Lehigh Valley Real Estate Blog, Home Buying & Selling Information

Pitfalls When Buying Your First Lehigh Valley Home

Statistically, every year approximately 40% of real estate sales are First Time Home Buyers. Last
year was no different as more than 37% of the home sales were first time
buyers.

One of the major problems Lehigh Valley First Time Home Buyers are facing is getting a mortgage.
The motivation is there but things like enough money and credit scores are
causing a problem.

As the government tightened the guidelines they made it tougher for a buyer to get a mortgage.

An ideal buyer has above a 640 credit score and a debt ratio below 45% (gross/debt each month). In addition, they have enough money saved up for the down payment (depends on loan type) and closing
costs.

As the credit score gets lower, the debt to income ratio becomes more important.(your credit isn't as good but you have less debt...makes sense).

Mortgage lenders have different qualifying factors and even if one mortgage company says No, another may say Yes.

With this in mind, there are couple of different Lehigh Valley Mortgages available:

FHA - minimum of 3.5% down payment - the buyer must have this money or have it gifted to them. This does not include the closing costs which can run 5-6% (FHA does allow up to 6% sellers assist for these costs). This is the most common loan with Lehigh Valley First Time Home Buyers. Buyer pays a monthly PMI (principle mortgage insurance) until 20% equity is obtained on the home.

USDA - 100% financing but only available in rural areas promoted by the Department of Agriculture (many homes in the Lehigh Valley qualify). The buyer must meet certain guidelines but can purchase a home with very little money. The closing costs can be buried in the mortgage using sellers assist. No PMI.

VA - 100% financing available but only to active or prior military members. Closing costs can be put into the mortgage using sellers assist.

Conventional - 5, 10, 15, or 20% down is required with the minimum down payment being lower as your credit score is higher. Unless, you put down 20% you will still have the monthly PMI that an FHA loan incurs.

As interest rates float in the 4% range, now is a great time to buy your first Lehigh Valley home. You just need to qualify for the mortgage.

Visit www.lehighvalleyhomesonline.com for all of your Lehigh Valley Real Estate information.

Can I Use an FHA Mortgage to Buy a Foreclosure or Short Sale Property

Yes, you can buy a Foreclosure or Short Sale property with an FHA Mortgage.

With an FHA mortgage you are not limited to any type of house (although condo ownership can be a problem with FHA financing) but you are limited to "houses without major problems or safety issue".

A cash buyer can purchase any home.

A 20% down conventional home loan may require repairs if any major defects are known or discovered by the appraiser.

With an FHA mortgage, when the appraiser goes out to the property they check for repair issues PLUS safety violations.

For instance,if the house has flaked paint and it was built before 1978, the FHA mortgage may require scraping and painting (it could have lead). A conventional mortgage doesn't care about paint.

The "mortgage required" repairs and safety issues must be corrected before you can obtain the mortgage to purchase the home. The repairs can usually be negotiated with the seller IF the property isn't being sold as-is (foreclosure and short sales are sold as-is, hence the problem).

A seller may accept an offer with FHA financing but state they are not going to do any of the FHA required repairs. There are cases where the home buyer has been painting their future home in order to satisfy the FHA lender required repairs.

A work around for repair or safety items is to do an FHA 203k Renovation loan. You borrow the money to purchase the home and on top of that borrow the money needed to repair or upgrade the home. This allows the FHA home buyer to purchase any home they wish.

Getting a Mortgage When Buying a Lehigh Valley Home - Use a Local Lender

It is essential when purchasing a Lehigh Valley Home that you get a good mortgage company. As a real estate agent, I typically give out a few names of mortgage reps. Why do I do that? What's in it for me?

Financially, not a thing is in it for me. Knowing my Home buyers will be working with a good mortgage rep, familiar with Pennsylvania real estate (beware out-of-state lenders) is extremely important to me and to them!

Two months ago, a Lehigh Valley Home Buyer used a mortgage company from Tennessee. They had been told that they would need about $400.00 on closing day to settle on the home. The day of the closing they all of a sudden found out they would need $3,000. Oops, the lender wasn't aware that there were taxes that need to be included (municipal, county, school). Thankfully, the home buyer had the extra money and closed on the home. What if they didn't?

When the offer on the home was presented, I had given the buyer an estimate of closing costs and it included these taxes. The out-of-state lender, although licensed to do mortgages in PA, really didn't understand our process and didn't include them.

A recent experience with a NJ lender led to the appraisal taking weeks to get done, no mortgage commitment on the agreed upon date (which was in the agreement of sale), and a delayed closing.

Pennsylvania is a Time is of the Essence State. Everything in our agreement of sale is on timelines and in writing. A lot of out-of-state lenders don't get it. 

I recently heard from a mortgage company: Who set that closing date? We, the mortgage company, set the closing date. Not true in PA.

If there is an issue with a date in a PA agreement of sale, we do an addendum that must be agreed upon by the buyer and seller. A mortgage company can't just blatantly ignore these dates. If they do, they put the complete transaction at risk and cause all parties a lot of stress.

To be fair, some out-of-state lenders do a great job. The problem, how do you, the home buyer know which ones.

Lehigh Valley Real Estate Agents usually refer mortgage reps because we expect a level of service from these companies and have a relationship. If the mortgage rep doesn't do a good job they may not get anymore potential clients from home buyers we know. Buying a home is stressful no matter what. We want to make the process as smooth as possible and recommend professionals to help make it easier.

Visit www.lehighvalleyhomesonline.com for all of your Lehigh Valley Real Estate information.

Buying a Lehigh Valley Foreclosure When You Have a Home To Sell

Any home buyer considering a Lehigh Valley Foreclosure property when they have a home to sell should read the following article:

Buying a Foreclosure Property When You Have A Home To Sell

For all of your Lehigh Valley Real Estate information, visit www.lehighvalleyhomesonline.com

Lehigh Valley Home Owners or Hazard Insurance

As part of a Lehigh Valley Home Purchase, the mortgage company is going to require that you have enough Home Owners Insurance to replace the home (replacement cost) in case of a disaster.  

On the other hand, you want to protect yourself. You should have coverage for all of your possessions. You don't want the insurance company giving you $200.00 for that television you paid $800.00 for. As a result, you probably want replacement cost and a certain dollar amount of what your possessions are worth.

In addition, if you have anything special (a coin collection, a stamp collection, a lot of jewelry) you should discuss that with your insurance rep since you may need a specific rider to ensure coverage.

Lehigh Valley suffers from Sink Holes due to large limestone deposits. You may want to have a rider on your insurance policy for sink hole coverage.

Also, you have to consider liability. What happens if someone falls and breaks their neck on your property? If they decide to sue, what are you covered for? Will they be able to come after you and your assets?

A lot of insurance companies do send someone out to the house to see what they are insuring (the home) but the rest of the above is left up to you and what type of policy/coverage you want.

These are all things that should be discussed with a good insurance representative.

This also brings up life insurance. If you are the main bread winner and you pass for some unexpected reason what happens to the house? It may be left to your spouse but can they afford it? Will your policy pay off the mortgage?

Lehigh Valley Home Buyer Interested in 2 Homes - 1 is a Short Sale - Pros & Cons

As a Lehigh Valley Home Buyer, you have found 2 homes that you really like. 1 is being sold by a seller with positive equity and the other is a short sale.

How does this affect your decision on which house to try and purchase?

Seller Has Some Equity
- Make offer, will probably have reply within a day or two
- Get property inspections, if any problems, try to negotiate with seller (will seller fix or will buyer pull plug)
- Seller should ensure utilities are on and home de-winterized for any inspections.

Short Sale
- Make offer, seller will or will not accept, then it goes to bank to see if they will allow seller to "short" them the money they are owed. How many liens are on the property? Can the seller definitely prove a hardship to get short sale approval?
- House is being sold as-is, property inspections are done for informational purposes only, depending on repairs the only option may be to pull plug on purchase.
- House may have utilities turned off or winterized. Who gets them turned on? Charges?
- Buyer may have to pay a few thousand dollars to have Short Sale Negotiation Company process the purchase (requirements vary with each listing).

What is the Advantage of Purchasing a Short Sale?

You get a home with more amenities for a better price.

If both homes are equally the same, you may get the home seller with equity to accept $5,000 or $10,000 off the list price of the home. You may be able to get the short sale for $20,000 less (the bank WILL send an appraiser out to the home to determine value before accepting an offer). 

What are the Negatives of Purchasing a Short Sale

The process to determine what the bank will accept can be long and tedious. Only a home buyer with flexibility on closing dates can usually place an offer on a short sale property.  

While waiting for a reply from the bank on the Short Sale Property, the other property you like may be sold.

If you really like the Short Sale property it may be worth it.

For all of your Lehigh Valley Real Estate Information, visit www.lehighvalleyhomesonline.com

Should I Sell My Lehigh Valley Home During the Winter

Opinions on Selling Your Lehigh Valley Home during the Winter months vary depending on who you ask. 

What I can tell you:

Lehigh Valley Home Sellers that don't have to sell over the holiday/snow months will typically take their home off the market. As a result, the inventory tends to go down.

Home Buyers that are out looking at Lehigh Valley Homes over the cold/wintry months tend to be motivated. You tend to have less tire kickers and more "We want to buy a home now" showings.

Most home sellers think, "We'll wait and sell it in the spring". Their home, which may be one of a few during the winter, may be come one of many in the spring.

It may be beneficial to list your home during these "down" times.

For all of your Lehigh Valley Real Estate Information, visit www.lehighvalleyhomesonline.com

Lehigh Valley Home Buyer Property Inspections

As part of a home purchase, Lehigh Valley Home Buyers usually get a Property Inspection sometimes called a home inspection.

The Property Inspection is done to find problems or material deficiencies in the home. Depending on the results of the inspection, the buyer may ask the seller for repairs. If the home seller doesn't agree, the buyer may opt to walk away from the sale.

Some of the problems are clear cut.

There is an electrical problem with an outlet in the kitchen. The home buyer would like it repaired.

Others problems are in the gray area.

The furnace is 25 years old. The average lifetime on this furnace is 20 years. It looks good and is working great. It may work another year or it may last 10 more years.

The electric problem in the kitchen is a clearly defined deficiency, Asking for the repair is justified.

The Lehigh Valley Home Seller will probably not agree to replace a furnace that is in good working condition regardless of the age.

Maintaining a home is part of home ownership and things are going to break. Some items are pointed out in a Property Inspection to forewarn the buyer that they will need to fix or replace something down the road.

For all of your Lehigh Valley Real Estate Information, visit www.lehighvalleyhomesonline.com

Selling Your Lehigh Valley Home in the Winter

As last weekend proved, home owners may be in for a tough winter in the Lehigh Valley. 6-10 inches of snow and many households losing electricity probably put a damper on many Halloween parties. I was supposed to go to two parties. The first one got cancelled (no electricty) and our babysitter couldn't make it so we also missed the second party.

Although a bummer, missing the parties was trivial (unless you spent a lot money on that not used Halloween costume) compared to the thousands of homeowners that lost electricity throughout the valley and had downed trees and damage throughout their neighborhood. Even 4 and 5 days after Saturday's storm, parts of the Lehigh Valley were still without electric.

How does the Winter affect Selling your Lehigh Valley Home?

For now, let's just present a couple of different scenarios when it is cold and snowy outside:

The Home Buyer enters the home, the lights are all on, it is clean, warm and the fire is going in the fireplace. You can picture yourself sitting there drinking a warm mug of hot chocolate listening to the crackling fire!

Next house, the sellers have moved out. The home is empty. The heat is turned off, and the home may have been winterized so there is no working plumbing. Big stickers across the sinks and toilets don't help a buyer imagine living in the home. Especially in the cold months.

A lot of things affect selling a home in the winter. Nature ensures homes don't look as nice during the winter. The trees don't have any leaves. The flower garden may look like weeds. Curb appeal, which is very important in the sale of a home, is harder to achieve.

When wintry weather sets in, Lehigh Valley Home Sellers are tempted to cancel showings. This can be a major mistake!

If a potential home buyer is out in cold or bad weather they are probably motivated and not just tire kicking. If they like another home, they may not wait to see yours.

For all of your Lehigh Valley Real Estate information visit www.lehighvalleyhomesonline.com 

Lehigh Valley Home Buyer or Investor Wants to Make an Offer on a Foreclosure Property

Lehigh Valley Home Buyers and Investors want to place an offer on a Foreclosure or REO property.

I typically hear,"I can get a really good deal on a bank owned property!!"

This may or may not be the case.

There is no doubt there are good deals out there BUT the bank's will not take just any offer. A cash offer is better than an offer involving a mortgage but that doesn't mean the bank will accept a very low offer just because it is a cash offer.

The bank's have appraisers and real estate agents helping to determine value on a Lehigh Valley Home or Property.

Even so, they may list the property for more than it is worth. A low offer does not usually get accepted at this higher listing price point even though the property may still sell for the lower price months later.

The banks will slowly reduce the price until the property sells. At some point, it may cause multiple offers when it becomes the "really good deal".

For more information about Lehigh Valley Real Estate visit www.lehighvalleyhomesonline.com!