Tuesday, November 8, 2011

Shaking Up Our Homes in Oklahoma

By now, everyone in Oklahoma has felt one of our recent earthquakes or their aftershocks. Tens of thousands of people have reported to the US Geological Survey that they have experienced the recent seismic activity in our state. It's not enough that the Sooner State has had to endure record snow falls, record high and low temperatures, drought, F5 tornadoes, largest hail, highest wind speed, etc. (and that's just in 2011 alone), Oklahoma also has a long history of shifting and shaking and, while we are far away from the "Big One", many of our homeowners are now wondering how their homes are affected.

Because my expertise is mortgages not insurance, I have turned to some trusted professionals that we work with that are experts in homeowners' insurance.

Not all companies offer earthquake insurance. The least expensive coverage is available as an endorsement on your current policy. If your current provider does not offer this, you can get a stand alone policy from a different company but it will cost at least twice as much. 

Estimates for premiums range from $40 to $150 for most Oklahoma homes. Cost is based on many factors such as deductible, amount of coverage, replacement cost coverage, etc. Brian Dudgeon of Farmers Insurance in Stillwater wrote a policy Monday "for a $300,000 home and the policy cost $81 for one year."

Although deductibles range from 2% to 10%, OKC Farmers agent Robert Chaplin says that the price difference is minimal, so 2% provides the best value. 

Value, however, is what you should seek from your insurance dollar. Joshua Lakey of Brookside Market Insurance Agency, an Allstate agent in Tulsa, points out that you should review your entire market basket of insurance to evaluate if earthquake coverage is right for you. For example, a $200,000 home with a 2% deductible would need to sustain more than $4000 worth of quake damage before you would see benefit from this type of coverage.

Lastly, there is a waiting period. Joey Capps, a Farmers agent in OKC, says it depends on proximity to the epicenter. Each company is different, but typically there is a 5-7 day waiting period if your home is located within 40 miles of the epicenter. This waiting period resets if there are aftershocks that measure 5.0 or greater on the Richter scale.

As with mortgages, everyone's needs and circumstances are different. If you have specific questions, contact your agent or one of the trusted professionals that contributed to this:
Oklahoma City - Joey Capps, Farmers Insurance, (405) 759-7100
Oklahoma City - Robert Chaplin, Farmers Insurance, (405) 751-9453
Stillwater - Brian Dudgeon, Farmers Insurance, (405) 707-9200
Tulsa - Joshua Lakey, Brookside Market Insurance Agency (Allstate), (918) 574-2400

Thanks also to my Fairway Mortgage colleagues in Oklahoma for their help compiling this information.
Oklahoma City - Jerry Ashford, (405) 517-4959
Oklahoma City - Jim Steward, (405) 821-1031
Stillwater - Pam Shipman, (405) 372-5363

Next, we will review how earthquakes affect mortgage underwriting.

Tim Epps
Sr. Loan Officer
Fairway Independent Mortgage Corp

Tuesday, November 1, 2011

Rent Versus Buy Debate Revisited

Buy a house now! Keep renting - Wait out the market!

How many times have you read a similar article about the pros and cons of buying a home versus renting. Of course, there are many points on each side of the debate that are very valid. Each point must also be evaluated by the audience on the merits to their own particular circumstances. 

The attached document shows graphically where the numbers fall. It is based on the following variables: FHA 30 year fixed rate purchase loan, credit score of 640 minimum, normal property taxes and homeowners' insurance, property appreciation & rent increases of 2% per year. Most people stay in their homes 5 years but the longer term benefits after 12 years are also illustrated. 

Even though the monthly payment of $919 is more than the expense of renting at $800, the amount of monthly expense is lower when buying when factoring in the tax deductibility of mortgage interest, mortgage insurance, and real estate taxes. Further, since the principal amount of your payment is actually going toward your equity, the net amount of your monthly housing expense is even less.

The home price used in the example of $125,000 would actually rent in a range of $1000 to $1200 per month. See? You can buy more house than you are renting now and do it for less money!

Most home prices in Oklahoma have remained very stable throughout the burst of the bubble in most of the rest of the country. There are some bargains out there and you should engage a REALTOR® to help you find those bargains.

But before seeking help finding a home, you need to find out how much you can afford. This leads to the best bargain in housing today. Rates continue to be at historic lows, and I will write in an upcoming post about the potential cost of waiting out the real estate market for the lowest home price possible.

Every person's situation is unique. As much as we would like things to be cut-and-dried, I can't recommend anything to any prospective buyer without first having some conversation about your needs, your goals and your circumstances.

Call today to get your self on the Path2Buy your new home.

Tim Epps
Sr. Loan Officer
Fairway Independent Mortgage Corp

Friday, October 14, 2011

Appraisal Standards Change And This WILL Affect Your Next Mortgage

Big Changes in Conventional Appraisal Standards Began September 1

Appraisals continue to be the knothole in a lot of real estate transactions. Underwriters and lenders struggle to make sense of the hodge-podge of commentary and adjustments on appraisals as well.

In an attempt to provide consistency and accuracy to the appraisal process, Fannie Mae and Freddie Mac have implemented the UMDP (Uniform Mortgage Data Program) and, ready or not, it rolled out on all appraisals completed on or after September 1, 2011. (FHA has issued guidance that they will follow suit with all case numbers issued January 1, 2012 and after.)

Obviously, the appraiser's job changes with this. But what does this mean to the rest of us - REALTORS, Sellers, Buyers, Refinancing Homeowners? 
While it is the most common source used for information gathering on comparable sales and currently, the MLS may or may not provide all of the data that appraisers will now be required to report. Therefore, they will have to call the listing REALTOR to get it. This could slow things down a bit, and prompt responses by all will be very important to getting appraisals completed on a timely basis.

Some of the significant data changes include the way the following items are reported:
  • Days On the Market
  • Offering Price
  • Sale Type
  • Financial Assistance
  • Site Area
  • Property View
  • Property Style
  • Condition of the subject property
  • Sale Date of Comps
  • Quality of Construction (This is one of the biggest changes being made!)
  • Basement and Finished Rooms Below Grade
  • Appraisal Management Company Reporting

Home sellers will need to help their REALTOR with the gathering of some of the above data points. They need to make known what improvements, especially kitchen & baths, have been made and the costs of those improvements. 

Home buyers and home owners taking advantage of the current rate market to refinance their home may face a longer lead time as these changes are put in place.

On a final note:  Despite all of these changes, nothing takes the place of the Underwriter’s review in the process. It is ultimately the underwriter who is held responsible for insuring that the appraisal is acceptable and supports the value. There is a process that takes place once the appraisal is in that tests the appraiser’s result against an automated valuation model for QC purposes. If this process detects that there are other, potentially closer or more recent comps, it will red flag the appraisal data. The underwriter may then have to further investigate value through the use of a review appraisal or by getting additional information from the current appraiser. So, it’s never over these days until we have a firm commitment from the Underwriter. At Fairway, we have in-house underwriting so we can reach out if needed.

Note to REALTORs: We have developed a Cheat Sheet for our REALTOR partners to use. It will be a great supplement to your listing appointments and your work in writing purchase agreements.

Please contact me to learn more about the high points of the specific changes to the appraisal process and how Fairway can help keep your transactions moving smoothly to closing.

Tim Epps
Sr Loan Officer

Monday, March 28, 2011

It All Started with a Haircut...

(In mortgage lending and finance, a haircut refers to a discount taken from the par value of assets being used as collateral. For this story, its traditional meaning is used.)

Last August, the young lady cutting my hair and I were talking about weather, sports, life, etc. She told me she had moved here from Iowa to go to school. She and her parents missed each other and (unlike this clip) yada, yada, yada, wanted to be able to see more of each other. I told her that if they wanted to buy a home here, that I could refer a couple of REALTORS® who could help them find a home when the time was right.
Her mother called me the next day and we talked about how to get approved for a mortgage for a second home. Over the next 6 months and through difficult weather, they made various trips to Tulsa to see homes (and their daughter) with Cindy Roberts of Chinowth & Cohen Realtors

Right to Privacy laws and my responsibilty to my clients prevent me from more detail, so... yada, yada, yada... They closed today on a home here in Tulsa!

The moral of the story is you never know who will be put in front of you and what there needs are unless you are available and open. Your next opportunity may come from anywhere, even a haircut.
If you are thinking about buying a home in the Tulsa area (or anywhere in Oklahoma), call me. I can help with long and/or short range planning on how you can get the best loan for a home here

Tim Epps
Sr. Loan Officer
Fairway Independent Mortgage Corp

Thursday, March 24, 2011

Renting Now? Start Paying Yourself "Rent"?

If you are renting a house or apartment now, take a few minutes to review this scenario.

Your rent expense of $800, $750 for rent & $50 for renters' insurance (you are insuring your property, aren't you?), will easily afford you a home of your own. The net payment on an FHA 30 yr fixed-rate mortgage for a  $125000 home is only around $727 on the attached example. You can download a copy of this scenario here.

[Please note that I am always conservative with my projections. I have projected a rate slightly higher than today's market rate and also accounted for the increase in the FHA mortgage insurance premium which will take effect April 18]

Instead of paying someone else rent of almost $50000 over the next 5 years, why not pay yourself? When the tax benefits are considered, your net payment over the same 5 year period is less than $44000. Also, you will have built up almost $10000 in equity in your new home. The benefit grows even greater over more time.

Call me to get a customized scenario for you and ask how you can get on the Path2Buy your new home. Whether your looking now, or waiting 5 months or 5 years, it is important to understand that you will be ready when your time is right.

Tim Epps
Sr. Loan Officer
Fairway Independent Mortgage Corp