Q I'm starting to hear about lenders that are offering 3.85 percent and even 3.75 percent on a 15-year mortgage. That strikes me as an amazing interest rate.
A The column policy is to not recommend individual lenders, Realtors, appraisers or anyone else involved in the real estate industry. But if you do your homework, you should be able to find an excellent lender. Here's what you should do:
1. Find four to five different kinds of lenders and spend time chatting with each of them. You should search out a national lender, a small bank that maintains mortgage loans in its portfolio, a mortgage broker (ask your real estate agent for some referrals) and a credit union (if you belong to or can join one).
2. Check your credit history and score. Go to annualcreditreport.com and receive a free copy of your credit report from each of the three major credit reporting companies (and buy the credit score for around $9) or go to myfico.com to purchase your credit score and report for $15.95.
3. Check your home equity. If you don't have at least 20 percent in equity, you'll have some trouble, even though Fannie, Freddie and FHA are doing loans up to 95 percent or so. If you have an FHA or VA loan, you might be able to do an FHA or VA streamline refinance.
4. Shop around. Figure out where you can get the best deal.
Once you have an idea of the rates available, make sure you understand what it will cost you to obtain the loan — especially the difference between costs that you must pay no matter what lender you use and costs that are specific to a given lender. You may find that charges differ significantly between lenders; those differences can affect your choice.
Q I'm afraid of buying a foreclosure because I don't want to make a mistake. I'm looking at two properties. One
is selling for $365,000, and I want to offer $295,000 and stipulate that the bank pay for all closing costs and fees. The second property is listed for $310,000 as a short sale. I want to offer $275,000 and request that the bank pay all the closing costs. Both properties are in gated communities with houses around it from $400,000 to $500,000. Are my offers too low?
A You can offer whatever you want, but the bank (in either case) may decide not to take it. With regard to the short sale, you might not find out for months if your offer is accepted. You may have the offer accepted by the seller only to find out that the lender won't approve the short sale unless you pay more for the home or you pay not only your closing costs but the closing costs of the seller as well.
I'm not suggesting that you're not offering the right price or getting a great deal. You just need to decide what you want to pay and to avoid getting drawn into a lengthy negotiation with the bank on the fees that could add tens of thousands to the cost of your home.
Some buyers in different areas find that foreclosed properties owned by a bank are easier to buy than short sales where the owner needs the approval of a lender.
In a short sale, the owner does not have the full amount of money from the sale to pay off the debts on the home and is therefore short of funds. A short sale can take months to be approved, whereas with foreclosed property a bank can make the deal rather quickly.
One final thought: Be sure to hire your own real estate attorney to help with the paperwork for the deal. Be sure you're protected from hidden liens and other problems or expenses that could crop up.
Contact Ilyce R. Glink through her Web site, thinkglink.com.