Lehigh Valley Real Estate Blog, Home Buying & Selling Information

What is a Mortgage Commitment in a Lehigh Valley Real Estate Sale?

The Agreement of Sale on your Lehigh Valley home purchase may include a Mortgage Contingency. As part of this contingency, a Mortgage Commitment must be presented to the home seller by a certain date (this is a negotiable item on the contract) to ensure the successful sale of the home. The seller is given confirmation by the mortgage company that the company is commited to giving the home buyer the loan.

The most common process is that the original Agreement of Sale is accepted but it is "contingent" on the home buyer being able to get a mortgage.

The mortgage pre-approval letter, included with the offer, indicates that a mortgage company believes they can provide the mortgage but pre-approval or pre-qualification letters are usually just a verbal relationship with a mortgage represenative. In order to carry any weight, the letter should at minimum indicate that the credit has been checked but it is still usually just a verbal relationship.

Now, that the offer has been accepted it is time to prove to the mortgage company everything you told them verbally. An official mortage application must be made within the timeline on the Agreement of Sale and then copies of W2's, tax returns, gift letters...etc will have to be provided to the mortgage company as requested. The mortgage company will order an appraisal of the property.

Once all of this information has been gathered, the loan will go into underwriting. The job of the underwriter is to put all of the data together to make sure it meets all of the loan quidelines, verify/clarify any credit issues, review the appraisal...etc.

After this process is finished, a Mortgage Commitment will be issued. The Mortgage Commitment provides proof to the home seller that the mortgage company is commited to providing the buyer with the home mortgage.

The Pennsylvania Agreement of Sale to purchase real estate has a negotiable date on when the mortgage commitment is due. In the Lehigh Valley, the mortgage commitment date is usually 3-4 weeks after execution of the contract. If the buyer's mortgage company does not provide the commitment by the due date, the seller can cancel the contract and put the home back on the market. Because it was a contractual contingency, the home buyer will get their deposit money back.

The mortgage commitment itself may also have contingencies such as the commitment is based on getting a tax return from the buyer. Now, you have an Agreement of Sale with a Mortgage Contingency that has a Mortgage Commitment with a Contingeny.

We'll leave that for another post :-)

Your Lehigh Valley Home Closing Day - What To Expect

It's finally here! After searching through houses, putting in an acceptable offer then going through the inspections while at the same time promising the mortgage company your first born the time has come to settle or take possession of your Lehigh Valley Home.

What should you, the home buyer, expect on closing day?

Hopefully, before closing day you made arrangements to switch all of the utilities over to your name and to have appropriate property insurance coverage on the property. If these items are all in place you're in good shape. If not, your Lehigh Valley Real Estate Agent can help you with this.

A Lehigh Valley Closing day typically consists of a pre-settlement walk-thru. You will meet your agent at the house and check to make sure everything is in working order and that the house you placed the offer on is the house you are getting (no holes in the walls, everything the way you expected...etc).

After the pre-settlement walk-thru, it is typical to head over to the "closing" where you will spend about an hour signing all the title work and mortgage papers. At the end of this, the Home is YOURS!

Lehigh Valley Home Buyer Deposit Money - What Happens To It?

As a buyer approaches closing day a common questions is "What happens with my deposit money?".

When a Lehigh Valley Home Buyer puts an offer on a house one or more deposits are involved. These deposits, provided by the home buyer towards the purchase of the house, are used to show intent to purchase.

Typically, the deposits are accepted by the listing broker and put into an escrow account until closing. On closing day, the broker will bring an "escrow" check to the closing to apply it to the transaction.

The Settlement Company will calculate how much money the buyer needs including the percent down plus closing costs and other fees. It will then subtract the amount of the "escrow" or deposits from this number.

If the transaction falls apart, the deposit money may be in jeopardy depending on how the Agreement of Sale was written and what the problem is. Your Lehigh Valley Real Estate Agent can further discuss this with you.

Lehigh Valley Home Seller Rents Instead of Repairing Property

In a recent Lehigh Valley home purchase, the home buyers were going to pay $147,000 for a house listed at $150,000. The home, located in North Bethlehem, had been on the market about one month. The agreement of sale asked for all of the new kitchen appliances.

The original offer of $145,000 got countered for $2,000 more if the appliances were included or would be accepted at $145,000 without the appliances. The buyer accepted the offer with the appliances for $2,000 more or a purchase price of $147,000.

The offer also asked for the property inspection, wood destroying insect inspection (typically called termite inspection even though it includes more that just termites) and a radon test. Asking for all 3 tests/inspections is pretty common in Lehigh Valley these days as buyer have somewhat of the upper-hand.

Within a week, all of the inspections were done. Conclusion:

There was major brickwork/masonry repair work needed on the outside of the house. The deterioration of the bricks was a result of past water problems with the chimney and roof structure of the house. The property disclosure had stated these water problems and that they had been fixed. What the sellers disclosure didn't indicate is that there was a problem with the brick exterior and that the sellers had gotten an estimate to fix the brickwork but decided not to do it. Two estimates said it would run between $1,500 and $2,200 to fix all of it.

In addition, the basement plumbing had asbestos on some of the older piping (this was disclosed in the property disclosure so the buyers were aware of this before-hand).

Termites were found in wood under the back porch. They had not gotten into the house but they were close.

Radon was present in the partial dirt basement (the level was around 11.5)...not real high considering the dirt floor. Lehigh Valley is no different than any other area with respect to radon. Some houses have it and some don't.

The property inspection also found other numerous smaller items that needed to be fixed.

After carefully reviewing all of the inspection results, we decided to ask the home seller to treat the property for termites and provide a $2,500 credit for everything else.

The home sellers immediately got the property treated for termites but only offered $1,000 credit for the rest of the repair work. If the home buyers didn't accept "that was okay since they would rent the property out instead and sell it when the market gets better for more money".

The home buyers walked away with a lose of around $425.00 for the inspections.

So, now the home is going to be rented.

Some renter is going to rent a home with radon and asbestos in the basement and the possibility that a brick may fall on their head if they walk along the side of the house. Did the Lehigh Valley home seller make the correct decision?

I don't think so. Unless they plan on letting the house just continue to run down someone has to pay to get the brickwork fixed, and the asbestos and radon eventually need to be dealt with.

What happens when the home seller attempts to sell in a few years? Will the house be in worse shape? Will they fix the known problems? Will they disclose these issues? Now, that they now, legally they should include these problems on the property disclosure whether they have been fixed or not.

I don't believe the home seller should have allowed the buyer to walk away for repairs that need to be done to the property regardless.