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Mortgage Rate Locks Become Crucial

by Desi Sowers, REALTOR, ABR, GRI, SRS, CRS

 

An interest rate lock is always a good idea in any market. But it becomes a better idea when it's crucial to lock in an interest rate and other loan costs at a level you can afford.

A changing market -- especially when the change is for the worst -- is one of those crucial times. During the first half of 2008, nearly a full percentage point separated the high of 6.45 percent in recent weeks and the low of 5.48 percent in January, according to Freddie Mac.

Get off the interest rate elevator ride with an interest rate lock. A traditional rate lock is a lender's guarantee that your mortgage will come with a specific interest rate, points, other costs and terms. Most locks are designed to protect home buyers from rising rates, but those refinancing can also benefit.

A rate lock's terms include a specified period for the lock. If you fail to complete your home purchase or refinance before the clock runs out, and interest rates rise, brace yourself for higher costs. Those higher costs could come in the form of more up front cash to keep monthly payments in line with what you can afford or what you lender will allow.

With a refinance, if your home ownership isn't at stake, you have more wiggle room and can wait out the market, take less cash out or otherwise cope. Of course, those refinancing to stave off foreclosure could also find higher rates, without a rate lock, to be just as problematic as for home owners.

In an up-and-down interest rate market, falling interest rates are another strong reason for a rate lock. If interest rates fall during the lock period you can't take advantage of the lower rate unless you rewrite the lock at additional cost or include a "float down" provision in the original lock.

The "float down" option grants you a lower rate if rates fall within a given window of time. Again, unless specified otherwise, float downs stick you with the higher rate if rates rise during the lock period.

All these rate lock variations underscore the importance of being sure the language of the lock contract gives you the options you need, for a sufficient term.

Get it all in writing. It's difficult to enforce a verbal agreement. The contract should lock should lock in the interest rate, points and other costs, where possible. The agreement should include your name; the lock's effective date; lock cost; what terms are locked; the lock's expiration date and time; and any post-lock options.

Lock as soon as you see the desired rate or "on application" -- when you first apply for the mortgage -- so that your rate is locked as you spend time getting the application approved. That's particularly important if you barely qualify at today's rates, and an increase would make buying unaffordable.

Of course, you can choose to set the lock on approval, especially in markets where loan applications are prolonged due to heavy demand for housing. In any event, the lock period should be long enough to allow for settlement, contingencies, and other potential delays. Locks average 30 days, but can range from 15 to 60 days.

Also consider:

 

  • Locks cost money. Shop around for both the terms of the lock contract and its cost, which varies from lender to lender. Some lenders want up-front lock fees. Others take them at settlement. There are non-refundable fees, flat fees, and fees based on a percentage of the mortgage, among the variations.

     

  • Before choosing a lock-in period, determine the average time for loan processing. Ask your lender to estimate the time necessary to process your loan and verify the information with other realty professionals. If the loan doesn't close on time, lenders can extend your lock for free, charge more for the extension or charge an additional percentage of the loan amount.

     

  • Once you lock-in a rate, if you haven't already, quickly submit the application and other required documents. You should have previously checked your credit report, prepared income, job, debt, asset and other documents to back up your application information.

     

  • If you have a floater, it's your job to keep an eye on the market.


    Written by Broderick Perkins
  • Don't Overlook The Garage When Getting Your Home Ready To Sell

    by Desi Sowers, REALTOR, ABR, GRI, SRS, CRS

    There's a lot of talk about curb appeal being the driving force drawing buyers into your home. It makes sense. If the house looks a mess from the outside, what buyer would want to set foot inside?

    Well, maybe your house isn't quite a mess. You have taken the time to fix-up the landscape, power-washed the house, and even painted the mailbox. But did you overlook what can be the biggest eyesore -- the garage?

    "It's the largest architectural element on the house. So it really, in this day and age, is impossible to dismiss the garage door as an important architectural element," says Braden Wasserman, owner of Access Custom Garage Doors.

    But the garage door is more than an architectural element. It can be a trigger point for buyers. They're driving down the street in a tract-home neighborhood and suddenly they spot a custom wooden garage door. It's striking and different and often gives them reason to stop and take a closer look, maybe even come inside.

    "If you have a house that has a nice garage door, it sets the stage for the fact that everything else in the house is going to have attention to detail and it really does differentiate homes that are on the same street," says Wasserman. He says with some exterior paint and a unique garage door, "The house really becomes a semi-custom house."

    According to Wasserman, swapping out an old steel-style, raised-panel garage door that once was so very traditional is a huge improvement to a home.

    "It was interesting that you would go past these $5 or $6 million houses where the architects and designers paid such critical attention to detail to the stucco color, the stonework, and the rooftop. Then for the biggest element, they would just put this wide raised-panel steel door because the consumer wasn't educated on how important the garage door can be in really just buttoning up and completing the design of a house," says Wasserman.

    However, these days, custom wooden doors aren't just for multi-million dollar homes. People in tract homes are making the switch either for their own benefit, a faster sale, or a potential gain in the value of the property.

    "There is definitely an increase in the property value commensurate with the investment that you make in the garage door. And then there is the perceived value. For every $5,000 of door that you put in, you get four times that dollar in perceived value," says Wasserman.

    What makes wooden garage doors so special is not only the escape from conformity but also the fact that they function like traditional automated steel doors.

    "They work exactly like a standard upward-acting sectional garage door. They segment on a track and they use a conventional residential garage door opener. Only from the front elevation do we try to design the doors to look like they're the old fashion carriage garage doors that swing open," explains Wasserman.

    The added decorative hardware, including handles and hinges, helps create the effect of an old-fashioned-garage door.

    But not every garage door works with every style of home. Wasserman says you should really take a close look at your architectural style before you decide on the right garage door. He says homeowners should match their home architecture to a garage door that is architecturally congruent.

    "That way you're making the whole house just look that much more custom and fitted," says Wasserman.

    Then next vital thing to look for in custom doors is to choose the appropriate material. "It's very, very critical that the lumber you select is designed and can last and can be durable for an exterior application," says Wasserman. He says typically that lumber would be mahogany, cedar, or redwood. Teak also works well outside but is very expensive.

    You should also note that with wooden garage doors there may be a little more maintenance depending on how much sun exposure the door gets. Wasserman recommends using a resin-based product to finish the garage door rather than a varnish. "A varnish is a really difficult product to maintain because when it fails, you have to strip the wood back down to the bare wood and you have to re-start the process from scratch and that becomes cost-prohibitive for these doors," explains Wasserman. Resin-based products are easier to clean. New product can also be applied directly over the old.

    Whether or not you decide to replace your garage door, it's important to make sure it at least is working properly.

    "Besides the garage door looking good, it's really an appliance on the house that has to operate efficiently, reliably, and without failure every single day," says Wasserman.

    The key concept to remember is that a garage door shouldn't just house your car and all your stuff that won't fit in your home. Instead it should help to entice buyers to want to see more of the house.


    Written by Phoebe Chongchua

    Man's Best Friend May Be Costly When Selling Your Home

    by Desi Sowers, REALTOR, ABR, GRI, SRS, CRS

    As beloved as pets may be to sellers they can be a detriment to the sale of a home.

    One of the main reasons has to do with how convenient it is for buyers to see your home. There can be issues caused by the pets that make seeing your home more difficult than viewing other properties. For instance, if sellers have to be called first before their home can be shown this can make it less appealing to buyers and agents.

    "You've got issues of access because you might have special pet instructions such as remove pets prior to entering home," says Benjamin Little, Realtor with John Hall & Associates in Scottsdale, Arizona. He says that makes it so agents and buyers have to set special appointments. "And in today's market, anything that impedes a showing is a hindrance to selling the house," cautions Little. He adds, "There are so many properties out there for sale that if you've got special pet instructions and there are 10 properties, that on paper are equal, those Realtors are going to be showing the other ones that they have easier access to and don't have to worry about setting up a time so that the pets are removed."

    It's not just access to viewing the property that causes the problem. Sometimes, regardless of how friendly the pet is, potential buyers can be reluctant to enter the home.

    "You might have an overly friendly dog, but the buyer still isn't comfortable being in the room with the dog and it could reduce the show time," says Little.

    He gives this example. "I was showing a house recently and the sellers left the house. I felt they should have taken the dogs, because an important feature was going out back and seeing the horse set-up on the property but potential buyers weren't allowed outside because of the dogs," says Little. He says the seller's dogs were left in the backyard and the laundry room. There was even a note from the sellers warning buyers and agents that the sellers were unsure of how friendly their dogs were. This makes viewing the home not only uncomfortable but potentially unsafe.

    Little says as a result, the showing time was compromised and his clients were not able to see several features of the property such as the horse area, laundry room, and garage.

    The longer buyers stay in a home, the more likely they are to be considering it for their own residence.

    Even if you don't leave notes about potentially unfriendly pets, sellers should also consider the stigma that goes along with listing a home for sale when it's obvious a pet is living in it.

    "If the house smells anything like a pet and buyers see the pet, it is a definite problem because non-pet owners are not sure that they can ever get that smell out of the home," says Little.

    However, Little says pets can also cause potential buyers to assume there are problems with the house even when there aren't any.

    Little says he worked with a buyer that didn't want any home that had a cat in it even if she couldn't see evidence of a cat living in the home. Her feeling was that cats are climbing around on everything and getting things dirty. Little says that when buyers learn that a pet lives in the house, it can be hard to shake the negative image they create. "The house may be spotless but they already have that image in their mind," says Little.

    "Sellers need to understand that they may be comfortable with their pet, but the general public won't be; so they need to do everything they can to make the home as accessible as possible. They need to really have a protocol for getting the pets out of the house before a showing," says Little.

    Little says removing pets or putting them in an area of the property that is not considered vital to selling the home is going to create a better experience for potential buyers.

    He also recommends asking for advice from people who are non-pet owners. Little says, "You should ask your friends if there is any smell or how they would feel if they saw the cat or dog in the house?" But not all pets are a potential hindrance to showing a home. Some pets can actually help to sell a home. "A fish tank can be considered exotic and help to enhance the color of the home, says Little. And if it's a horse property, by all means, have a horse there!

    "The horse can actually be a bonus if you're marketing a horse property. So in that sense, the pet actually enhances the property," says Little.

    But for the most part, sellers have to remember that even though their pet may be treated like family, there's still good reason that man's best friend isn't always friendly to the most successful real estate deals.


    Written by Phoebe Chongchua

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