Home Financing
Government Shutdown’s Effect on Real Estate Market
While a government shutdown won’t stop people from buying and selling homes, the ripple effects across the economy could be disruptive, especially if it drags on.
Some expect to see delays around mortgage loans, particularly if the shutdown isn’t resolved quickly. Zillow estimates around 2,500 originated loans would be delayed per working day. Homebuyers applying for a government-backed mortgage from the Federal Housing Administration would face processing delays.
A government shutdown could also delay mortgage loan approval for other reasons. In areas where flood insurance is required, for example, buyers could be stalled if the National Flood Insurance Program were to pause operations.
- Delayed Loan Processing- Some federal agencies, such as the Federal Housing Administration (FHA), may operate with reduced staffing or close entirely. This can lead to delays in loan approvals and processing, affecting both homebuyers and sellers. It’s essential to inform your clients about the possibility of extended timelines.
- Verification and Documentation- Many mortgage applications require verification of income, tax returns, and other documentation from government agencies. If these agencies are affected by a shutdown, obtaining necessary documents may become more challenging, further slowing down the mortgage approval process.
- National Flood Insurance Program (NFIP)– The NFIP is vital for many homeowners in flood-prone areas, as lenders often require flood insurance for mortgage approval. A government shutdown could impact the availability of NFIP policies and affect property transactions in flood-prone regions.
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IRS and Tax Transcripts–The Internal Revenue Service (IRS) provides tax transcripts required for mortgage applications. The IRS would remain funded through the Inflation Reduction Act, but obtaining these transcripts may become difficult, potentially leading to delays in loan processing and closing.
- Appraisals and Inspections- Government shutdowns may disrupt the scheduling of appraisals and inspections, as federal agencies oversee certain aspects of these processes. Delays in these areas can lead to extended closing times and may affect contract deadlines.
- Market Uncertainty- A prolonged government shutdown can create uncertainty in the real estate market, causing some buyers and sellers to delay their transactions until stability is restored. This could result in slower market activity and potential fluctuations in home prices.
- Economic Confidence- Government shutdowns can erode consumer and investor confidence in the economy. If potential buyers and investors become hesitant due to political uncertainty, it may impact the overall demand and stability of the real estate market.
Why Use an Exclusive Buyer’s Agent for New Home Construction?
Because the builder’s agent’s job is to convince you to buy only their homes at the highest price. Your Exclusive Buyer Agent’s job is to even the odds and negotiate for the lowest price and best terms for YOU!
If you’re building what you buy, you might think, “Why would I need an agent?” However, new construction is a complicated and expensive process. The advantages are many; aside from the obvious ones. The fact that having buyer agent representation is often FREE cannot be repeated often enough. So too, should the misconception that not using a buyer’s agent will save money be constantly repeated – that simply doesn’t happen.
A seasoned agent with experience in new home construction can give you invaluable insight during the process. Whether they’ve done business with those particular builders, or are aware of other comparable communities in the area, they can provide a wider context to your transaction. They might have an existing relationship with your builder, easing any tensions that might arise.
Remember that that site agent represents the builder/developer. Most real estate agents are sub-agents of the Seller or Transactional agent. In neither case do they have a fiduciary responsibility to the Buyer.
The site agent is an employee of the builder and is obligated to represent the best interests of the builder, not the homebuyer. They are expected to work to secure the builder the best deal.
The further you get into the home shopping process, the more challenging it becomes to bring in an agent. In fact, if you’ve already registered with a community, it might be too late.
Benefits of Using an Exclusive Buyer Agent for New Home Construction:
- Compare and evaluate builders’ reputations and history of their construction quality and service.
- Help you compare and evaluate advantages and disadvantages of new construction homes vs. resale homes.
- Provide information about the community.
- Help buyer with evaluation and selection of a building lot and options. Lot location and certain options have a very real bearing on resale value.
- Help buyer evaluate which options should be done by the developer during construction and which are more affordable to be done by an outside vendor post closing.
- Truly negotiate on behalf of the buyer. Many builders are offering “free” options and upgrades, but some are also making additional price concessions.
- Review the Agreement of Sale (PA) prior to buyer signing. This is not a legal review (only an attorney can do that), but an experienced agent will be able to spot terms and conditions that are atypical and of potential concern to the buyer. The agent may then be able to negotiate terms and conditions that are more favorable to the buyer but still acceptable to the builder. Keep in mind most new construction contracts are written by attorneys that represent the builder and these contracts are therefore heavily weighted in favor of the builder.
- Recommend a real estate attorney for final contract, title commitment and to hold your escrow funds.
- A buyer’s agent serves as an extra set of ears as a witness at court or arbitration– When the builders sales representative is familiar with all rules, features and prices and it’s all new to buyer – it is good to have experienced person on buyer’s side listening with buyer and taking notes, a lot of information is verbalized in short period of time.
- Attend the signing of the Agreement of Sale
- Assist with the buyer’s financing and review financing paperwork. This is especially important if the builder is tying “free” options and upgrades to the use of a builder-affiliated lender.
- Check on the property during construction and keep a photo record at different stages.
- Assist in options selections to optimize budget and maximize resale.
- Be your leverage with the builder as problems arise during construction.
- Keep everything in writing– Sometimes even the very nicest builder makes verbal promises that later become a point of contention. An experienced buyer’s agent is conditioned and trained to “put it in writing” even though at the time it doesn’t seem necessary.
- Arrange for a final inspection with a license building inspector and generate a “punch list” to be completed before final closing.
- Document and help resolve any issues with construction, financing, title, etc. throughout the process.
- Attend a pre-settlement walkthrough with the buyer to make sure that all items are satisfactorily completed or that a proper punch list is established to assure completion after settlement.
- Obtain and review a preliminary HUD-1 settlement statement to be sure it is accurate and advise the buyer of the amount needed for settlement.
- Assist buyer with utilities, security and HOA requirements, decorators, service professionals, schools, et. al.
- Attend settlement with the buyer.
- A buyer’s agent will be there even after the home closes. It is routine for issues to arise during the first year of a new home. Site agents tend to forget a buyer’s name after the contract is signed.
- NO ADDITIONAL COST TO YOU!
Read My Reviews from New Home Construction Clients!
2023 Florida Jumbo Loan Limits
A jumbo loan is a type of mortgage loan that’s used to finance loans that exceed the conforming loan limit. In the United States, the Federal Housing Finance Agency (FHFA) sets loan limits for conforming loans each year.
Beware of “Too Good To Be True” Lenders
- Mortgage scams for profit: Those who attempt mortgage fraud for financial gain are typically lenders, brokers and other entities that make false claims to obtain monetary compensation or equity from lenders and homeowners.
Planning for 2023 As Mortgage Rates Rise
If you’ve been house-hunting in recent years, you’ve really been through it. Maybe you were waiting out the market, hoping the rocketing prices would start to flatten. Now, of course, they have — but between 2021 and 2022, mortgage rates have more than doubled, from less than 3 percent to more than 7 percent.
If you are renting and trying to save for a down-payment, the cost of your rental has likely increased as well.
Sellers who are sitting on low mortgage rates are not listing their homes for sale and supply shortages, cost of land, and cost of lending, along with higher labor and building costs have slowed down new construction.
All these factors contribute to a continued shortage of desirable inventory and home prices are staying propped up and not decreasing as one would expect.
Buyers need to adjust their expectations…Every buyer needs to do a gut check on how much house they can afford now. That might seem daunting, but higher mortgage rates don’t have to derail your dream of buying a home. In fact, historically, today’s rates are not considered particularly high.
Review your Budget: When you review your budget, keep in mind that newly built homes typically come with builder and manufacturer warranties and new energy-efficient appliances. Those advantages of a new home can lower your monthly housing costs. That’s especially true if you currently own an older home that needs repairs and has inefficient appliances.
Raise More Cash: Another option to buy a home with a higher rate is to spend more cash up-front. You can use cash to increase your down payment as a percentage of your loan amount, pay for builder upgrades in cash, or buy down your loan’s interest rate. You should work with your lender on the best use of your cash to achieve the lowest ongoing expenses to home ownership.
Evaluate Loan Options: A third strategy is to get a hybrid loan. This type of mortgage has a fixed rate that resets at the end of a specified period and is then fixed or adjustable for the remainder of the term. An example is a 7/1 hybrid adjustable-rate mortgage (ARM). This type of loan has a lower fixed rate for the first seven years. After that, the rate is adjusted annually (that’s the “1” part) for the remainder of the 30-year term.
Hybrid loans can be more affordable since the initial rate is usually lower. But there’s a risk: If you don’t refinance or sell your home before the rate resets, your payment could rise significantly for the rest of the term. If you can’t afford the higher payment, you could lose your home.
Rethink Your Needs and Wants: Buying a less costly home is another way to cope with higher rates. Less costly doesn’t have to mean a home you don’t like or that doesn’t fit your needs.
Reconsider Your Timing: Interest rates fluctuate, sometimes dramatically, over time. If you postpone buying a home, rates might be lower in the future, making the home you want more affordable. Or they could be higher, putting the home you want further out of reach. Experts are predicting the latter. The question for homebuyers is whether waiting and hoping makes sense. The answer is never as clear as a crystal ball.
Experts recently polled project average 30-year mortgage rates to fall between 5-9.31%in 2023. No one is expecting a move downward in the next 5 years. Several factors could lead to unexpected rate movements in the coming year.
Owning a home has certain benefits that renting doesn’t offer. Renting means no control over future [home price or interest rate] increases, no accumulation of equity through price appreciation, no tax deduction for property taxes and mortgage interest if you itemize your deductions, and no benefit for improvements you make to the property. Waiting to buy while you hope rates move lower means forgoing those benefits.
The lost opportunity of not buying due to a fear of higher rates far outweighs the benefits of homeownership. It’s best to take advantage of what the rates are today and build equity sooner rather than later.
Shop for a Mortgage as Rates Rise
- Low or fixed rate. A loan’s interest rate might be fixed or low only for a short introductory period — sometimes as short as 30 days. Then your rate and payment could increase dramatically. Look for the APR: under federal law if the interest rate is in the ad, the APR also should be there. Although it should be clearly stated, you may instead need to look for it buried in the fine print or deep within a website.
- Very low payment. This might seem like a good deal, but it could mean you would pay only the interest on the money you borrowed (called the principal). Eventually, though, you would have to pay the principal. That means you would have higher monthly payments or a “balloon” payment — a one-time payment that is usually much larger than your usual payment.
- principal (money you borrowed)
- interest (what you pay the lender to borrow the money)
- taxes and
- homeowners’ insurance
Contract Contingencies Are Returning for Home Buyers
Using Home Equity To Buy Another Property
- Private money lenders
- Seller financing
- Peer-to-peer lending
- Hard Money Loans
- Personal Loans
Florida Closing Cost Primer for Buyers
Closing costs are inevitable when you’re buying or selling a property. While they vary from state to state, the amount you’ll pay in Florida depends on both the property and the county it sits in. As a buyer, you’ll have to cover most of the fees and taxes. In Florida, you’ll also have to post a fee for documentary stamps (or doc stamps), which is a percentage of the sales price. Then there are the taxes. You’ll likely be subject to property and transfer taxes.
Neither party is responsible for 100% of the closing costs in Florida, which includes fees, taxes, insurance costs and more. The buyer typically pays between 3% to 4% of the home loan’s value and is responsible for the bulk of the fees and taxes. The seller usually pays between 5% to 10% of the home’s sale price. Closing costs also vary among counties.
Condos are regulated by the Florida Condominium Act. The legislation lays out your rights to the property and gives you an “undivided interest” in all the common areas of the building. You’ll have to pay a monthly maintenance fee or a yearly homeowners association fee to cover the servicing of those areas that fall under the “undivided interest.” The fee isn’t tax-deductible.
If you are getting a mortgage The fees shown on the Good Faith Estimate can be difficult to understand but can be broken down into five sections.
One-time fees
- Appraisal fee
- Reinspection fee
- Credit application, credit report and credit supplement fees
- Mortgage origination fee
- Lender’s title insurance policy (optional owner’s title insurance)
- Escrow fee
- Home inspection fee (optional)
- Closing attorney fee
- Courier fee
- Bank processing fee
- Recording fee
- Notary fee
- Loan discount points
Recurring fees
- Homeowners insurance
- Property taxes and tax servicing fees
- Mortgage insurance premiums
- Flood certification fee (in some areas)
Appraisal fees
Lenders typically require an appraisal as part of the underwriting process, before financing a home purchase. Appraisals will vary in price depending on the location and size of the property. The lender hires an appraiser to provide the fair market value of the home, and the buyer pays the lender.
Mortgage origination fee
Every lender will charge a mortgage origination fee, which covers their service and administrative costs. The average loan origination fee is 1% of the total loan amount. Buyers should shop for lenders with both experience and low origination fees.
Title insurance policy fees
Lenders typically require borrowers to purchase insurance to protect the financial institution from future title claims. This policy is called lender’s title insurance and the cost depends on the location and size of the property.
Owners title insurance protects the Buyer from future claims against the title. The customary party that pays for the Owners Title Policy varies by County in Florida. In Sarasota,Collier, Miami-Dade and Broward County, the Buyer pays for title insurance and chooses the title company. In all other counties, it is the Seller’s responsibility.
Escrow fees
During the purchase and sale transaction, your funds will enter a holding account managed by a third party — an escrow company. When the transaction is complete, the escrow representative will disperse your down payment, fees, and loan proceeds to the appropriate individuals.
Home inspection fee
A home inspection is a common contingency for a home purchase. As the buyer, you can hire an inspector to evaluate the condition of the home and its systems prior to purchase. Home inspection costs vary depending on the size and age of the property. You will pay the inspector for their service out-of-pocket, and this amount is separate from the purchase and sale transaction.
Attorney Fees
Florida is a Title Theory state and does not require that an attorney be used to close a real estate transaction. Private real estate attorneys, or borrower’s attorneys, are an additional and optional cost for buyers who want a specialist to assist them with contract-related issues or professional advice beyond the scope of their agent’s abilities. Private real estate attorneys charge by the hour or charged a fixed rate for the transaction and rates vary based on their level of expertise and services provided.
Documentation fees
During a financed home purchase, several institutions need to process information and create official records.
- The courier fee allows lenders to send your documents to necessary parties
- The bank processing fee pays the bank for handling the necessary loan documentation.
- The lender uses the recording fee to pay the county to file a public record of the transaction.
Loan discount point fees
When locking your interest rate with your lender, you’re allowed to buy down the rate. To do this, you pay “points” — essentially, paying interest in advance. One point is equal to 1% of the loan; but that does not translate to a 1% drop in interest rate. Not all buyers choose to buy down their interest rate, but when they do, the rates vary by lender.
Homeowners’ insurance
As a stipulation of your financing, you will be required to purchase homeowners’ insurance. You will continue to pay the insurance premium on a yearly or twice-yearly basis directly to your insurer, or monthly via an escrow payment that is part of your monthly mortgage payment to your loan servicer. Homeowners insurance policy fees range based on the amount of coverage and the size of the property.
Property taxes
Your property taxes will be prorated based on your closing date. Some buyers pay their taxes in lump sums annually or biannually. If you don’t pay this way, you might escrow the taxes, which means they would be included as an escrow line item in your monthly mortgage payment to your loan servicer. Property taxes are paid in arrears in Florida.
Mortgage insurance premiums
If your loan amount is more than 20% of the value of the home, you are typically required to pay insurance to protect your lender’s investment. Mortgage insurance is generally escrowed but may vary from lender to lender. Some lenders will also charge a one-time application fee for mortgage insurance.
Flood insurance
Depending on the location of your property, you may also be obligated to purchase flood insurance to help protect your lender’s investment. Flood insurance policies range by risk level, based on location and are a Federal Program and the pricing cannot be competitively shopped for.
What are the closing costs for cash buyers?
Cash buyers are still required to pay for things like notary fees, property taxes, recording fees, and other local, county and state fees. Unlike a buyer who is using financing, cash buyers won’t have to pay any mortgage-related fees. But most cash buyers still opt to pay for things like appraisals, inspections, and owner’s title insurance.
Closing costs can vary depending on where you live in Florida, the type of property you buy and how much it sells for. While the seller forks over some money, the buyer pays for the bulk of the fees and taxes, which typically add up to 2.5% of the average sale price depending on the time of year you close ( proration sensitive).