Tag Archives: Kansas City Home Loans

Getting Pre-Approved To Buy A Home In Johnson County Kansas

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The Pulse Of The Kansas City Real Estate Market

When buying a home in Kansas City, Johnson County KS, Overland Park or the surrounding area, the first thing you’ll need to do is get pre-approved with a local mortgage lender. The first mortgage loan question that I hear most buyers ask is, what are today’s interest rates?  While a very good question, there’s many other factors you will want to consider when choosing your mortgage lender. 

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Before you have a lender run your credit report (so they can determine what your interest would be), ask the lender what the loan closing costs will be. While closing costs for any lender should included similar appraisal fees, escrow amounts, etc, the lender is in business to make money and some of the fees they charge are likely specific to the financial institution. This means they can vary from one lender to another, so be sure to ask for a breakdown of the closing costs so you can see how much the lender is charging you to make the loan. 

Lender fees to look for could be labeled as loan origination fees, application fees, processing fees, underwriting fees, etc. Whatever it’s being called, the total amounts of such fees should be a reasonable amount. The best way to determine that you’re paying a fair rate is to start by getting a lender referral from a real estate agent like myself or from a trusted family member or friend. Another smart way to ensure you’re getting a fair shake is to shop more than one lender.

Prepare a few questions to ask your lender, such as… How long can you lock in the current interest rate? Do you qualify for an FHA and/or conventional loan? Will the lender help you get a lower interest rate later, if rates should drop in the mean time? How long is the lender’s turn-around time to complete the loan. We’ve seen some lenders requiring 40 days for closing because their underwriter’s are overwhelmed. If that’s the case, you’re better off going to a different lender because timeliness is critical in a real estate transaction. 


Posted by Jason Brown

There’s More To Choosing A Kansas City Mortgage Lender Than The Interest Rate Being Quoted

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Checking The Pulse Of The Kansas City Real Estate Market

Are you considering buying a home in Kansas City, Johnson County Kansas, Overland Park or in the surrounding area? If you are, one of the first things you should start checking on are today’s mortgage interest rates. The lower the interest rates available, the lower your mortgage payments will be… or the more home you’ll be able to afford. 30-year fixed rate loans are the most common loans made today and you can check how today’s rates are looking here at BankRate.com, Yahoo and CNN Money. 

Remember, while interest rates are a critical part of the equation, there’s a lot of other details than need considered as well. Ask each lender what fees and costs are associated with the loan. Check with multiple lenders too and once you’ve determine what you deem to be a solid interest rate and fair fees, go to work in locating a local LOAN OFFICER who can get the job done. Dealing with an out-of-town loan officer GREATLY increases the likelihood of some sort of trouble with getting the loan closed on time — or closed at all in some cases. There’s something about having a local loan officer that you or your Kansas City Realtor has done business with in the past that keeps a transaction moving along smoothly.  

How do you know how much the loan you’re inquiring about will cost you? Ask for a Truth In Lending estimate that spells that information out. It will show the interest rate being quoted on that given day (remember that interest rates change daily) as well as any fees associated with the loan in question. 


Posted by Jason Brown

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New FHA Requirements Increase Minimum Down Payments For Many Kansas City Home Buyers

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Checking The Pulse Of The Kansas City Real Estate Market

For the past several years it’s become more difficult for home buyers to secure financing. There’s been an obvious over-correction in the market as lenders went from giving your dog a loan for his dog house to not giving a self-employed borrower with 50% down and an 800 credit score a loan. But things have opened up enough now that solid buyers can secure loans and purchase a great home. But just when we need some more good news, FHA comes out this month with requirements making it more difficult for borrowers to secure an FHA loan.

If you’re credit score is anywhere below 500 you can not get an FHA loan any longer. Period. Though when I asked a few lenders just how many borrowers this would affect, they all said very few… because they weren’t giving loans to sub 500 credit score buyers in the past, even though FHA would have allowed it. The real change is for the borrowers with credit scores in the 500 to 579 range. Those borrowers must now have a TEN PERCENT down payment — rather than the 3.5% minimum down payment that previous borrowers with the same credit score needed.


Posted by Jason A. Brown

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FHA Loan Changes Will Reduce Up Front Costs But Raise Annual Premiums For Kansas City Home Buyers

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Checking The Pulse Of The Kansas City Real Estate Market

Back in April up-front FHA mortgage insurance premiums were raised from 1.75% to 2.25% of the loan amount. This was done in an effort to replenish the FHA reserve funds and keep the program afloat. Considering that more than half of loans being done today are FHA loans, I can’t think of anything more important right now than making sure FHA doesn’t cease to exist. Unfortunately the increase to up-front insurance premiums hasn’t gotten FHA completely healthy and now the powers that be are implementing a new plan.

Beginning October of this year, new FHA changes will include lowering the up front mortgage insurance premiums all the way down to 1% and then raising the annual premiums paid by FHA borrowers significantly. The new higher annual premiums will follow the following guideline: .90 basis points on loans with 5% or less down payments and .85 basis points for loans with more than 5% down payments. These changes will not have any affect on FHA loans already in progress.

Under the current structure, a $100,000 FHA loan would cost the borrower $2,250 in an up front mortgage insurance premium and then around $550 a year in yearly premiums. Under the new structure going into effect in October, the same borrower would pay $1,000 in an up front mortgage insurance premium and then around $900 in annual premium. If you analyze this for a short while, you’ll see that at some point around year 2 of the loan, you’ll be at a break even point either way. But after year two, you’ll be paying about $350 more per year (for every $100,000 amount borrowed)  thereafter.


Posted by Jason A. Brown

I PITI The Fool Who Doesn’t Know What This Acronym Means When Buying A Home

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Checking The Pulse Of The Kansas City Real Estate Market

When getting Pre-Approved for a home loan, there’s more to the process than just rushing to get the Pre-Approval Letter in hand. Yes, that letter tells you the lender is willing to give you a loan.  But what it doesn’t tell you is how much your monthly mortgage payments are going to be. And, if you ask me, that’s the most important aspect of getting Pre-Approved. Of course closing costs are very important too, but it’s the monthly payments that you could be faced with making for 5, 10, 15 years…

So be sure you consider each component that makes up your monthly mortgage payment. PITI is an easy acronym to remember for the four core aspects of a monthly mortgage payment. They stand for Principal, Interest, Taxes and Insurance. The Principal is the portion of each monthly payment that’s being deducted off the total amount you still own on the home. In other words, if you’re selling your home later and $5,000 of your monthly payments over the years have gone towards principal, that’s $5,000 in equity you’ve built up by way of your monthly payments.

The next aspect is Interest. We all know what this is. It’s how the lender profits by loaning you the money to buy the home. If the principal and interest portion of your monthly mortgage payment is $1,000 per month, possibly $950 of each payment is going to interest. This is certainly the case in the first several years of a mortgage loan because mortgage loans have the earliest payments front loaded with interest.  This is how mortgage loans have been done for decades and essentially your monthly mortgage payments are being recalculated each month based on the new loan balance (after taking your previous month’s payment into consideration). In case you’re wondering at what point would the principal pay-down portion of a monthly mortgage payment equal the interest portion, I belive it’s somewhere around year 20 on a 30 year mortgage loan.

The next aspect is Insurance. By insurance we mean Homeowner’s Insurance – a.k.a. Hazard Insurance. If you’re home burns down, Homeowner’s Insurance is what’s going to rebuild the home. Why do lenders require this be included in your monthly payments (if you have less than a 20% down payment)?  Well, for a buyer who has just a 5% down payment, it would mean the bank actually “owns” 95% of the risk in your home. So, if it burns down, the borrower lost 5% of the asset but the lender would be losing 95%! If a borrower has more than a 20% down payment, most lenders feel the borrower has such a big interest in making sure the home has insurance in place that they don’t require it be included in the borrower’s monthly mortgage payments.

The next aspect of the mortgage payment is Taxes. By taxes we mean County Property Taxes.  Your lender doesn’t want a lien placed on your home by the government in the event you don’t stay current on your property taxes. So, if you have less than a 20% down payment, the lender will collect your property taxes in your monthly payment. This portion of your monthly payments goes into an escrow account so the money is there when the property taxes actually come due.  This is important to the lender because if they have to foreclose on you in the future, they won’t have to worry about the government standing ahead of them in line with an interest in the property.

But wait… there’s more. Although PITI are the four main aspects of a monthly mortgage payment, if you have less than a 20% down payment you can also expect to add a fifth critical item to the equation — Mortgage Insurance. Borrowers with less than a 20% down payment are considered higher risk loans. To cover this risk, lenders will require the borrower to pay for Mortgage Insurance, which means the borrower is paying for insurance that guards against possible losses the lender might incur from the borrower defaulting on the loan. Also, some condo and townhome association dues are collected as part of the borrower’s monthly mortgage payment, thus adding a sixth component to the monthly mortgage payment for some borrowers.


Posted by Jason A. Brown

There’s More Than Just LOWER Prices To Consider When Purchasing Kansas City Real Estate

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Checking The Pulse Of The Kansas City Real Estate Market

9 out of 10 Kansas City home buyers tell me that locating a home at a PRICE they can justify is the most important factor in their home search. I can easily show those nine how that can be flawed thinking. We are seeing historically LOW interests rates and rates that I may never see again in my lifetime.  Today’s interest rates are so low in fact that they need weighed just as much as a home’s price when making the decision whether to purchase. Don’t believe me? Then check this out…

Scenario: Over the next 18 months, prices decrease by 5.0% but interest rates increase by 0.5%:

123 Oak – Current Market:
123 Oak – Future Scenario:
Home Price is $200,000 Home Price FALLS 5% to $190,000
Interest Rates are 5.0% Interest Rate RISES 0.5% to 5.5%
Monthly Payment = $1,074 Monthly Payment = $1,079
Note: monthly payments above include principal & interest only (no property taxes, homeowner’s insurance, etc.)

So using the above scenario, let’s say I take you out and we locate the perfect $200,000 home. It even has a jetted master bathroom corner tub (that your spouse loves) but you tell your spouse, “I wear the pants in this family and I won’t pay a dollar more than $190,000.”  All this despite the fact it’s the perfect home and I show you the market stats indicating the home is priced perfectly in our current Kansas City real estate market. You interject, “It’s not a deal, if it’s not a steal. We’ll wait to see if we can buy the home later for 5% less”.

Well that home sells the next day, your spouse leaves you and the home search is over. 18 months later, you’ve reconciled with your spouse and we locate an identical home, in the same subdivision on the same type of lot, etc. Both homes even face west.  Everything is exactly the same as the home you lost out on… except this home’s corner tub isn’t jetted. Your spouse doesn’t say a word on this given day, but you know you’re never going to hear the end of it… You tell me and your spouse that everything is going to turn out rosy because you’re going to be able to purchase THIS home for just $190,000. At this point, I break the following news to you: Although we can buy the home for 5% less than the same home 18 months ago,  interest rates have gone up  from 5.0% to 5.5%. So your $190,000 home with a 5.5% interest rate has virtually the same payment – actually $5 higher – as the guy who paid $200,000 but got a 5.0% interest rate – oh, and don’t forget the corner tub on your home isn’t jetted. Or that you lost out on the mortgage interest deduction the last year and a half. Or that you had to deal with that landlord and the neighbors while living in that rental.

I’m not kidding people. If you were to wait to buy and home prices DROP 5% but interest rates RISE just 0.5%, you have a wash on your hands. The scenario works the same if home prices DROP 10% but interest rates RISE 1.0%. See the pattern? And if you don’t think interest rates could be at 6% in 6 or 12 months, I have history to show you otherwise. The Fed even has plans to stop buying mortgage-backed securities in the next month, which some analysts are predicting could jump interest rates a FULL PERCENT by the end of 2010. Home prices aren’t in a free-fall here in the Kansas City area and I can’t imagine any scenario where home prices would drop 10% quicker than interest rates would go up 1%. They may not fall at all. But I bet interest rates rise. Do you agree?

If you think interest rates will rise, here’s one last scenario for you to ponder…  If you wait 2 years and a $300,000 home (today) can be purchased for $270,000 (a 10% drop) BUT interest rates go up from 5.0% (today) to 7% at that time, your monthly payment would be $187 HIGHER ($1,610 versus $1,797).  This despite the fact that you bought the home for $30,000 less by having waited! Oh, and I haven’t even mentioned the tax credit that’s here today but gone tomorrow. So, do you still want to wait to buy that perfect home?

Posted by Jason A. Brown

New 2010 Good Faith Estimates Haven’t Led To Self-Inflicted Injuries In Kansas City

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Checking The Pulse Of The Kansas City Real Estate Market

The new 2010 Good Faith Estimate has been in effect for more than a month and I’ve yet to see any mortgage lenders, borrowers or real estate agents climbing buildings or jumping off bridges. The changes do however have people talking and will certainly change the way loans have been handled over the years. For the best mortgage lenders, these changes won’t have the same drastic effect they’ll have on shady or unorganized lenders. The lenders I know well have also taken on the changes head on in educating agents and borrowers alike about the changes.


The January 1st 2010 Real Estate Settlement Procedure Act (RESPA) has certainly made the Good Faith Estimate a lot more good faith — and a lot less Que Sara, Sara. Lenders will have to educate borrowers on what’s being charged for their loan, why they’re being charged each amount and in many cases, who exactly is charging the fees. I’m expecting it will clearly educate borrowers on the risks of ARM loans and other creative financing methods that are at the root of our current financial mess. I’ve read many places online that it will make it very easy to compare the Good Faith Estimate that was given out early in the process to the actual HUD-1 Settlement Statement that will be produced  for the real estate closing.

The new Good Faith Estimate requires that mortgage lenders show all the key loan terms and closing costs to borrowers. More importantly, if the lender half-asses a Good Faith estimate, the lender could be on the hook for overages in many instances. I’m thinking this will give home buyers some good assurance that the Good Faith Estimates will be reasonably accurate and minimize or eliminate the junk fees seen all too often over the years. Finding junk fees on the HUD-1 has put many a borrower in the difficult circumstance of not being able to fight it because they’ve already closed on their home sale.  And, if you’re thinking ahead like me, this seems likely to lead lenders to work closely with closing agents to build a comfort level that the fees quoted early on are  more-or-less guaranteed come closing time.

Different aspects of the new Good Faith Estimate (GFE) are defined at different tolerance levels. The one I’ve commonly heard referred to is the 10% tolerance of quoted fees. This applies to settlement service fees where the lender specifies the provider to be used in the transaction. But there’s also many that fall under zero tolerance, including fees the lender was in direct control of when they were listed on the GFE – such as the lender’s own origination fees, underwriting fees and processing fees.  Then there’s the unlimited tolerance for items that the borrower is in control of – such as title insurance, home inspections and homeowner’s insurance. You can see how the lender can’t be expected to guarantee the latter.

It’s worth noting that many lenders believe any money saved by the new GFE could be lost due to the extra time and costs required to make sure they are in compliance with the changes — all costs they’d likely want to pass on to consumers. But if lenders start erring on the safe side, competitors who are on the ball and quoting accurate fees and costs will undercut them and secure the borrower’s business. So I find it unlikely that lenders will simply quote high amounts on the GFE, because if they do they may go  out of business – due to having no business. The new Good Faith Estimate is a 3-page document  that provides a break down of loan costs in layman terms. ALL mortgage lenders are required to use  this document going forward and you can check out some of the most common GFE questions here on these 57 pages of frequently asked RESPA questions.

A down side that I’m pondering is whether lenders will refuse to give borrowers a Good Faith Estimate early in the home buying process. If they refuse until a buyer has applied for a home loan and gone under contract, this would keep a borrower from really knowing the costs of the loan until they’re already under contract. Although I could argue that’s no worse than what’s been dealt with before these changes were made. We’ll need several more months to see how things play out and make any definitive assessments of the effect of the new GFE. Irregardless, it’s as critical as ever that borrowers work with a reputable and trust-worthy lender. If you’re looking for a good lender to finance your home purchase or refinance your current home, here are three lenders that I would trust to handle my own Kansas City mortgage loan…

Jill Underwood with Pulaski Bank
Email: jill@jillunderwood.com
Phone: 913-915-0150
www.JillUnderwood.com

Alan Scarpa with National Bank Of Kansas City
Email: ascarpa@nbofkc.com
Phone: 913-253-0189
www.nbofkc.com

Rick Woodruff with Metropolitan Mortgage Corporation
Email: rick@e-metropolitan.com
Phone: 913-642-8300
www.emetropolitan.com
Posted by Jason A. Brown

Get That 3.5% Down Payment Together Before You Head Out To View Homes

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Hands On The Heartland
Checking The Pulse Of The Kansas City Real Estate Market


Unless you’re paying cash for a home or have VA loan eligibility, there’s no point in heading out to view homes if you aren’t able to make a 3.5% down payment. On a $200,000 home that means you need to have $7,000 saved up. That’s what FHA requires and it’s 1.5% less down payment than you’d have to have if doing a conventional loan. I was surprised to read this week that FHA is currently backing 25% of all mortgage loans in today’s market! That’s about double what they were doing less than a year ago. My first reaction was that FHA is playing an important role in trying to pull our real estate market out of the funk it’s in. My second thought was they sure are taking on a lot of risk at time when few are willing to step up. My fears were eased when I saw that the average  FHA buyer’s credit score had jumped from 630 to 690 – that’s a huge jump. FHA is still taking on some risky buyers with credit scores below 500 but the risk involved with a potential default is lessened by their requirement that these buyers have a 10% down payment.

This leads to me to a question I often here from Kansas City home buyers… “Should I get an FHA or conventional loan?”.  If you’re a buyer who is scraping together a down payment, there’s a huge advantage in the 3.5% minimum FHA down payment versus the 5% minimum conventional loan down payment. And that’s the main reason many buyers go FHA. Yet Conventional loans are still the most popular loans made today and that’s because their less complicated all the way around.  Yet there are many distinct advantages to going FHA as well and here ‘s some random FHA loan versus Conventional loan thoughts to consider…

  • The maximum FHA loan amount for the Kansas City area is currently $271,050.
  • Conventional loans USUALLY don’t have a pre-payment penalty; FHA loans NEVER have a pre-payment penalty.
  • FHA loans require about TWICE as much effort on the borrower to provide the lender with necessary supporting documents on employment, income, etc.
  • Although proving qualifications is harder, the actual qualifications for an FHA loan are less restrictive than on a conventional loan.
  • FHA allows up to 6% in Seller concession (i.e. seller payed buyer closing costs); Conventional loans only allow up to 3% in Seller concessions.
  • FHA loans require a 3.5% minimum down payment; Conventional requires a 5% minimum down payment.
  • Unlike conventional loans, the down payment on an FHA loan can be gifted by a relative.
  • To get roughly an equivalent interest rate on a conventional loan, you’d need a 10% down payment (although only 5% is required); Conventional rates are often better than FHA rates if buyer has more than a 10% down payment.
  • Conventional loans with less than 20% down payment go through TWO underwriting procedures (one for the loan and one for the PMI); FHA loans go through just one underwriting procedure.
  • Conventional loans have no up-front PMI; FHA loans have a significant up-front PMI fee of 1.75% of the loan amount (the fee can be financed into the monthly payments).
  • FHA loans have a streamlined refinance process and the loans may also be assumable by another buyer later.
  • Contrary to many rumors FHA loans are not just for First Time Home Buyers.
  • There are no income minimums or maximums to qualify — yes, Donald Trump can go FHA.
  • FHA won’t make loans on homes that were involved in a sale within the past 90 days.
  • FHA won’t make loans on homes with major structural or condition issues.
  • Seller’s don’t like FHA loans because the appraisals are more strict and take longer to fund at closing.
  • Appraisers are held to strict FHA guidelines for declining markets (which has been just about every market).
Posted by Jason A. Brown
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