Buy a House Fast

As a consumer, your main concern may be “What do I have to do to get the keys for my new house?”  For the mortgage broker arranging the loan and the lender providing it, there is a lot of behind-the-scenes work to get you to the closing table.

One hurdle in the process is the appraisal.  The lender wants to know the actual value of the property to make sure that it is in line with the selling price.  Over the past few years, some homes were sold for much more than the property was actually worth.  Consumers ended up with huge loans on properties that later could be sold for a fraction of what they paid; if the house went into foreclosure, banks lost much more than if the loan value and the actual property value were more in sync.  In areas where predatory lenders were at work, this difference was even greater.

To combat these potential losses, HUD recently released some new rules governing appraisals on FHA loans effective February 15, 2010.  All home loans are under stricter regulation these days.  Last May, Home Valuation Code of Conduct (HVCC) rules went into effect to regulate who can appraise property and how much they charge for it; FHA rules are much more specific.

Most people who comment on the foreclosure crisis today claim that appraisers were influenced by Realtors, banks, and even sellers to have the appraisal come in at a certain amount.  In the process they often ignored flaws or neighborhood factors that could influence a lower value.  To facilitate this, the appraiser might have been hand-picked, been paid a premium rate, or been influenced by conversation with the agent or the seller during the process. As a result, he would come in with a higher appraisal than the market could support.

The new rules for FHA appraisals intend to keep the appraiser independent.  High points of the changes include:

• The appraiser cannot be selected by the mortgage broker or be commissioned for his work by the lender.
• The appraiser must be familiar with the area where the property is located and with the type of structure he is appraising; i.e., a single family home vs. condominium or manufactured home.
• The mortgage broker can order the appraisal and be informed of the progress but cannot communicate with the appraiser during the appraisal.
• The name of the appraiser who actually did the work must appear in the paperwork.
• The fees the appraiser charged for the work can be listed in the appraisal report, but the fee should not include any administration fees from a third party.
• The only parts of the administrative fee that can be passed along (and listed separately) are the costs to order, process, or review the appraisal.
• The separate fees charged by both the appraiser and any third party must be “reasonable and customary” for the area.
• The borrower may request – and pay for – another appraisal if he believes the appraisal is inaccurate.
• If the borrower changes lenders, the appraisal can be transferred to the new lender.

These rules are intended to prevent the abuses of the past.  Some Realtors® and lenders have concerns, but the rules are here to stay.  Stay tuned to this blog for further developments.

Express Realty Services complies with all legal requirements if you are purchasing a home with an FHA or conventional loan.  For a great selection of properties in MD, or VA, contact us today.

Did you buy a home last year or are you are planning to buy now?  Either way, there are some important things to remember about the home buyer tax credit.

What You Might Know

• The credit applies to you if are a first time buyer or a repeat buyer.  You are considered a first-timer if you have not owned a home in 3 years. First timers can qualify for up to $8,000, while repeat buyers can receive up to $6,500.
• You must have a signed sales contract by April 30 and have your closing on the property by June 30 in order to claim the credit (If you are in the military or foreign service, you have an extra year).
• The home you buy must be your principal residence. If you are a repeat buyer, you don’t have to sell your old home, but you can rent it out or turn it into a second home while using your new home as you primary home.

For a complete summary of all criteria, see the official site.

What You May Not Know

• Unless you applied all or part of your credit to your down payment or closing costs, you will receive your funds after you have filed your taxes.
• To claim the credit, you must submit a copy of the HUD-1 settlement statement and IRS Form 5405 to claim either the first-time home buyer tax credit or the repeat home buyer tax credit.
• You can claim your refund with your 2009 return, amend it if you have already filed, or save it for your 2010 return.
• To claim the credit, you cannot E-file. You must mail a paper return because you have to send some supporting documentation (proof of residency, a signed mortgage statement and drivers license) along with the return.  If you use online tax software like TaxAct, you can use their forms but still must print them out and mail your tax return to the IRS.
• It may take up to four months to receive your refund.

Before you blast the IRS for gross inefficiency and inflicting mental cruelty, blame your fellow citizens who tried to scam the government. The rules were changed with the November 6, 2009 extension to prevent fraud.

Despite the wait, the money is a good incentive to buy a home. Express Realty Services has a great selection of pre-owned homes in the greater DC area. Visit our website to find your next home in Maryland, Virginia, or DC.  Many are newly renovated and ready for you.