The Accunet Mortgage Show (2/9/20 Episode)
Brian and David solve the math of square foot metrics, watch as interest rates trend lower, and talk about two nifty ways buyers can keep cash in their pockets when closing on a home.
This week’s highlights:
- Brian and David advise against making a home offer based on price per square foot.
- Mortgage rates remain favorably low.
- A trained mortgage lender can help you save on payments by putting less than 20% down?
Cost per square foot doesn’t always “measure up”
This week, Brian discussed how people looking to buy a home are miscalculating their offer prices; Instead of taking all factors into account, they’re basing their offer prices on the property’s square footage. They are looking at comparable houses for sale and dividing the price by the square footage of those homes to get the “value per square foot” metric.
Brian specifically described a situation where a buyer was comparing the per-square-foot numbers of a two-story home against a ranch, which just doesn’t stack up…literally. The old realty adage says, “It costs more to build out than up,” meaning that, in this case, square footage was an inaccurate measure of value.
What do appraisers care about?
Appraisers take square footage into account, but only as a fraction of their overall appraisal. In fact, most appraisers would price square footage at roughly $50/square foot, meaning these homebuyers were overshooting their offer estimates — by a lot. There are a ton of factors that are more important in an appraisal. For example:
- Lake view vs. busy street
- Number of bathrooms
- Number of bedrooms
As a rule of thumb, it’s always better to let your mortgage lender or appraiser play the numbers game.
Contact a home loan expert. Accunet is happy to walk you through any and all homebuying scenarios, no matter the square footage!
Mortgage rates continue to remain favorably low for the third straight week.
As of 2/7/20, Accunet can offer…
- 3.5% on a 30-year fixed-rate mortgage, with a 3.53% APR and $995 in closing costs.
- 3.125% on a 15-year fixed-rate mortgage, with a 3.19% APR and $995 in closing costs.
Accunet Mortgage is able to customize your loan term to any number of years between 10 and 30, and our trained loan officers can help you find the sweet spot where you’ll see the most payment savings.
Accunet can also offer you a Custom Rate Quote for the home of your dreams!
Client story: The benefits of less than 20%
David told the story of the daughter of a long time client whose father gifted her a cash down payment on a home. She had a decent credit score, and could have put 20% down, but David noticed that her income fit within the box of Fannie Mae’s ‘Home Ready’ qualifier, which states that if the income used to qualify falls within 80% of the area median income of where the home is located, you can get a break on monthly PMI and a break on pricing.
David used this qualifier to the buyer’s advantage: Her rate at 20% down was going to be 3.99%, making her monthly payment $1,293; so David suggested she instead only put down 19.5%.
While putting down less than the suggested 20% would cause her to have to pay private mortgage insurance up front, by utilizing this program, her interest rate would drop to 3.375%. And even though she now had monthly PMI, her overall payment would drop down to $1260 (a $33 difference). Her PMI will fall off all on its own within 18 months, further bringing down her rate another $38.
Client story: A closing cost credit for cash
Finally, David urges that a buyer’s first most important step after getting an accepted offer is to schedule a home inspection to determine the health of the home, and start preparations for amending the purchase agreement should any defects be found.
If the inspector finds something like a crack in the foundation or a loose handrail, the best way to write the verbiage for an amendment is to ask for a ‘seller credit’, stating that, “the seller is going to give the buyer a closing cost credit for x amount of money.” Phrasing it in this manner ensures that the buyer gets cash in his or her pocket to perform the repair on their own terms while keeping offer price intact, and waiving the standard, ‘seller has right to cure defects’ clause.[elementor-template id=”10109″]
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