Lehigh Valley Real Estate Blog, Home Buying & Selling Information

New FHA Mortgage Guidelines for Lehigh Valley Home Buyer's

Starting in 2009, a Lehigh Valley Home Buyer will face a new minimum for the required amount of money they will need to purchase a home using an FHA loan. The old minimum was 3.0%. The new amount needed by a home buyer will be 3.5%.

With this in mind, if a home buyer wants to purchase a $200,000 home they will need $7,000 of "their own" money. There is no exception to this. The buyer must have the money or have it gifted to them by a friend or relative. Therefore, the maximum loan for a home will be 96.5% of the purchase price.

In addition, there are closing costs involved (title insurance, transfer tax, real estate taxes) that amount to typically 4-5% of the purchase price.

So, in order to purchase that $200,000 house it will cost the home buyer 3.5% of their own money plus an additional 4-5% that they will need for closing costs. ($7,000 plus $8,000 - $10,000)

Most Lehigh Valley Home Buyers have the minimum (3% now, 3.5% in January) but use Seller's Assist to include the closing costs in the mortgage. FHA mortgages allow up to 6% Seller's Assist and there are no plans to change this.

Lehigh Valley Home Buyer's Seller's Assist or Seller's Concession!

Seller's Assist, sometimes called Seller's Concession, is very common in the purchase of a Lehigh Valley Home. Sometimes it is a little confusing to the Home Buyer or the Home Seller exactly how it works.

The bottom line is that Seller's Assist is a way for the buyer to include closing costs in their mortgage.Various mortgage options allow the inclusion of 3% to 6% of the purchase price to be used to pay the Buyer's Closing Costs.

Let's use an example:

A Lehigh Valley house is for sale for $100,000. The Buyer makes an offer of $105,000 and asks for a $5,000 sellers assist. The Seller will get the $100,000 they want but agree to a purchase price of $105,000 so that the mortgage can include $5,000 of the Buyer's closing costs.

Seller's Assist DOES NOT mean the seller is giving the buyer a gift. The buyer is including the costs in their mortgage and will eventually have to pay it back. The seller is accepting the Purchase Price minus the Seller's Assist.

The risk to the Home Seller is if the house does not appraise. In our above example, if the house only appraises at $103,000 and the Buyer definitely needs $5,000 towards closing costs then the seller will have to accept less money ($98,000) to keep the transaction together.

The offer from the Home Buyer does not have to be higher than the listed price. The buyer could offer $100,000 for the house and still ask for $5,000 in Seller's Assist. The Lehigh Valley Home Seller would get $95,000 for the house but the Buyer would still get a mortgage based on $100,000 in order to get the $5,000 they need for closing costs.

Lehigh Valley Home Buyers Getting Into Multiple Bid Situations

This past Sunday morning, I scheduled 3 Lehigh Valley houses to show to a potential buyer on Monday evening. Sunday afternoon I received a call from one of the listing agents. They had multiple bids on the property and one of the offers was going to be accepted that afternoon. Okay, we were down to viewing two houses.

Then, on Monday morning, I received another call from one of the listing agents. They also had multiple bids on the property and the owner was going to select one of the offers and the showing was cancelled. Wow, now we were down to just one property.

Over the past few weeks, I have shown another buyer multiple properties. We placed offers on two properties during these weeks and in each situation another offer came in at the same time and they lost both of the properties. They were limited in their financing due to needing 6% sellers assist and they just couldn't compete with the other offers. We did get an accepted offer on a third property the other day.

The similarity in both of these situations is that both buyers were looking to purchase their Lehigh Valley home in the $150,000 or less price range. This price range has become one of the more popular price ranges in the valley.

Visit http://www.lehighvalleyhomesonline.com/ for all of your real estate needs!

Lehigh Valley Mortgage Pre-Qualification versus Pre-Approval

There is typically an interchange of terms when referring to a mortgage pre-qualification versus a mortgage pre-approval. It can definitely get confusing for Lehigh Valley Home Buyer's and Seller's. Here's the reason.

A Mortgage Pre-Qualification is when a buyer makes a 10 minute call to a mortgage representative and discusses their income and debt. Based on this conversation, they are issued a pre-qualification.

A Mortgage Pre-Approval requires not only the 10 minute conversation but it goes further by requiring that the potential buyer prove what they stated to the mortgage representative. Their credit is checked and they must supply employment verification (W2's) and tax returns. Then all of this information is sent to the underwriters and a pre-approval is issued. This buyer is considered very strong. They just need to find a house and they are good to go.

I should note that a morgage pre-approval or approval is not a mortgage committment. A mortgage committment is dependent on the appraisal of the house and any other factors that need to be cleared up before giving the buyer the mortgage.

Anyways, the confusion between the pre-qual and the pre-approval is because most mortgage companies issue something in the middle. They spend 10 minutes on the phone with the buyer, pull their credit, and then issue a piece of paper (can be called a pre-qual or a pre-approval) but don't require the W2's and tax information needed to do an actual pre-approval. They wait for the buyer to make an acceptable offer on a house then they do the rest of the process.

A Lehigh Valley Home Seller should review what the mortgage company has issued. At a minimum, the Buyer's credit should be checked. If not, then the buyer may be providing the seller with a useless piece of paper from the mortgage company. The buyer will still have to prove what they told the mortgage company is true but bad credit will prohibit the loan no matter what.

Forks Township Community Days - September 20,21 2008

The Forks Community Days celebration will be held Saturday, September 20th, from 11:00 AM - 10:00 PM and Sunday, September 21, 2008 from 11:00 AM to 6:00 PM. Come join in the celebration!

Why Can't Lehigh Valley Home Sellers Fix Up Their Homes?

Although I work with both Lehigh Valley Home Buyers and Home Sellers, I tend to work with more home buyers than sellers. As a result, I see a lot of houses.

What amazes me is the shape that some of these houses are in. The home seller does absolutely nothing to the house but then attempts to list it for top dollar.

A few gallons of paint and some carpet cleaning would do wonders to some of these houses.

I was in a home a year ago and everything was wrong. The sellers were at the property during the showing (in various rooms throughout the house), there were dirty dishes all over the kitchen, and the house smelled badly of cat urine. The buyer's were almost running out of the house and didn't even consider putting an offer on it.

A few weeks ago, I showed that property again. Now, it was a vacant foreclosure property that still smelled like cat urine. 

If the home owners had attempted to "sell" the property, they might have gotten an offer. Instead, the bank ended up with a property that had a tremendous lose in value.

When talk is mentioned about bailing out homeowners near foreclosure, I have to give it a second thought. If the home owner has a true hardship and tries everything possible, including trying to sell the house..without ruining the sale by being dirty and unkempt...then a helping hand may solve their problem.

If the homeowner did not actively engage in trying to fix their financial position, then why should they receive help.

Each situation is different but the bottom line is that in order to sell the house it should be in the best possible shape as possible.Along that line of thought, there are many minor things a Lehigh Valley home seller can do to increase their chances of selling the house. Being absent is one of them.

Lehigh Valley Well Problems - What Solutions are Available?

Many homes in the Lehigh Valley have Wells and Septic Systems. As a possible home buyer or home seller in the valley, a well and septic system may be a major component of the home. You need water and the ability to get rid of it in order to live in the house. The cost, if one of these systems fails, may be expensive. Pennsylvania does not require any specific tests be done on these systems in order to buy or sell a house.

Typically, during the home buying process, the water from the well is tested to ensure it is safe to use and drink. The reliability of the well, regarding the production of water, is usually determined through the property disclosure. What does the seller say? Has the well ever run dry?

After moving into the house, what do you do if the well runs dry? Who is responsible....the buyer or the seller? The answer varies depending on each situation.

Regardless of who is responible, what do you do about the dry well? A possible solution could be to Hydro-Frac (hydraulic fracturing) the well.

Most wells fail because the veins or arteries supplying water to the well get clogged. Fracturing the well is done with high pressure water. The well is sealed off and then highly pressurized water is forced into the well. The water forces itself into the clogged arteries of the well and opens them up much like modern heart surgery.

                    Figure 1 - Obstructed Pathways  Figure 2 - Pathways clear after Hydro-Frac

In the above illustration, the well was sealed and then the injection of the pressurized water opened up the obstructions blocking the water passages into the well.

In most cases, the above procedure will put the well back into full operation. For more information visit: www.pahydrofrac.com