House Closings

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.

If the home you’re purchasing will require you to borrow more than the conforming loan limit (CLL), you’ll need to apply for a jumbo loan. But because of the larger loan amounts and increased risk for lenders, Florida jumbo loans often come with higher interest rates and stricter requirements than conventional loans.

In 2023, the conforming loan limit for most U.S. real estate markets is $726,200. However, the jumbo loan limit in Florida depends on what county you’re planning to buy a home in.

· $726,200 is the conforming loan limit in most Florida counties.

· $874,000 is the maximum limit in Monroe County

The amount being borrowed is what determines whether you will need a jumbo loan, not the price of the home.

The requirements for a jumbo loan are much more stringent than a conforming loan. Each lender may have different requirements or processes, but below are the typical requirements for borrowers seeking a jumbo loan.

Higher credit score: When it comes to obtaining a jumbo loan, credit score requirements are typically stricter than for conventional mortgages. While some lenders may be willing to accept a lower score, a credit score of at least 720 is generally required to qualify for a jumbo loan.

Larger down payment: When applying for a jumbo loan, keep in mind that down payment requirements are generally more substantial than for traditional mortgages. While the specific amount will depend on the lender and the borrower’s financial situation, many jumbo loan lenders require a down payment of at least 10%, and some require as much as 20% or more.

More assets: During the asset review process, lenders typically request that jumbo loan borrowers provide evidence of sufficient liquid assets or savings to cover the equivalent of one year’s worth of loan payments.

Lower debt-to-income ratio (DTI): Whether you’re applying for a traditional mortgage or a jumbo loan in Florida, lenders evaluate your spending habits and creditworthiness by analyzing your debt-to income ratio ( DTI) The DTI is determined by dividing the total of your monthly debt payments by your gross monthly income. While some lenders may accept a DTI as high as 50% for a conforming loan, those applying for a jumbo loan should aim for a DTI under 43% and ideally closer to 36%.

Additional home appraisals: For a jumbo loan, lenders may require an additional home appraisal to ensure that the property’s value is accurate. This is particularly true in places where there are few comparable home sales. The additional appraisal acts as a second opinion and helps the lender to mitigate their risk. It’s important to note that the cost of a second appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.

Filed under: Blog, Boca Raton real estate, closing costs, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Home Financing, Homebuyer Advice, House Closings, Jumbo loans, Mortgage Information, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, Refinancing, South Florida Real Estate by Kim Bregman
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Beware of “Too Good To Be True” Lenders

Homeowners beware.

With the potential of a recession and rising mortgage rates; lenders are seeing fewer loan applications and many buyers are not able to qualify for legitimate loans. Homeowners are often coerced into using the equity in their homes to pay off debt, finance unexpected expenses and to cover job losses, etc.

Lenders that over promise are likely to be ones to stay away from. If you cannot qualify for a mortgage with a reputable financial institution if is best to wait to purchase a home until you can.

What Is Mortgage Fraud?

Any misrepresentation of information on a home loan application can be considered mortgage fraud, classified under Financial Institution Fraud (FIF). Mortgage fraud is typically carried out for profit or for housing.

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.

How To Spot Mortgage Scams

In cases of mortgage fraud for profit, scammers most commonly promise victims to save their homes from foreclosure with term modifications and debt management, or to entice buyers with free services and reduced interest rates. Scammers prey on vulnerable homeowners and prospective homeowners who lack education or financial security.

Predatory mortgage lenders will often use tactics to make their offer seem like a good deal. You may be getting scammed. The following signs may indicate mortgage fraud.

‘Too Good To Be True’ Interest Rates

Mortgage rates that are noticeably lower than market interest rates are typically a sign of various hidden fees or even a bait-and-switch tactic. Predatory lenders may try to tell you that you no longer qualify for the advertised rate, or tack on additional fees after locking in the original rate if they think they can get away with it.

Your Loan Estimate Isn’t Honored

Your Loan Estimate gives basic loan information in a standardized format from the U.S. Department of Housing and Urban Development. It includes itemized costs of a loan, including fees, and is sent within 3 business days of a mortgage application. Lenders aren’t allowed to charge fees outside of the credit report fee prior to accepting the terms.

Mortgage Payment Scams

A mortgage payment should remain under 28% of your monthly income. The higher your debt-to-income ratio (DTI), the riskier you are for a mortgage lender. If your lender is recommending a type of home that requires a loan larger than 28% of your disposable income, be wary.

Homes Overvalued

Overvalued property creates risk for legitimate mortgage lenders by generating an inaccurate resale valuation or an inflated borrower income that will be difficult to pay off with existing income.

Penalties For Prepayment

A prepayment penalty is charged for paying off your mortgage too quickly or for refinancing. While prepayment penalties can offer lower overall interest rates, oftentimes, they’re hidden in the fine print of agreements. As a result, many borrowers don’t realize the stipulations of the penalties and are hit down the line with fees. Generally, these penalties are included as a way for lenders to make money on interest payments at the expense of the borrower.

Your Credit Score Doesn’t Matter

Your credit score will always affect your mortgage rate, without exception. If you’re being offered a home loan that states this score won’t affect the mortgage, be wary. These tactics are typically scams that prey on low-income borrowers and generally come with undesirable terms.

Deceptive Marketing

Victims of predatory lending frequently describe being subjected to a flood of phone calls and letters from brokers and lenders, encouraging them to take out a home equity loan.

Red flag: Lenders who engage in high-pressure tactics, telemarketing, cold calling, and deceptive advertising campaigns.

Excessive Fees

Predatory lenders routinely charge borrowers fees totaling as much as 15% to 20% of the loan amount. Fees alone can have a ruinous impact on a homeowner’s equity. But add them to prepayment penalties and you’re locked into a high-rate, financially disastrous loan.

Red flag: You inquire about fees and charges, but you can’t get the facts. They insist there are no “upfront” fees.

Equity stripping

You need money. You don’t have enough coming in each month to cover your expenses. You have equity in your home. A lender tells you that you could get a loan. This is a big shock because you know you will have difficulty keeping up with the payments. The lender encourages you to “pad” your income on your loan application to help get the loan approved.

Equity stripping is particularly dangerous for people who find themselves in financial trouble. Scammers target people who are facing foreclosure or other financial hardships and make false promises of relief. Beware of anyone who pops up at what seems like the perfect time promising to let you cash in the equity you’ve built up without any consequences. Falling for this scam could end up with you losing your home and all the equity you’ve accumulated.

Red flag: Any suggestion that you can qualify for a loan when you know the truth is you cannot reasonably make the payments.

Balloon payment

You’ve fallen behind in your mortgage payments. Another lender offers to save the day by refinancing your mortgage and lowering your monthly payments. But beware. The payments may be lower because the lender is offering a loan on which you repay only the interest each month.

Red flag: Unrealistically low payments.

Loan churning

Senior homeowners who are asset-rich, but cash-poor are prime targets for this scam. A mortgage company contacts you offering to refinance your loan and throw in some extra cash along with it. The problem is, each time you refinance, the fees and interest rates are going up. Red flag: Lenders that contact you and any suggestion that a loan is the way to get your equity to start “working” for you.

Not all lenders are predatory. The best way to protect yourself against those who are is to be keenly aware of their tactics and always on the lookout for the red flags. If you need an explanation, talk to someone you can trust who has nothing to gain or to lose by the decision you make. Be careful how often you refinance your mortgage. Talk to a HUD-approved housing counselor (hud.gov/counseling) if you have questions or concerns about any mortgage loan transaction. Then consider all the costs of financing and repayment before you agree to a loan.

Filed under: Blog, Boca Raton real estate, cash out refinance, Exclusive Buyer Agency, First Time Homebuyers, Florida Real Estate, HELOC, Home Buyer Advice, Home Buyers, home equity, Home Financing, Homebuyer Advice, House Closings, Mortgage Information, peer to peer lending, private money lender, Real Estate, real estate news, Refinancing, Reverse Mortgage, Seller Financing, South Florida Real Estate by Kim Bregman
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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.

Filed under: 2022 Real Estate, Blog, Boca Raton real estate, cash out refinance, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, Home Financing, Homebuyer Advice, House Closings, International Home Buyers, International investors, Mortgage Information, peer to peer lending, private money lender, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, Refinancing, Relocation, Retirement, second home, Self Directed IRA, Seller Financing, South Florida Real Estate by Kim Bregman
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Shop for a Mortgage as Rates Rise

It is always advisable to shop for a mortgage, but as rates rise the savings can be significant. Each lender offers different loan programs and sets different borrower requirements. It’s important that you get quotes from several types of financial institutions, mortgage lenders, and brokers to find one that offers the best loan program for you.

Banks

Banks are for-profit financial institutions that typically offer several different products such as mortgages, credit cards, checking and savings accounts, and more. Many large banks have branches nationwide or throughout a specific region where you can get in-person support, and they also might offer a wider selection of mortgage products.

One downside to banks is that they tend to charge slightly higher interest rates on home loans compared to credit unions, according to a side-by-side comparison by the National Credit Union Administration.

Credit Unions

Credit unions are nonprofit organizations that offer banking services to their members. In addition to offering lower interest rates on mortgages and other financial products, credit unions have historically earned the highest customer satisfaction ratings.

However, you’ll need to join a credit union to get a mortgage. Some credit unions are open to anyone, but others may require you to work in a certain industry or live in a certain area.

Mortgage Lenders

You might also find a home loan with another type of lender. For instance, online lenders, such as Rocket Mortgage, offer an end-to-end digital process. You may be able to get pre-approved, upload loan documents, and close on the loan all online. By saving money on overhead costs, online lenders may also be able to offer lower rates or special discounts.

Mortgage Brokers

Mortgage brokers are licensed to act as a go-between with you and your lender. When working with a mortgage broker, you’ll have access to a variety of residential loan programs from different lenders. The broker doesn’t make a loan. Instead, the broker has a variety of lenders they work with.

In general, a mortgage broker will have a lot of knowledge of different home loan programs, and a good idea of what you might qualify for, including what interest rate you’re eligible for.

Shop For Best Rates

Getting rate quotes from multiple lenders and comparing offers is one of the easiest ways to save money on your mortgage. That’s because the interest rate is one of the key components of the mortgage’s total cost, and rates can vary considerably with each lender. Despite this, about half of homebuyers skip shopping for the best rate.

To find the best loan for you, research all costs of the loan. Knowing just the amount of the monthly payment or the interest rate isn’t enough. Even more important than knowing the interest rate is knowing the APR — the total cost you pay for credit, as a yearly interest rate. The interest rate is a very big factor in calculating the APR, but the APR also includes costs like points and other credit costs, like mortgage insurance. Knowing the APR makes it easier to compare “apples to apples” when considering mortgage offers.

When you’re shopping around, you may see ads or get offers claiming to have rates that are very low or fixed. But they may not tell you the true terms of the deal as the law requires. The ad may feature buzz words that are signs that you’ll want to dig a little deeper.

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.

You also may find lenders that offer to let you make monthly payments where you pay only a portion of the interest you owe each month. The unpaid interest is added to the principal that you owe. That means your loan balance will increase over time. Instead of paying off your loan, you end up borrowing more. This is known as negative amortization. It can be risky because you can end up owing more on your home than what you could get if you sold it.

Find out your total payment. While the interest rate determines how much interest you owe each month, you also want to know what you must pay for your total mortgage payment each month. The calculation of your total monthly mortgage payment considers these factors, sometimes called PITI:

principal (money you borrowed)
interest (what you pay the lender to borrow the money)
taxes and
homeowners’ insurance

“Mortgage rates rose again as markets continue to manage the prospect of more aggressive monetary policy due to elevated inflation,” says Sam Khater, Freddie Mac’s chief economist. “Not only are mortgage rates rising but the dispersion of rates has increased, suggesting that borrowers can meaningfully benefit from shopping around for a better rate.”

Filed under: 2022 Real Estate, Blog, Boca Raton real estate, cash out refinance, Exclusive Buyer Agency, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Home Financing, Homebuyer Advice, House Closings, Mortgage Information, peer to peer lending, private money lender, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Refinancing, Reverse Mortgage, Seller Financing, South Florida Real Estate by Kim Bregman
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Contract Contingencies Are Returning for Home Buyers

Spiraling mortgage rates on top of record-high and still-rising home prices are leading many experts to predict the real estate market is on the verge of a correction—if it isn’t already in one. They anticipate home prices will flatten, or even go down a bit, in certain markets.

The result is that new buyers would be paying about 50% more for the same home compared with a year ago in their monthly mortgage bills. And that’s greatly diminishing the buying power of many Americans—especially during a time when inflation has hit a 40-year high, gas prices have spiked, and even rent levels are nationally hitting new highs.

However, experts don’t believe the market is in a bubble or a crash is in the cards, like during the Great Recession. The nation is still suffering from a housing shortage that has reached crisis proportions at a time when many millennials are reaching the age when they start to consider homeownership. That’s likely to keep prices high.

In addition, lenders are giving mortgages only to the most qualified borrowers. These buyers are less likely to wind up in foreclosure. And prices aren’t expected to plummet unless another wave of foreclosures and short sales sweeps through the nation.

The real estate market nationwide is slowly shifting back to a more normal market and may be a Buyers’ market in some areas. In the past couple of years buyers have removed contingencies to woo sellers and win bidding wars.

Price is becoming more negotiable and the need to waive contingencies is hopefully becoming a thing of the past.

As the market has started to shift toward a more neutral market, buyers are regaining some power again and able to use contingencies to better protect themselves. As the market shifts, even in red hot markets, more contingencies are likely to appear as part of the process.

Mortgage and inspection contingencies are likely to become more negotiable in included in contracts for the Buyer’s protection, but contracts contingent on the sale of your current home is still not in the cards for most buyers.

Filed under: Blog, Boca Raton real estate, contracts, Exclusive Buyer Agency, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Home Financing, home Inspections, Homebuyer Advice, House Closings, Real Estate, Real Estate Closings, real estate news, Real estate trends, South Florida Real Estate by Kim Bregman
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Pit Falls of Post-Closing Occupancy Agreements

More sellers want to stay in their home after closing, sometimes for weeks or months. In many cases, they want to do it for a fraction of the fair market rent or even for free. Agreeing to their request gives some buyers an edge over the competition in a bidding war, but it comes with risks.

The Post-Closing Occupancy Agreement allows the Seller to remain in the property for a designated period after the Buyer takes ownership of the property. As easy as a post- occupancy agreement sounds, there are serious implications arising out of a Seller requesting to remain in occupancy of residential property after the Seller conveys title to the Buyer.

When the seller continues to live in the home after closing, all the risks lie with the buyer. What could go wrong? Plenty…. How long will the seller stay? How much will they pay, or will they pay at all? Who is responsible for utilities, HOA fees, property taxes, insurance, pool and yard maintenance, et. al.? If they want to extend the lease, is that possible? What if they decide not to move out? What if the property is damaged after the closing? What if they do not pay the bills?

Despite all these potential and very serious problems, there are some things you can do as a buyer to protect yourself if you decide to agree to this arrangement. Of paramount importance is to retain an attorney to review the Purchase Contract before signing and to prepare the lease or post-occupancy terms prior to Closing. Considerations that need to be negotiated with the Seller include but are not limited to….

Enter a formal lease?
Security deposit?
Escrow proceeds from the sale to cover damages, unpaid bills, et. al.?
Seller secure renters’ insurance.
Capture the entire rent payment from Sellers proceeds at closing and hold in escrow?
Require a walk-through of the property in advance of returning the Seller’s proceeds held in escrow?
Hold back fund in escrow if they fail to vacate the property on the agreed to date?
Can the lease be extended or terminated early?
Who will be occupying the property?

Transactional agents will be very casual about post-occupancy agreements and assume that everything will go as planned. Buyers need to assume that things will go wrong and make sure that they are protected once they close on the property. Always us an Exclusive Buyer Agent to ensure that you are represented by a fiduciary.

Filed under: Blog, Boca Raton real estate, contracts, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Homebuyer Advice, House Closings, post closing occupancy, Real Estate, Real Estate Closings, South Florida Real Estate by Kim Bregman
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Using Home Equity To Buy Another Property

Interest rates are rising and so it the equity in your current real estate holdings. There are alternatives to financing a second home or investment property other than a traditional mortgage. If you have a large amount of equity in your first home, you could obtain enough money through a Home Equity Loan to pay for most—if not all—of the cost of a second home.

Using a home equity loan (also called a second mortgage) to purchase another home can eliminate or reduce a homeowner’s out-of-pocket expenses. However, taking equity out of your home to buy another house comes with risks.

If you’re interested in using home equity to purchase a new home, the value of your house will need to be high enough to support the loan, and you’ll have to meet your lender’s requirements. Here’s how to get a second mortgage to buy another house.

1. Determine the amount you want to borrow. Before taking equity out of your home to buy another house, decide how much you want and need. Home equity loans limit how much you can borrow. In most cases, you can only access up to 85% of the equity in your home.

2. Prepare for the application process. Your approval for a home equity loan will depend on multiple factors. The value in your home will determine the maximum amount of equity available, and your financial information will determine how much of that equity you can borrow. In addition, your lender will look at your credit score, income, other outstanding debts and additional information.

3. Shop around for a home equity loan. When taking out a home equity loan for a second home, you can use any lender. The loan does not have to be with your current bank or mortgage company. So the best way to get a competitive interest rate is to shop around and get quotes from multiple lenders. As you compare, look at the interest rate, loan terms, fees and estimated closing costs. You can also negotiate with the lender on the rate or a particular term.

4. Apply to the loan with the best terms. Once you’ve determined the loan with the best terms, you’re ready to apply. You’ll submit the application and provide the requested information. Your lender will order an appraisal of the home or determine the value using another method.

5. Close on the loan. After you go through the underwriting process, your loan will be ready to close. Before finalizing the loan, make sure you understand the terms carefully. Also, know that the Three-Day Cancellation Rule allows you to cancel a home equity loan without penalty within three days of signing the loan documents.

Before you use a home equity loan for a second home, consider the pros and cons of taking equity out of your home to buy another house.

Pros:

· You’ll reserve your cash flow. Using home equity to buy a second home keeps cash in your pocket that you would otherwise use for the home purchase. This increased cash flow can result in a healthier emergency fund or go towards other investments.

· You’ll increase your borrowing power. Buying a house with equity will allow you to make a larger down payment or even cover the entire cost — making you the equivalent of a cash buyer.

· You’ll borrow at a lower interest rate than with other forms of borrowing. Home equity products typically have lower interest rates than unsecured loans, such as personal loans. Using home equity to purchase a new home will be less expensive than borrowing without putting up collateral.

· You’ll have better approval chances than with an additional mortgage. Home equity loans are less risky for lenders than mortgages on second homes because a borrower’s priority is typically with their primary residence. This may make it easier to get a home equity loan to buy another house than a new separate mortgage.

Cons:

· You’ll put your primary residence at risk. Using a home equity loan to buy a new house can jeopardize your primary home if you’re unable to handle the payments.

· You’ll have multiple loan payments. Taking equity out of your home to buy another house means you’ll potentially have three loans if you have a mortgage on both your primary residence and the second home in addition to the home equity loan.

· You’ll pay higher interest rates than on a mortgage. Home equity products have higher interest rates than mortgages, so you’ll be borrowing at a higher total cost.

· You’ll pay closing costs. When using equity to buy a new home, you’ll have to pay closing costs, which can range from 2% to 5% of the loan amount.

Other options for buying a house with equity

Using a home equity loan to buy another house is just one path borrowers can take. Here are a few additional options for using equity to buy a new home.

Cash-out refinance

A cash-out refinance is one way to buy another property using equity. A cash-out refinance accomplishes two goals. First, it refinances your existing mortgage at market rates, potentially lowering your interest rate. Secondly, it rewrites the loan balance for more than you currently owe, allowing you to walk away with a lump sum to use for the new home purchase. Taking equity out of a home to buy another with a cash-out refinance can be more advantageous than other options because you’ll have a single mortgage instead of two. However, interest rates on cash-out refinances are typically higher than standard refinances, so the actual interest rate will determine if this is a good move.

Home equity line of credit

A home equity line of credit (HELOC) is another option for using home equity to purchase a new home. HELOCs are similar to home equity loans, but instead of receiving the loan proceeds upfront, you have a line of credit that you access during the loan’s “draw period” and repay during the repayment period. This method of using equity to buy investment property can be helpful if you’re “house flipping” because it allows you to purchase the property, pay for renovations and repay the line of credit when the property sells. However, interest rates on HELOCs are typically variable, so there is some instability with this option.

Reverse mortgage

Homeowners 62 or older have an additional option of using equity to buy a second home — a Home Equity Conversion Mortgage (HECM). Commonly known as a reverse mortgage, a HECM allows borrowers to access home equity without making payments. Instead, the loan is repaid when you leave the home. Reverse mortgages provide a flexible way of using equity to buy another home, as borrowers can choose between receiving a lump sum or a line of credit. However, keep in mind that while you won’t make payments with a reverse mortgage, interest will accrue. This causes the loan balance to grow and can result in eating up all the home’s equity.

Alternate forms of financing for purchasing a second home include:

Private money lenders
Seller financing
Peer-to-peer lending
Hard Money Loans
Personal Loans

Filed under: Blog, Boca Raton real estate, cash out refinance, contracts, Down Sizing, Exclusive Buyer Agency, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, HELOC, home equity, Home Financing, Homebuyer Advice, House Closings, International Home Buyers, International investors, Mortgage Information, peer to peer lending, private money lender, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, Refinancing, Retirement, Reverse Mortgage, second home, Self Directed IRA, Seller Financing, South Florida Real Estate, vacation home by Kim Bregman
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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).

Filed under: 2022 Real Estate, appraisal, Blog, Boca Raton real estate, closing costs, contracts, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Flood Insurance, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, Home Financing, home Inspections, Homebuyer Advice, Homeowners Insurance, House Closings, Mortgage Information, Mortgage Interest Deductions, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Relocation, South Florida Real Estate, Tax deductions, Title Insurance, Uncategorized by Kim Bregman
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2022 South Florida Real Estate Projections

Nationally, expect slower housing price appreciation, easing inflation and rising interest rates in 2022, according to a survey of more than 20 top U.S. economic and housing experts by the National Association of Realtors® (NAR). “Overall, survey participants believe we’ll see the housing market and broader economy normalize next year,” Yun said. “Though forecasted to rise 4%, inflation will decelerate after hefty gains in 2021, while home price increases are also expected to ease with an annual appreciation of less than 6%. Slowing price growth will partly be the consequence of interest rate hikes by the Federal Reserve.”

Fed boosts to interest rates do tend to move rates higher on longer-term loans, such as 30-year mortgages. Yun expects the 30-year fixed mortgage rate to increase to 3.5% as the Fed raises interest rates to control inflation but noted this is lower than the pre-pandemic rate of 4%.

In South Florida Home prices are projected to continue to grow, but slower than the past year. “We don’t expect to see the same price appreciation we had last year, though we don’t expect to see a decline in pricing,” said Eli Beracha, director of the Hollo School of Real Estate at Florida International University. A Realtor.com forecast predicts that South Florida housing prices may rise almost 6% over the next year, while a Zillow forecast predicts that home price appreciation could shoot up by 15%.

A few factors are going to cause slower price growth: more inventory as sellers try to capitalize on the hot market, new developments hitting the market and an increase in mortgage interest rates. Demand from foreign and out-of-state buyers will continue to drive South Florida’s housing market, but experts also expect new inventory to alleviate some of the pressure that has been fueling the pandemic-era housing boom.

Experts say the market will still favor sellers, as demand and limited inventory will keep the balance in their favor. Bidding wars and multiple offers on homes will probably still be a common.

The supply chain issues, and lack of labor will continue to lead to increased construction costs and thus higher prices for buyers.

Filed under: 2022 Real Estate, Blog, Boca Raton real estate, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Homebuyer Advice, House Closings, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, South Florida Real Estate by Kim Bregman
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What is An Appraisal Gap and Appraisal Gap Coverage Clause?

An appraisal gap is the difference between the fair market value determined by the appraiser and the amount you agreed to pay for the home.

An abnormally high number of homes across the United States are being appraised below their agreed-upon sales prices, causing some deals to implode.With home prices soaring in recent months, buyers often pay above asking price to win bidding wars. As a result, CoreLogic estimated that about 13% of appraisals came in below the contract price in August.

A home appraisal is an evaluation and report performed by a licensed appraiser to determine a home’s fair market value. Lenders require a home appraisal to ensure the amount you agreed to pay for the home is equal to or less than the appraised value. To create a home appraisal, appraisers normally rely on factors like data from recent closed and pending sales. But since sales usually close a month or two after going under contract, rapidly increasing home values can sometimes skew appraisals that rely on home values recorded months earlier.

In today’s hot market, many prospective buyers will get into bidding wars and possibly waive the appraisal contingency or offer an appraisal guarantee up to a certain amount. In both cases, the buyer would have to come up with the difference in cash between the appraisal and the sale price, or their appraisal guarantee and the sale price.

The disparity underscores the risks buyers face in the current market, especially those stretching their dollars to win a bidding war. Mortgage lenders will typically offer only enough to cover the appraised value of a home, forcing buyers to either provide the balance, renegotiate, or terminate the deal if an appraisal comes in below the contract price.

Using An Appraisal Gap Coverage Clause:

If you want your bid to outshine the others, an appraisal gap coverage clause may be necessary. An “appraisal gap clause” is used in a sales contract to guarantee that the home buyer will cover the monetary gap between the appraisal and the sales contract if an appraisal gap becomes an issue.

The clause states how much of an appraisal gap you’re willing to cover. Since there’s no guarantee an appraisal will match the agreed-upon sales price, it’s often something sellers look for to know the offer will still stand even if the appraisal comes in a little low.

The main thing that needs to be noted is the monetary value of your appraisal gap guarantee. It’s not wise to state that you will cover an unlimited amount between the sales price and the appraised value. I recommend always putting in the maximum amount that you are willing to cover.

What Should You Do When The Appraisal Is Less Than The Offer?

You have several options when the appraisal is less than the offer including walking away from the sale, but that doesn’t work in every situation.

Here’s what to consider:

Pay The Difference

If the seller won’t negotiate to lower the purchase price, you’ll be on the hook to pay the difference unless you have an appraisal contingency in your contract. The appraisal contingency gives you a way out of the contract without losing your deposit. Without it, you must buy the home or risk losing your the money you have already put down into escrow.

Without a lower sales price, you’ll have to pay more for the home. Since lenders base your loan amount on the appraised value, you’ll need your agreed-upon down payment plus the difference between the sales price and appraised value.

What if you don’t have the cash?

Ask for gift letters from family members or leverage your investments. You may be able to use some retirement funds without paying a penalty. Talk to your 401(k) administrator or tax advisor to see what options you have. If you own other real estate, consider tapping into the equity and using the funds to cover the appraisal gap.

Renegotiate The Offer

If you have an appraisal contingency on your sales contract, you may be able to work with the seller. Start by requesting the seller to lower the price to the appraised value. This would eliminate the appraisal gap and your financial issues in buying the home.

Asking the seller to renegotiate can be risky in a seller’s market, so be careful. If the seller has a kick out clause, they could accept another offer that comes through. They still must give you the time to remove your appraisal contingency and seal the deal, but they can choose the other offer if you don’t.

Dispute The Appraisal

You can dispute the appraisal, asking for a reconsideration of value. However, this is not easy to do as you’ll need plenty of evidence to prove the appraisal is inaccurate.

You must prove one of the following:

The appraiser didn’t use appropriate comparable sales, and you have proof of more accurate options
The appraiser missed features or upgrades in the subject property
You found mistakes in the report
The appraiser only conducted a drive-by or exterior appraisal

Walk Away from the Sale

It’s not the most pleasant choice, but if you’re worried about paying more than a property is worth, sometimes walking away from the sale is the best option. If you’ve unsuccessfully renegotiated with the seller and disputed the appraisal to no avail, it may be best to look for another property.

Before you do this, talk to your attorney. If you didn’t include an appraisal contingency in your contract, you might risk your deposit. Sometimes other contingencies still help, though, especially a mortgage financing contingency.

Filed under: appraisal, appraisal gap, appraisal gap coverage clause, Blog, Boca Raton real estate, contracts, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Home Financing, Homebuyer Advice, House Closings, Real Estate, real estate news, South Florida Real Estate, Uncategorized by Kim Bregman
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