What is the difference between estimates and home values? aka - Why Zillow is such a mess.
When searching for Iowa real estate it is important to understand the difference between residential real estate estimates versus actual home values. Many popular real estate related websites provide information that superficially appears to be home values when it fact, the data is actually only an estimate.
Home Values Defined. Home values are derived from actual sales data taken from residential real estate records.
Estimates Defined. Popular websites estimate residential real estate values based upon computer calculations that use data taken from local property tax offices. Since property taxes are infrequently updated (sometimes as infrequently as every five years, the information can be woefully out of date.
Tip. When searching for Iowa new homes or pre-existing Iowa homes for sale be sure to obtain actual homes values rather than estimates. A qualified real estate agent will have access to full sales data rather than estimated home values taken from tax records.
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What is mortgage lock fraud?
Mortgage lock fraud is rampant and can cost thousands of dollars over the life of your loan but many people never even realize they are the victim of fraud. Learn how to identify the problem and protect yourself from this predatory practice without losing the home of your dreams.
How It Works...
Mortgage lock fraud begins with a simple lie; typically the mortgage originator tells you the rate lock is in place when it isn't. Sometimes this can be a simply mistake but remember, loan officers deal with this daily and understand the importance of locking in a specified interest rate. In some instances, marginal home buyers may not qualify for a residential real estate mortgage at a higher rate.
The Cause...
Mistakes. Occasionally mistakes happen but it should be extremely rare. One way to prevent mistakes from taking place is to verify all information at least twice. Common errors include failure to adjust a rate for lower than anticipated credit score or higher loan to value ratios. Go over all the details with the loan officer twice to make sure everything is accurately reflected.
Pure and simple - greed. Unfortunately greed is also a major reason for mortgage lock fraud. Loan officers make money from what is called a “yield spread" or the difference between the market rate and the rate you actually pay.
How to Protect Yourself...
1. Deal with a reputable mortgage broker. Never deal with a broker with a history of frequent "mistakes".
2. Get the Rate Lock in Writing. Don't accept excuses and don’t wait for written verification. Make sure it is signed, dated and completely filled in.
3. Never submit incomplete forms. "Undisclosed" information becomes a scapegoat that allows the loan officer to increase rates at the last moment in the hope you won't walk away from the deal.
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What is a short sale?
Short sales can work for buyers and sellers of Iowa real estate as long as both parties fully understand all of the ramifications. Unfortunately, that isn't always the case. Use this quick checklist to make sure a short sale goes smoothly for everyone involved.
1. Understand what a short sales is – and isn't. Basically a short sale is when a buyer is interested in purchasing residential real estate for less than what is currently owed on the property. For obvious reasons, this typically involves sellers who are in trouble with their mortgage or at risk of foreclosure. Perhaps they purchased Iowa new homes at the height of the market with an adjustable mortgage and now cannot obtain new financing due to a job loss or other financial difficulty. Whatever the reason, the seller is motivated to sell the property in order to avoid foreclosure or greater financial hardship.
During a short sale, the seller does not have the final "say-so". The lender or bank must approve the sale unless the seller agrees to pay the difference due on the mortgage at the closing. In areas of high foreclosures or dropping home prices, some lenders will approve a short sale in order to save the cost of foreclosure, legal fees, empty homes and other transaction expenses.
2. Prepare a Plan. Before approaching the bank or lender with the short sale offer be sure to have a full plan prepared. Demonstrate your credit worthiness, pre-approved status, down-payment and other financial to let them know you are a serious contender.
3. Broker Price Opinion or BPO. Work with a real estate broker who can present the average selling price, time on the market and other comparison information to support your offer.
4. Second Mortgage. If there is a second mortgage on the property then present an offer to that lender first. In the event of a foreclosure, the second mortgage typically is eliminated so there is an additional incentive for a second mortgage holder to approve of a short sale offer.
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How can I buy a home if I'm self employed?
ResMAE, one of the largest lenders responsible for writing stated income loans, discontinued writing new stated income loans during the end of 2007 leaving many self-employed home buyers in a difficult situation.
Stated income loans have experienced more than their share of difficulty in recent years; so much so that the industry itself dubbed them "liars’ loans". Poor over-sight and an unscrupulous mortgage brokers were complacent in obtaining minimal documentations to substantiate many of the loans written. Combined with buyers eager to obtain residential real estate at any cost, falsification of information and other irregularities become so common it is estimated that 1 out of every 3 stated income loans would not have been granted if the correct information had been provided.
Unfortunately, honest self-employed home buyers are now feeling the fall-out. After ResMAE discontinued their stated loan programs, nearly all sources of loans for the self-employed have followed suite making it harder than ever to obtain financing when buying Iowa new homes.
If you are self employed and seeking to purchase Iowa real estate then here are some tips to help:
1. Plan in Advance. One of the problems plaguing self-employed home buyers is a good CPA. Yes, you heard us right! By taking advantage of all those legal tax deductions, self-employed workers frequently end up with very little taxable income. It may benefit you to increase the earned income for a few years in anticipation of buying an Iowa real estate.
2. Larger Down Payment. The most widely abused stated income loans were those requiring little to no money down. Expect to put at least 10 percent, if not closer to 20 percent down when purchasing a home with a stated income loan.
3. Good Credit. Review your credit well in advance and correct any errors. A solid credit score will be critical to obtaining a loan if you are self employed.
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Where can I find financial assistance to purchase Iowa real estate?
Begin your search for Iowa new homes or pre-existing Iowa homes for sale by visiting these great resources. You might be eligible for down-payment assistance, low interest rate loans, funds to rehabilitate a property or other programs designed to make owning your own Iowa home affordable.
Iowa Finance Authority: The Iowa Finance Authority offers two main programs "FirstHome" and "FirstHomePlus" designed to provide low interest, fixed rate financing options to Iowa buyers. There are not points or origination fees and low down payments. Find out if you qualify by visiting: http://www.iowafinanceauthority.gov/en/for_home_buyers/.
AHEAD Inc: Designed for first-time home buyers, AHEAD is sponsored by Area 15 Regional Planning Commission. To learn more visit http://www.area15rpc.com/.
Iowa USDA. Rural housing assistance is available from the Iowa USDA program for the purchase of residential real estate and farming related properties. To apply or learn more visit http://www.rurdev.usda.gov/ia/rhs.html.
State of Iowa Community Development. This program makes grants to cities and towns throughout Iowa which then assist homeowners to rehabilitate homes, invest in special revitalization districts and other programs. To learn more contact
State of Iowa
Division of Community Development
200 E. Grand Ave.
Des Moines, IA 50309-1819
Phone: (515) 242-4850
Fax: (515) 242-4809
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What type of mortgage scams should I be aware of?
If you are in the market for Iowa real estate then there is a high likelihood you will use some type of real estate loan to finance the purchase. Predatory lending practices and mortgage fraud are common concerns for home buyers and with good reason; while the majority of mortgage brokers are honest people trying to make an honest living, the shady practices of a few bad apples can cost you tens of thousands of dollars over the life of the loan...or worse, result in the loss of your home.
Awareness if the first step to protecting yourself. Take time to review some of the most common mortgage fraud schemes currently used by predatory brokers.
1. Good Faith Estimate Scam. This typically involves a twist on the old "bait and switch" scam where the closing cost and rate quoted are not the ones provided by the date of closing.
2. Application Deposit Scheme. The old adage "If it sounds too good to be true it probably is" applies to mortgage loans just like anything else. Fantastic promotions of ultra-low rates, guaranteed approval and other promises are often designed to entice buyers into sending in a mortgage application, complete with hefty application fee and deposit. Once the application and fee is received then the fine print often indicates the "catch" or reason you don't qualify for the rates promised. In the meantime, the application fee and deposit are long gone.
3. Mortgage Lock Fraud. Another costly "bait and switch" designed to part you from your money.
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How can I find a great property?
Searching for Iowa real estate can be challenging simply because of the abundance of choices; the natural beauty and charm of Iowa can leave prospective home buyers feeling overwhelmed. Learn how to spot a great deal when searching for Iowa homes for sale by using these quick tips.
1. Work with an agent that specializes in your category of real estate; farm, condo, single family residential or vacant land.
2. Select a community that reflects your lifestyle. Schools, work, churches and outdoor activities are all important considerations when deciding where to live.
3. Add up the small features and benefits. It's easy to overlook small things like a fenced in back yard, fruit trees or that handy storage shed but combined, they add up to big savings. Make a list of positives and negative about each property as you view it to compare against others.
4. Pride of ownership shows. Properties with obvious deferred maintenance could be a short term problem due to illness or a family that has already relocated, or a sign of much larger problems. Long term deferred maintenance is often a warning sign of future problems. Seek out properties that have been maintained and lovely cared for in order to reduce the future cost of maintenance.
5. Equity. The ability to purchase a property at slightly lower than average cost allows instant equity which can preserve future purchasing power and allow you to sell in the future even in a stagnating market.
It's often the little things that make the biggest difference in the long run. Make sure you spend time becoming familiar with the area, lifestyle and profit potential before making your final decision. Chances are the same things that attract you to an area will be a selling point in the future
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