4 things to do if your home isn’t selling

Confused couple checking their phones

In the wake of the hot housing market, it may seem a bit too soon for any home for sale to not attract buyers. But the market is transitioning, and we may start seeing homes sit on the market for longer than we’ve grown accustomed to.

Bloomberg’s Natalie Wong and Chris Fournier call it “the chill.” And, the cooling of the once national, red-hot single-family home market may be contemplating extending its icy fingers into our local market as well.

Chalk it up to higher borrowing costs if you like. The fact is home “Showing activity across the U.S. is down 8.8% from October,” according to research from the ShowingTime Showing Index®.

Don’t let this frighten you out of the market. Instead, as your real estate representative, we urge you to consider the following steps if your home seems to be languishing on the market.

1. Reduce the price

The most common reason that a home sits on the market is price. Homebuyers know when a home is overpriced, and their real estate agents certainly know. Consider the following:

  • Nearby homes, similar to yours, are priced lower than yours.
  • Showings of your home are few and far between.
  • You have received no offers in the first two to three weeks the home is on the market, or offers that you do receive are below your asking price.

These are all indications that your home is overpriced. There is no shame in a price reduction. In October of last year, “… homes unsold after more than 120 days saw prices reduced by an average of 15.8%,” according to Lucia Mutikani at Reuters.com, citing data from the National Association of REALTORS®.

To avoid such a hefty reduction in what you’ll walk away with, lower the price sooner, rather than later.

Real estate markets can change quickly, so we’ll check current conditions and advise you on a new price, if necessary. We often find that when a homeowner reduces the price, traffic picks up.

2. Make some cosmetic changes

Feedback from potential buyers who tour your home is invaluable both for you and for your agent. We actively solicit this feedback to help us determine if the condition of the home is keeping buyers from making offers.

The information helps the seller understand which changes to make, what to update, and what to spiff up.

Sometimes fresh paint will do the trick but don’t be surprised if buyers are turned off by something that’s more expensive to fix, such as flooring.

Before and after renovation

3. Beef up the marketing plan

Compelling advertising of a home is critical. As your listing agent, we will be considering what tweaks we can make to our marketing plan. If we feel that we’ve missed the mark on that point (which really rarely happens), we’ll look at additional ways to make your home stand out.

4. How’s your flexibility?

Yes, it’s challenging to have to keep your home model-perfect while it’s on the market and it’s easy to become annoyed when someone calls at the last minute, wanting to view the home.

The more people that come through that door, however, the quicker it will all be over. If you are putting restrictions on when the home can be shown, it may just sit on the market longer than you expected.

Sometimes, real estate markets experience a lull. If your home is in good condition, it’s priced right and you’re Gumby when it comes to flexibility, take a deep breath and relax. It will pick up again.

Step-by-step guide to a successful move

Want to see your friends get really busy real fast? Tell them you need help packing and moving – it’s amazing the assortment of “Oh-I’m-sorry-but-I-have-to’s” that will come up.

So, plan on minimal help, unless you hire someone. Even then, there’s a lot more to do than merely hiring a moving company, so sit down and create a timeline of events and tasks that need to be done within the two months before the move.

Yup, the moving process can be downright overwhelming, unless you use our handy Moving Checklist. This is part one so you’ll need to check back next week for the next installment.

Bins and purge

You don’t necessarily need to run out and purchase a bunch of bins for this part of the process; big boxes will suffice.

You’ll need three boxes, and if you have a lot of stuff, you’ll need three boxes for each room in the house. One box will be for items you want to donate to charity, another for items you want to sell and a final box for items to give away to family, friends or even strangers – anything not suited, for one reason or another, to give to charity.

What to do with all that stuff you won’t be keeping

The local chapters of VVA don’t pick up items; the pickup must be coordinated through the national chapter. Just follow the link above and you’ll get to the right place.

  • Sell: If you’ve decided a garage sale is just too much work but have items that you want to sell, consider Craigslist, ebay or Facebook Marketplace.
  • Give Away: Many people and places will take items you no longer need. Consider giving linens, such as blankets, sheets and towels to your local animal shelter or favorite rescue. Hospitals may take old books and magazines off your hands. Homeless shelters and food banks may take your unwanted food.

Place a “curb alert” ad on Craigslist.org. Typically listed in the “For Sale” category, in the “Free” sub-category, curb alerts let folks know that you’ve placed free items at your curb, to be picked up on a first-come, first-serve basis. TIP: Don’t list your phone number in your curb alert or you’ll have people phoning you to find out if the items are still on the curb.

And the stuff you’ll be taking with you?

Go through each closet in the home with an eye toward making it appear roomier. This might mean removing bulky winter clothing if winter has come and gone and anything large that you store in the clothes closets.

Box these items up for the move and stack the boxes neatly in the garage. Do the same for the linen closet, ridding it of bulky winter blankets and comforters. Don’t forget the bathrooms.

In the kitchen, box up items you seldom use but want to hang on to. This might include items you use when you entertain and seasonal items (Thanksgiving platters, etc.).

Anything that you can remove and store for the move will help make the storage options in the kitchen (pantry, cupboards and drawers) look roomier, which is appealing to homebuyers (if you’ll be selling the home).

Next time we’ll look at who will do the actual move: You, a moving company or a combination of both. See you then!

Is Seller Financing Right for You?

Being turned down for a mortgage is disheartening, especially if you’ve worked hard to get one.

But it doesn’t mean it’s the end of the line for your homeownership dream.

There are other options and one of them is seller, or owner, financing.

What is owner financing?

“Owner financing happens when a property’s seller finances the purchase for the buyer,” according to Jean Folger at Investopedia.com.

It differs from a bank loan in that the seller doesn’t provide cash to the buyer, but instead, extends credit.

Seller financed loans are typically short term. They are ideal for the buyer who has met challenges qualifying for a bank loan or meeting traditional credit score requirements.

The homeowner who owns his home free and clear is in the best position to offer financing. Those that still carry a mortgage typically need their existing lender’s permission to offer financing.

The challenge for the buyer seeking seller financing is finding a seller willing to help him out. Most sellers are reluctant to finance — less than 10 percent do – mainly because of the risk that the buyer will stop making loan payments. It is possible, however, to reduce the risk of default.

To get tips on how to reduce the risk, visit Nolo.com.

Then there are the legal and logistical hurdles to overcome. Combined, these challenges convince many sellers that financing the buyer is too much work.

If you need to get the home sold, however, it could turn out to be a blessing.

Benefits for sellers

The biggest benefit for homeowners is the sizable return on investment they realize with seller financing.

Borrowers who typically seek seller financing are considered a higher risk than others. Because of this, sellers commonly charge 8 or 9 percent interest on the credit extended, according to Michele Lerner at BankRate.com.

Offering financing is also beneficial in a buyer’s market, with lots of other homes on the market. It opens your home to a larger pool of buyers and may help sell the home quicker.

The seller is released from paying property taxes, homeowners insurance and maintenance expenses, according to Scott Steinberg at RocketMortgage.com.

Additional seller benefits include:

  • A faster closing than would be had during the traditional mortgage process.
  • No closing costs.
  • The possibility of selling the home as-is.
  • “Potential to earn better rates on the money that you raised from selling your home than you would from investing the money elsewhere,” suggests Folger.

Benefits for buyers

Seller financing can be a bonanza for buyers with less-than-perfect credit who can’t obtain financing from a traditional lender. Down payment requirements are typically lower as well.

The terms of the loan are negotiable so , while it is unlikely, it’s possible that the buyer may be able to get a better rate than what banks offer. Depending on how the loan is structured, buyers may also get the tax benefits of homeownership.

Types of seller financing

Sellers can choose from a variety of financing options and much of the choice will be based on the buyer’s financial situation. Here’s a quick look at a few of the more common types:

Assumable mortgage – This type of seller financing allows the buyer to take over the seller’s existing mortgage. Not all mortgages are assumable but VA loans and some FHA and conventional mortgages are. You’ll need the lender’s approval with this option.

Land contract — With a land contract, title isn’t conveyed to the buyer but she gets what is known as “equitable title,” a shared ownership until the loan is paid in full.

Lease option – This method allows the buyer to lease the home for a specified amount of time. The rent is typically higher than market rents and there is an upfront fee, akin to a security deposit, except the buyer will forfeit it should he decide not to purchase the home at the end of the lease.

The terms of a lease option are negotiable. This generally includes the length of lease, what portion of the rent is credited toward the purchase and the purchase price. For this reason, there is no standard lease option but numerous varieties.

The all-inclusive mortgage and junior mortgage are two other popular methods of providing seller financing. Ask your real estate attorney for details on these options.

Seller financing can be complicated for those not familiar with it. It is important that both the buyer and the seller obtain the services of a real estate agent.

Don’t hesitate to call us or your real estate attorney with any questions about seller financing.



What you need to know about mortgage interest rates

Interest rates, especially mortgage interest rates, have become the stuff of headlines over the past year. Homebuyers with budgets that put them on the edge of affordability have been forced out of the market and those who are left can look forward to higher house payments than they had hoped.

If you’re new to buying a home, read on as we dive into the topic of mortgage rates and why they fluctuate so often.

The Federal Reserve

The Federal Reserve System, known as “the Fed” for short, is considered our country’s central banking system. It is, however, independent of the federal government. In essence, the Fed controls the movement of money throughout the U.S. financial system.

The Federal Reserve System is comprised of a Board of Governors and 12 Federal Reserve Banks, spread throughout the country.

The seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four other reserve bank presidents serve on the Federal Open Market Committee (FOMC), the policy-making body that determines, among other things, the interest rate charged to commercial banks.

The FOMC controls inflation by tightening or loosening the country’s money supply. One way they do this is by raising interest rates to control inflation. When borrowing money costs more, consumers tend to shy away from taking out loans, hopefully leading to lower prices.

By the same token, lower interest rates encourage consumers to borrow and spend, which in turn boosts the economy. Overall, the fluctuations in mortgage interest rates reflect an attempt to keep a balance in the economy and to prevent inflation without bringing the economy into a recession.

Mortgage investors

The Federal Reserve is not the only player affecting mortgage rates. To create more money to lend, banks often sell their loans on the secondary market, now controlled by the federal government.

Banks and other mortgage lenders sell mortgage-backed securities to investors. The return on investment for these investors is generated by interest paid by mortgage holders on their loans. For the investors to realize a return, banks must charge a higher interest rate.

Homebuyers (mortgage loan borrowers) naturally want low-interest rates on their mortgages. This force drives interest rates back down. In addition, when investors know rates are going to drop, they purchase these securities, increasing demand and eventually sending interest rates back down. Banks must balance these two opposing forces, and the resulting push-and-pull drives mortgage interest rates.

The impact of fluctuating rates on loans

“Your mortgage rate isn’t guaranteed until it’s locked,” cautions Denny Ceizyk at LendingTree.com. And locking in your rate is critical if you hope to protect yourself from fluctuating mortgage rates.

“Even minor changes to mortgage rates can impact the amount you pay when you refinance or close on your home loan,” suggests Victoria Araj at RocketMortgage.com.

You can lock your rate anytime from loan approval to five days prior to closing on the loan. According to Araj.

“Some lenders may even lock your rate at the same time they send you the loan estimate,” she continues.

“However, your rate lock will have an expiration date, after which your interest rate will start to increase or decrease even if you haven’t completed your refinance or home purchase,” Araj warns.

While all of this may seem complicated to the average homebuyer, an awareness of what drives interest rate changes can help you know when the ideal time has arrived to apply for a loan.

We are not mortgage specialists or financial professionals so we urge you to contact either for more information about how fluctuating mortgage rates can impact your loan.


Planning on selling in spring? Remember what they say about the early bird

It’s right around the corner. As mercurial as the current housing market is, many homeowners are itching to get into the spring market. I understand why spring represents this magical time to so many real estate consumers. It’s the best time to sell a home.

If you’ve followed the news lately you know that interest rates have risen and will rise again throughout the year. These hikes and potential hikes have created a new sense of urgency among homebuyers. If you’ll be buying another home after selling your current home, you, too, should be feeling some urgency. After all, you’ll be a buyer when your house sells.

Of course, we have no way of knowing when the next interest rate increase will come, which is why I’m urging my clients who hope to sell in spring to get the home on the market as early in spring as possible to avoid any unpleasant surprises.

What you’ll need to do

Let’s get a market analysis done now. Yes, it’s a bit early, but we just need a ballpark figure for you to take to a lender. He or she can then present options for buying the next home.

The worst thing you can do is sell your home before being pre-approved for a loan for your next home so speak with the lender about what you need to do, financially, to ensure mortgage approval.

Spring officially arrives on March 20, 2023, and lasts until June 21. Starting your preparations to sell right now gives you plenty of time to get the home ready for the market. Sure, there’s not much you can do to the exterior with the ever-changing weather we’re having, but if you have repairs to be made inside, spend some time during the weekends to get those knocked out.

Then we’ll come up with a staging plan if needed. Not all homes require staging but if yours does, let’s get together and discuss how you can show off your home to its fullest advantage.

Again, don’t wait

“When interest rates are moving up, waiting to sell could end up costing more than selling sooner and locking in today’s rates. Waiting to sell could also mean having to wait to buy when there are even fewer homes available,” warns Jonathan Smoke, chief economist for realtor.com.

He goes on to suggest that the market is in flux. “As rates continue to rise, higher financing costs will eventually dampen demand.”

If you don’t want your house numbered among a glut of them when demand dries up, get it on the market before rates rise again. Spring, and even summer, is the perfect time to sell.

The key to understanding the housing market: There is no such thing as a stupid question

If you’re planning on buying a home this year, you aren’t alone. A new NerdWallet survey finds that “… about 28 million Americans” have plans to buy a home in 2023.

That’s the happy news.

According to the same survey, these would-be homebuyers think that they will spend $269,200 on the home. That’s not-so-happy news.

In fact, that figure, according to NerdWallet.com’s Elizabeth Renter, illustrates “… an unrealistic optimism.”


Because the nationwide median price of a home in January (the latest figure available at the time of this writing), was $359,000, according to housing market experts at NAR.realtor.

In reality, the median home price hasn’t been as low as the figure dancing through potential buyers’ heads since 2013, claims Renter, citing Federal Reserve statistics.

While this is good news for home sellers (because this figure represents a month-over-month price increase) it shows that most home buyers, and most likely home sellers as well, have a lack of understanding of the current housing market.

Home price activity in our market. Yes, the national housing market is a product of the economy overall, but to understand the local market you’ll need to follow home prices here, at home. Remember, all real estate is local, and not every market is faring the same.

For instance, Holden Lewis with NerdWallet.com claims that “Home prices already have been falling, especially on the West Coast, and prices will fall in some cities in 2023,”

That “some cities” claim is more proof that not all real estate markets are reacting similarly. Thus, again, it the importance of understanding what’s happening in our market.

Keep an eye on mortgage rates


Did you know that, over the past 50 years, the average 30-year mortgage rate was 7.75%? (NerdWallet.com).

Put in that context, our current rates, albeit frequently fluctuating, are far below the historic average. As of February 23, weekly averages sat at 6.5% for a 30-year mortgage and 5.76% for a 15-year mortgage, according to Freddie Mac’s Primary Mortgage Market Survey®. Economists expect them to decline further if inflation eases.

So, there are two additional things to keep your eye on:

  • Inflation news
  • Current mortgage rates are realistically evaluated against the average over the past 50 years.


Mortgage rates change daily. If your aim is to buy a home sooner rather than later and you have an idea of an interest rate you can tolerate, check rates online as often as possible. This allows you to follow and “… understand the trends and make sure you’re getting the best rate,” suggests Ben Luthi at Bankrate.com.

“Just keep in mind that your specific rate could be lower or higher than the average rate, depending on your financial profile, down payment and other factors,” he concludes.

If you are brand new to the world of real estate and economics, we suggest that you check out the Congressional Research Service’s Introduction to U.S. Economy: Housing Market. It’s a quick, informative read.

The most important thing to do while waiting to sell or buy a home is to learn as much about the market and the process as possible. We are always willing to share our knowledge of the market with you and point you to financial experts if you have questions about the mortgage process and mortgage rates.

There’s no such thing as a stupid question, so ask away!

3 Things to know about the home appraisal

One aspect of a home sale that impacts both seller and buyer equally is the appraisal. A low appraisal can literally bring the transaction to a halt.

No matter how carefully the seller’s agent researched the current market, no matter how much the buyer is willing to spend on the home, the fact remains that the lender relies solely on the appraiser’s estimate of value.

Let’s take a look at the process and three things you should know about it.

1. The appraiser 

When we reference “the appraiser” in a real estate deal, we’re typically talking about a specialist hired by the buyer’s lender to determine a property’s current market value.

Appraisers who specialize in residential real estate use a number of methods to determine a particular property’s value. First, they measure the property and will compare what they come up with to the legal descriptions of the property held by the city or county.

They will also evaluate the neighborhood in which the home is located. They’ll use city or county sources, along with MLS statistics, to obtain information on recent sales in the area. They may draw land diagrams and they always write a written report for the lender and the buyer.

2. Why the appraisal may be low

Real estate agents that have been in the business for some time, who have listed many homes, and who know the area well, typically come up with the same value for a property as the appraiser.

That said, there are homeowners who refuse to take their agent’s advice and overprice the home. This is one reason an appraisal may come in lower than the agreed-upon price, and there are others. These include:

  • A shift in the local economy impacts the housing market. If a whole bunch of foreclosures hit the market quickly, surrounding home values decline.
  • The agent and/or the homeowner may undervalue certain improvements made to the home. In this case, the appraisal may come in higher than expected.
  • The appraiser may feel the home’s location or another problem drags down its value more than the agent and homeowner did.

3. Your options when the appraisal is low

Let’s face it, a low appraisal is scary. Buyers and sellers do, however, have a few choices to remedy the situation.

  • The seller can lower the price to meet the appraised value. I know – this is not an attractive option for most sellers. The truth is, you’ll be faced with this same dilemma with the next buyer, the next buyer and the one after that.
  • The buyer can come up with more cash. For instance, if the appraised value is $5,000 less than the buyer offered on the home the buyer can somehow come up with $5,000 to add to the down payment. This brings the loan amount to a point where it’s right in line with the appraisal. The problem for the buyer is that he or she is paying more for a home than it’s worth.
  • The buyer and seller can meet halfway. The seller can lower the price and the buyer can bring in more cash.
  • Challenge the appraisal. This isn’t as easy as it may sound. The seller will need to get involved by verifying the accuracy of the report. Appraisers are human and they sometimes get things wrong. Some of these include square footage, the number of bedrooms or bathrooms, and the age of the home and these errors may be on the subject property or the comparables used by the appraiser.

Sometimes sellers have knowledge about the conditions of a particular sale in the neighborhood that the appraiser isn’t privy to. Perhaps your neighbor got a job offer in another state and to get there quickly, took a low offer.

At any rate, if you find inaccuracies you should challenge the appraisal and request a new one from the lender. Questions about selling your home? Feel free to contact us.


What you need to know about your home warranty

The first thing you need to know about home warranties is that they are neither insurance nor warranties. They are, in reality, service contracts.

They were created to provide financial protection for homeowners faced with the failure of major mechanical systems, such as the home’s heating and air conditioning. Home warranties provide, most of all, peace of mind.

What does a home warranty cover?

Home warranty companies offer a variety of plans and typically the more you pay, the more your plan covers. Most of the basic warranties – first-tier and second-tier plans – cover the following:

  • HVAC System – heating, ventilation, and air conditioning system components such as heat pumps and ductwork.
  • Plumbing – all of the home’s interior plumbing systems components such as pipes, drains, and faucets. Some home warranty plans cover outdoor plumbing as well, such as the sprinkler system. Some companies offer a separate policy for hot tubs and pools.
  • Electrical system – wiring, doorbells, electrical panels, and other electrical system components are covered under either Tier 1 or Tier 2 plans.
  • Major appliances – the basic plan typically covers the range, refrigerator, garbage disposer, washer, dryer, and water heater.



Ah, those nasty “exclusions.” Just like your health and homeowners insurance even a home warranty contains them. Not everything in the home is covered under a home warranty. Like inclusions, exclusions vary, depending on the company. The following are some common home warranty exclusions:

  • Normal wear and tear
  • Problems that arise from deferred maintenance
  • Insect or vermin damage
  • Damage caused by the homeowner
  • Structural problems (leaky roof, cracks in walls)
  • Acts of God (earthquake, flood, etc.)

Optional coverage, at additional cost, is usually offered for:

  • Well pump
  • Septic system (if you have one, this is highly recommended)
  • Spa
  • Pool
  • Central vacuum system

How much does a home warranty cost?

Since the price of a plan varies for several reasons, and it also depends on whether the buyer pays an annual lump sum or makes monthly payments, there’s no single answer to this question.

When paying a lump sum, the average starting cost for a basic plan is $413.89 per year. On the high end of the price range, comprehensive coverage averages $799.82 per year.

“A home warranty will typically cost a homeowner between $264 to $1,425 per year, with a national average cost of $600,” claims  Meghan Wentland and Evelyn Auer at BobVila.com.

Here’s how the home warranty typically works

In the event of a mechanical failure or appliance problem, you will place a call to the home warranty provider’s service department who will then send out a service technician of their choosing.

The technician then bills the home warranty company directly, but you will be required to pay a service fee (think of this as akin to a health insurance co-pay) each time a repair person comes to the home.

The nationwide average service fee price range is $55 to $150, according to Wentland and Auer.

Many home warranties not only cover repair but replacement of appliances as well, meaning that if it can’t be repaired they will install a new one.

Are home warranties worth their cost?

This is a hotly debated topic among real estate agents. Some say they aren’t worth the paper they are written on.

Many more say that because of the peace of mind they offer new homeowners, they are absolutely worth the purchase.

Especially during the first year you are in your new home, when you may be strapped for cash, a home warranty may be well worth the price of it. When a major system in the home malfunctions, the price to repair or replace can devastate your savings. A home warranty offers both peace of mind and financial security.

Check out the plumbing before you put in an offer on that home

Snooping around a home’s plumbing is not one of the more glamorous parts of buying a home. Yet far too many homebuyers ignore this aspect.

Common problems include leaks, water heater problems, and lead pipes and they can cost a small fortune to remedy.

You don’t necessarily need to put on your coveralls and construction boots to sleuth out any possible problems, but you do need to know what to look for.

Keep an eye open for plumbing leaks

Did you know that a plumbing leak won’t necessarily show up right where the leak originates? In fact, the symptoms can show up significantly far away from the source. Check ceilings, walls, foundation and driveway for the telltale signs.

  • An increase in water bills over time. Ask your agent to find out the water bill amounts for the past 12 months.
  • Stinky odors emanating from the walls or floors.
  • Cracks in the foundation.
  • Hearing running water when faucets and toilets aren’t running.
  • Unexplained warm spots on the floor
  • Ensure no water is running and check the water meter. If the dial is turning there may be a water leak.
  • Wet or spongy areas in the yard.

What are the home’s pipes made of?

“If the home was built before 1930, there is a good chance that the pipes are made of lead. “An estimated 18 million Americans are at risk of lead leaching from old pipes in their homes and city water systems; such exposure can cause neurological problems in adults and—in children—delayed or stunted brain development,” according to Robert F. Service at Science.org.

If the pipes in the home are a dull gray in color, suspect that they’re made of lead. Another test you can try is to use a key or other implement to scratch the pipe. Lead pipes can easily be scratched.

The only solution to lead pipes is to replace them with modern plumbing supplies.

A lack of lead pipes doesn’t rule out lead in drinking water. Lead can be present in groundwater, particularly in well water, and lead solder may have been used to join the pipes together.

The only reliable way to determine if lead contaminates the home’s drinking water is to have the water tested. Lead-contaminated tap water is colorless, odorless, and tasteless. Possible signs that tap water contains lead include:

  • Corrosion of pipe joints.
  • Frequent leaks (caused by corrosion).
  • Rust-colored water when taps are turned on.
  • Stained sinks, dishes and/or laundry.

Does the water heater heat the water?

It’s important to check the water heater when buying a home. How old is it? The “… typical water heater has a lifespan of about 10 years,” claims Nick Gromicko with the International Association of Certified Home Inspectors (NACHI).

If it is at, over, or near the end of its life, you may want to ask for it to be replaced by the homeowner.

Otherwise, ask your real estate agent to find out if the current owner has experienced any problems with it and has been maintaining it according to the manufacturer’s specifications. This typically includes a bi-annual check by a professional. Then, to avoid problems with the buildup of rust, sediment and corrosion, water heaters should be flushed every year.

You also need to determine if the water heater has enough capacity for your needs. This depends on a number of factors, with the most obvious being the number of people who live in the house. A family of five will, presumably want a hot water heater with more capacity than a couple without children.

Plumbing problems are always nasty surprises, but perhaps never more so than when you’ve just moved into a home. You can save yourself a lot of headaches and cash by making sure the plumbing is in good shape before buying a home.

The nuts and bolts of the mortgage process

If you think that making the decision to purchase a home was a tough one, wait until you see what’s next! The very first step in the process involves revealing your finances to complete strangers and then waiting to see if what you’ve shown is acceptable enough to be given a loan for hundreds of thousands of dollars.

That’s pretty scary stuff, right? Fortunately, it doesn’t have to be. There’s a process to follow when applying for a mortgage and the first part of it involves shopping carefully for a lender and a loan.

Where to find a mortgage lender

Mortgages are available from banks, credit unions, savings and loans, private mortgage companies and the government. Take your time and look into the different types of lenders and what they offer so that you can intelligently compare them.

The best way to narrow down the choices is to get referrals from your real estate agent, friends, neighbors and family. Then, check their current rates online. CreditKarma.com offers a handy rate-checker that is updated daily.

If you’re going after an FHA-backed mortgage, make sure that the lender you choose is FHA-approved. You’ll find a list of those lenders online at the US Department of Housing and Urban Development’s website.

The most commonly used FHA-backed mortgage for a single-family residence or condo is the Title II.

Differences in rates and terms between lenders can be striking, so choose several with attractive rates and then compare what each has to offer. Ensure that you are comparing the annual percentage rate (APR) of each loan.

This rate includes “… your interest rate as well as additional fees and expenses associated with taking out your loan, such as any prepaid interest, private mortgage insurance (PMI), some closing costs, mortgage points (also called discount points) and other fees you may need to pay,” according to Victoria Araj at RocketMortgage.com.

You might also want to consider visiting a mortgage broker. Instead of offering loans from one lender (their employers), brokers work for themselves and shop around for loans that fit particular circumstances, such as credit scores, financial situations and more.

If you are a veteran of the U.S. military, a senior or a member of a labor union that offers loan assistance, you have access to programs that other consumers don’t.

Meeting with the lenders

Later on in the loan process you’ll be at the lender’s mercy if your income and credit are less-than-stellar. Right now, though, you are in the driver’s seat, so take full advantage of the situation. Get all the information you can to help you make an informed decision about who will be your lender.

Get clear on the exact amount of money you have for a down payment. Then, when you meet with lenders, ask about:

Interest rates

  • Ask the lender for current rates and whether that rate is fixed or adjustable.
  • If you want an adjustable rate, ask when the rate will increase, how that will impact the payments and whether your payments will decrease when rates do.
  • This is critical: request the loan’s APR. Expressed as a yearly rate, this figure includes the interest rate, fees, points and other charges. It is the APR you should use when comparing loan offerings.


Points typically confuse first-time borrowers but when explained, you’ll “get it.” Bank of America has the easiest to understand explanation:

“Points are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can, in turn, lower your monthly mortgage payments. A point is equal to 1% of your mortgage amount (or $1,000 for every $100,000).”

See how easy that is? If only everyone in the real estate industry explained concepts so clearly!

Take this knowledge and use it to ask the lender to express the points in a dollar amount versus the number of points. In other words, make him or her do the math for you.

The fees

There are a lot of people involved in the loan process, from the appraiser to the notary public to the real estate agents and the lender. Oh, and Uncle Sam has his fingers in the pie as well. Naturally, they all expect to be paid, so the list of fees (included in your closing costs) will be lengthy and somewhat confusing. Some of the fees are negotiable, and the Consumer Financial Protection Bureau walks you through the process.

In 2015, the federal government decided that Americans needed a better tool with which to compare loan products. “Know before you owe” changed the Good Faith Estimate that lenders were required to supply borrowers to two forms.

The first is the Loan Estimate, which you will receive within three days of submission of your loan application. This form includes all the facts and figures having to do with the loan that you discussed with the lender. The figures, however, are not set in stone but they will give you a rough estimate to compare against those you receive from other lenders.

Pay close attention to the “Estimated Cash to Close” section. Again, this figure is an estimate, and not the final amount you’ll owe. That could be higher or it could be lower.

Then, at least three business days before closing your lender is required to send you the Closing Disclosure. Yes, it looks very much like the estimate but these figures are set in stone, unless you dispute them.

You have three days to peruse the form and compare it to the estimate. Have questions? Call your lender immediately to get the answers. Remember, you are about to close on the loan ― time is of the essence.

If all goes well you’ll sign a stack of papers and be handed the keys to your new home. Congratulations!