What is an appraisal?

imgresWhat is an appraisal?

An appraisal is an ‘opinion of value’ that is completed by a professional appraiser, licensed by the State of Nebraska,  who visits and inspects the size, condition, function and quality of the home. There are a few steps in the process. First, he/she comes to the property and inspects the home. Next, the appraiser will research similar homes in the area and compare recent sales to determine a fair market value. The appraiser will then give a final appraisal report with all the data and research to issue a final ‘opinion of value’.  An appraisal helps assure you and your lender that the value of the property is based on facts, rather than the Seller, or Listing Agent’s, opinion.

Who selects the appraiser?

The Buyer’s lender will initiate the appraisal order.  However, a licensed independent professional appraiser selected by the Appraisal Management Company (AMC) conducts the appraisal. By law, the appraisal must be ordered by an objective party (AMC) resulting in the selection of an appraiser who has no interest in the outcome of the appraisal.

What are the main steps in an appraisal?

  1. The Inspection – a licensed appraiser comes to the property and inspects it to determine fair market value
  2. Comparables – the appraiser researches similar homes in your area and compares recent sales (preferably within 90 days) to determine market value.
  3. Final Appraisal Report – using the data gathered from the inspection and comparables research, your appraiser issues a final appraisal report.

How much does an appraisal cost?

The appraisal is a cost to the buyer.  The cost is normally $450-$500.  The lender will likely request a deposit for this cost. Since there is a ‘debit’ column on your Closing Statement for all costs associated with your loan, there will be a ‘credit’ that also appears on this statement for your deposit.

Who receives a copy of the appraisal?

For a typical home loan (that is, a loan secured by a first mortgage on your residential real estate), you are entitled to receive a copy of the appraisal. Keep in mind that the appraisal belongs to you, and is not shared with the Seller.   You should receive a copy of the appraisal soon after it is delivered to the lender in complete form—no later than three days before closing.

Questions?  Feel free to contact us at 402-671-0400 or via www.OmahaHomeEquityGroup.com

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How do I come up with a down payment for a house?

How do I come up with a down payment for a house?imgres-1

Finding money for a down payment on a home can be a challenge for some homebuyers.  A large sum of cash can be hard to find. To make things more problematic, you cannot borrow for your down payment, and you must be able to prove the source of your money to a lender.  So, how do you come up with thousands of dollars? Here are some possibilities:

1. Your savings account – Set an attainable goal and plan to set aside a specific amount of money each payday to meet that goal.  In addition, here are some ideas that you can follow to assist you in saving for that your down payment:

  • Get a second job and use that money for your down payment
  • If you plan to use your next tax refund for this goal, consider adjusting your withholding so you are bringing more money home in your paycheck.
  • Clear out the clutter. Look around at some of the things that you have accumulated but really don’t need. Garage sales, ebay, and Craigslist are all ways to sell used items.
  • Save your coins.  Find a large glass container and throw all of your change in it at the end of every day.  Once a month, clear it out and place the money in your savings account.  You will be amazed at how quickly this adds up.
  • Gift giving. If you want to save money while also giving generously, create your own homemade gifts. You can make food mixes, candles, fresh-baked bread or cookies, soap, and all kinds of other things at home quite easily and inexpensively.
  • Entertain at home. Instead of hitting the town, host a fun pitch-in dinner with your friends. Play cards, sit around a fire pit, or watch movies with your guests. You’ll all save money – and have a blast.
  • Share your dream of owning a home. This seems like an odd way to save money, but think about it. If you spend lots of time with the people you love the most, and share your dream with them, it becomes easy for everyone to work with you toward your goal. 

2. Gift letter – Although you cannot borrow money, it can be gifted to you from a family member. If you are gifted money, the lender will require your donor to sign a gift letter that states the money is a gift and will not need to be repaid. The donor will also need to provide their contact information, the purchased property address, and the amount and source of the gift. Documentation of the withdrawal and transfer of gift funds will be required.

3. 401(k) – There are some situations in which borrowing from your 401(k) may be an option. However, many financial advisors would advise against withdrawing funds from your  401(k) due to penalties. Some 401(k) plans do allow for you to take out funds penalty free if applied to a down payment for your home. Again this is something that you would need to consult your financial advisor about.

4. Tax Return – Are you expecting a tax refund this year?  If so, this may cover your down payment ($1,000 needed for NIFA loans), or it could go a long way in bridging the gap between your savings and the amount needed for your down payment.

What are my options for financing a home purchase?

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1) Nebraska Investment Finance Authority (NIFA) was created by the Nebraska Legislature in 1983 to provide affordable loan programs for first-time home buyers (certain exceptions apply). NIFA offers competitive interest rates, low or no down payments, closing cost assistance, and government or conventional loans.  Over 84,000 Nebraskans have purchased their home with a NIFA loan.  Check with Omaha Home Equity Group for eligibility and to find a NIFA lender in your area.

2) Federal Housing Administration (FHA) is another financing option.  Home buyers will need a 3.5% down payment as well as upfront Private Mortgage Insurance (PMI) and PMI for the life of the loan.  A home buyer may ask the seller to pay up to 6% of the purchase price towards closing costs.  The maximum loan amount in Nebraska for an FHA loan is $271,050.

3) Veterans Administration (VA) loans provide financing those who have served the United States in the military. Benefits of a VA loan include no down payment, no PMI, and home buyers may ask the seller to pay up to 4% of the purchase price towards closing costs.  The maximum loan amount for a VA loan in Nebraska is $417,000.

4) A conventional loan is another way to finance a home purchase.  With a conventional loan, you will have PMI (Private Mortgage Insurance) as part of your monthly payment if you have less than a 20% down payment.  You do not have to pay upfront PMI.  The higher your down payment the more you can request in seller assistance for costs.

5%-9.99% down payment – the home buyer may ask for up to 3% of the purchase price in closing costs from the seller.

10%-24.99% down payment- the home buyer may ask for up to 6% of the purchase price in closing costs from the seller.

25% down or more down payment – the home buyer may ask for up to 9% of the purchase price in closing costs from the seller.

OmahaHomeEquityGroup.com

402-671-0400

daveanderson@npdodge.com

jananderson@npdodge.com

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Preparing to Write an Offer

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What about financing?

You must be pre-approved with a lender prior to writing an offer, unless you are paying cash for the home.  If you are borrowing the money for the home purchase, we will need to provide a pre-approval letter; if you are paying cash, we will need to provide proof of funds.  This documentation must accompany any offer we present to a seller.   

What are the costs prior to closing?

Earnest Deposit – this can be a little as $500, but is generally 1% of the purchase price.  You will present a check at the time you write an offer.  It will be deposited and held in escrow by the title company until closing, at which time it will be credited toward your down payment.

Lender Deposit – most lenders will require a deposit of $500 to cover the cost of the appraisal.  This will be credited toward your down payment at closing.

Home Inspection / Radon Test – A full home inspection costs between $300 – $400, depending on the company you choose and the size of the home.  If you request a radon test in conjunction with the full home inspection, it is an additional $100 – $125.  This is paid directly to the inspector at the time of the inspection, which is within one week of acceptance of the contract.  This money is not refundable or credited to you at closing.

Decisions to consider before writing a contract:

  • What do you want to pay for the home?

We can determine fair market value of the home by preparing a market analysis on your behalf.

With this figure in mind, you can determine what your offer should be.

  • What kind of financing do you plan on using, VA, FHA, Conventional?
  • How much do you plan to apply to your down payment?

 (VA = 0%, FHA = 3.5%, CONV + 5%-20%+)

  • Do you want your contract to be contingent on a home inspection? And/or a radon test?
  • Do you plan to ask for the seller to provide a one year Home Warranty?
  • Do you plan on asking the seller to pay your closing costs?
  • How much do you plan to provide for an earnest deposit?
  • Determine what day you would like to close on the home.

 (This is normally about 45 days from the contract date)

You will want to take time to review the Seller’s Property Disclosure prior to writing a contract.

After the contract is written:

  • You will choose the home inspection company and set up the appointment.  We have a list of trusted inspectors.
  • We will accompany you to the inspection walk through to help you determine if you need to ask for repairs to the home.
  • You will contact your insurance agent for homeowners insurance and provide your insurance company information to your lender.
  • We will work with you, and the closing company, to determine closing time.
  • You must deliver all paper documents that the lender requires, as soon as possible.