Think you Can’t Buy?  Think Again.

Watching the news can be depressing.  Many of the headlines are just plain bad news.  The mortgage “crisis”, the bursting of the “bubble” and the “collapse” of the real estate market have all been exposed, examined and rehashed a few too many times.  This bad press has kept some potential buyers from contacting their Glen Ridge NJ realtor.

Contrary to what you may be thinking, this isn’t such a bad time to buy.  There are a number of good reasons to consider buying sooner rather than later.

• Tax credits for buyers, first time and repeats.
• Low interest rates.
• First time buyer programs.
• Excellent inventory on the market.
• Most reasonable prices in years.

These are just a few reasons to think about calling your Montclair NJ realtor.  Tax credits will be ending in June so timing is crucial if you want to take advantage of buying while it is most beneficial. 

While the real estate market isn’t all gloom and doom, there are a few things you will need to have in order before you start house hunting. 

• A fairly healthy credit score.
• Preapproval for a mortgage.
• A down payment and/or closing costs.

It is true that lenders are a little more carful these days.  If you credit score is poor, you’ll need to do some work if you want to qualify for a lower rate.  You may still be able to get loan with a lower score but your interest rate won’t be as low.

Research lenders and choose one you trust.  Get a preapproval for your loan.  This is different from prequalification, although many people use the words interchangeably.  Preapproval is a firmer commitment from your lender to loan you a certain amount at a certain rate.  Your lender will do everything for a full approval except the title search and appraisal.  Prequalification is more of a rough estimate.  It’s based on information you provide and subject to change depending on a credit check and other verifying factors.  Preapproval gives you an edge when negotiating; it shows you are serious about buying and capable of doing so.

You may also want to save up a down payment and closing costs.  Again, this shows sellers that you are a serious buyer.  Sellers want to work with buyers who have everything in place and won’t cause delays. 

Think again if you thought you weren’t able to become a homeowner.  This might just be the right time for you to buy.

RESPA Rules

Starting in January this year, you and your Glen Ridge NJ realtor have some new tools to protect you from unfair lending practices.  The new Real Estate Settlement Procedures Act (RESPA) regulations went into effect as of January 1, 2010.  This consumer protection act is meant to make you a better loan shopper.

The origins of RESPA stretch back to the early 1970s, but it has become an important measure of protection in the wake of recent problems in the industry.  The act requires a lender to disclose certain bits of information to the borrower at specific times in the process.  It also prohibits practices that increase the settlement costs.  RESPA covers mortgages and loans for the purchase of most residential properties, refinancing loans and equity lines of credit, among others.  The act is enforced by one of the offices of the department of Housing and Urban Development (HUD).  HUD’s website and your Montclair NJ realtor can show you what your lender should be showing you based on this legislation, but here are a few of the details.

At the Application
Disclosure begins in the application process.  One of the most important things the lender should give you is a Good Faith Estimate (GFE) of the cost you will have to pay at settlement.  A Mortgage Servicing Disclosure Statement should also be given to you.  This tells you if the lender intends to transfer the loan to another lender and gives you information about complaint resolution.

Before Settlement
Some lender will ask you to use one of their affiliates during the transaction, like an appraiser or an attorney.  A Controlled Business Arrangement (CBA) disclosure will explain that you are not required to use that affiliate to represent your interests.  This document lets you know you are free to find your own provider for the services.

At Settlement
Both borrower and lender should be given a HUD-1 Settlement statement showing all the actual settlement costs of the transaction.  You should also get an Initial Escrow Statement showing all the costs, fees, taxes, premiums and other charges that will be paid from your escrow account.

After Settlement
Your lender should provide you with an Annual Escrow Statement to summarize all escrow payments made in the preceding year.  This report will tell you of any shortages, overage or actions taken in regards to your escrow account.  If your lender sells or transfers your loan to another lender, you should be notified with a Services Transfer Statement.

This is only a short summary of all that RESPA covers.  Take some time to educate yourself on the details of this important consumer protection act.  It will make you a smarter borrower.