes only and does not replace a consultation with a qualified lending professional.

 

OPEN HOUSE * 6625 Plantation Lane in Snow Hill

February 26th, 2015

OPEN SUNDAY * March 1 * 1-4pm

6625  Plantation Lane, Warrenton, VA

Click here to see more photos

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FRESHLY PAINTED KITCHEN AND FAMILY ROOM (not pictured) * SELLER ASSISTED FINANCING AVAILABLE ** A MUST SEE IN SNOW HILL ON 1.5+ ACRES! * CUSTOM DESMOND GETTI BRICK HOME * 5 BED / 4.5 BATH * NEW CARPET * BACKS TO 13 ACRE WOODED COMMON AREA * KITCHEN CTR. ISL * DBL OVEN * 2ND STAIRCASE * * MASTER JACUZZI TUB * 2 WALKIN CLOSET & SEP OFFICE * TIERED DECK W. SUNSETTER AWNING * MOLDING * HARDWDS * WIRED FOR SEC SYS * EXTENDED 3 CAR GARAGE W. WORK BENCH

Lighting Your Home

February 19th, 2015

Lighting Your Home

Ever wonder how to determine how much light is recommended to sufficiently light a room?  Well I have, so I did some research and found there is actually an easy formula to determine how much light will be needed.   What a great way to narrow down light fixtures before you start, right?

The quick and easy formula for determining the amount of light needed in a room is Length of room x Width of room x 1.5 = Wattage needed for the space.
Here’s an example:
A room ~ 8′ x 10′ x 1.5 = 120 watts is needed for adequate lighting in the space. This calculation can be used for all rooms and the total wattage can come from a variety sources.

 

 

Title Insurance Basics

February 2nd, 2015

Title Insurance Basics

with Keith Barrett

Click the picture above to learn more about why you, the Buyer, should seriously consider title insurance before you get to the settlement table. 

Answer questions like:

What is title?

Can the seller transfer their title insurance policy to the Buyer at closing?

Why might I still need title insurance when I am purchasing a new construction home?

Why doesn’t the lender policy cover the home Buyer?

Do I get a different policy if I am purchasing a foreclosure?

Where do the fees I pay for title insurance go and how often do they pay policy holders?

Grantor’s Tax

February 2nd, 2015

Grantor’s Tax

Breaking Down the Settlement Statement

Changes to Real Estate Grantor’s Tax – July 01, 2013. This will affect Seller’s!
The Virginia General Assembly agreed with Governor McDonnell’s proposal on April 03,2013 to partially fund transportation improvements in Northern Virginia with a 150% increase in the real estate grantor’s tax. This tax is a burden to the Seller when they sell a home. The previous rate was .10 cents per $100 and will be increased to .25 cents per $100 on July 01, 2013. For example, if a home is being sold for $600,000 the Sellers tax burden will increase from $600 to $1500. It is estimated that this will raise $30M to fund transportation projects in Northern Virginia.

The Virginia Association of Realtors (VAR) lobbied against the original proposal of 50 cents per $100 by digging into the numbers. They were able to get the increase reduced as they found the average grantor tax values used to calculate the revenue were from 2007-11. These were years that included a decline in values and are not representative of our market today.
While no one likes to see a rise in taxes, the funds are earmarked to be used on necessary transportation upgrades in and around Northern Virginia.

Mold in Your Home?

February 2nd, 2015

Mold in Your Home?

What Every Homeowner Should Know About MOLD . . .

Since we’ve kicked off 2014, a lot has happened in the real estate market that you may not be aware of. First, shortly after the ball dropped in Times Square . . . . so did the temperatures. It was a deep freeze affecting the entire nation. Some of us felt it more than others. And with the freeze came freezing pipes in homes, offices, and schools. If you didn’t feel it at home you may have been affected at work. While we would love to put the Polar Vortex behind us, the rise in temperatures and humidity will tell us if we’re safe from repercussions or not. If water damage was not remediated correctly or if it went undetected it will let us know. How?? MOLD!
Mold is always an issue and while there is never a real “mold season”, spring seems to be the busy time for mold. The key is keeping mold at a healthy level and to remediate it correctly when found. Servpro of Fair Oaks Centreville Chantilly is certified in mold remediation and can give you excellent advice in what is causing your mold issue and how to get it under control. The thing to remember is mold needs three things to grow; moisture, a food source, and mold spores. Mold will “eat” anything organic. Food sources for mold include building materials such as drywall. Mold spores develop organically in nature and travel to inside environments through open windows, on our clothes or shoes, by way of pets or any number of ways from the outdoor environment. In fact, spores are present naturally in every environment mostly at safe levels. Out of the three things mold needs to grow, moisture is the one component we can control.
For more information on possible mold that is growing in your home you can rely on Servpro of Fair Oaks Centreville Chantilly. They can visit your home and help detect where the water source is, check the moisture levels in the air and structure, and explain the remediation process. This is usually done at a charge of $150. If you mention Keller Williams they will waive the fee. They will also give you an estimate based on discounted insurance pricing. If they feel it could be an insurance claim worth filing, they will advise you how to do that. All technicians have IICRC certified training and years of experience. Servpro can be reached at 703-830-5800.
Contributed by Wendy Dickinson of ServePro of FairOaks, Centreville, Chantilly

 

Toll Brothers Incentives

January 30th, 2015

Toll Brothers Incentives

To learn more about Toll Brothers & the current National Sales Event call Courtney (703) 728-6590

Start the New Year with a New Dream Home During Toll Brothers’ National Sales Event

Lending Update

January 27th, 2015

Lending Update:
Hopefully you have seen the news that FHA has lowered they PMI by almost a half of a percent! This means that with their low rates and lower PMI, you will be seeing more and more clients using FHA! Also, anyone with an FHA loan now is eligible to do a streamline refinance to lower their current PMI effective NOW!
This tip was contributed by:
Mike, Amy & Carrie of The Farrell Team
First Home Mortgage