Let’s talk about loans …


O.K. maybe not loans, but I think everyone should have a short primer regarding how folks pay for a house.  It really doesn’t matter if it is a co-op, a condo, a town home or a single family home.  One of the basic rules of contract law includes the need for consideration. Consideration is just a fancy legal term for money. If you want to buy a house, you have to be able to produce the funds at settlement.

Now, if you happen to be loaded and can pay cash for the house, well you can either read through this for information, or you can check out another one of the articles I have written. For those of you that want to buy a home and don’t have cash on hand, this is for you.

For purposes of example, I will use a $500,000 purchase price. You and the seller have agreed on the price. Well now, wait a minute, let’s back up. You really should have an idea about all of this before you begin looking for a home.  The very first question you have to ask yourself after deciding you want to own a home of your own is how much can I pay for a home (keeping mindful that your comfort level should be dictated by what you can afford and not what you would like).

I am not a lender. I can only give you general advice in this area. Let’s make that specific advice. After reading this primer, talk to a bonafide lender! Then talk to another. Keep talking until you find one that you are comfortable with. They will provide the rock that your dreams of owning a home will be built upon. The lender will gather information about you and tell you what you can borrow.

The most basic loan is a conventional loan.  Lenders like this sort of loan because it requires that the borrower (you) contribute at least a 20% down payment.  In the example of a $500.000 purchase, you will be putting at least $100,000 down and the lender will provide the rest of the money. Each month you will make a payment that includes principal and interest.  If you do not have 20% down, you can receive a gift from parents or grandparents or anyone to make up the difference. You will need to provide the lender with proof that it is in fact a gift and not a loan. If you just don’t have the 20% down, you have other options.

The FHA guarantees loans. That just means that your lender will have insurance that some of the money you borrowed is guaranteed to be paid back. If you default, the insurance involved steps in. This guarantee allows lenders to loan money to people that don’t have the 20% down payment available. You still have to have at least 3.5% of the purchase price available, and there are limits on how much money you can borrow. The credit demands are a bit less restrictive. Oh, and you still go through the underwriting process. The FHA has rules about who can qualify and their criteria must be met. Every month you will have a payment that includes principal and interest and the mortgage insurance premium (yep, you have to pay the insurance. if you don’t like that, put 20% down).

Veterans have loan guarantees available to them as well. They can get a VA loan. This type of loan is from lenders but it is guaranteed by the Veteran’s Administration. Another feature of the VA loan is that you don’t have to have any money down. This sounds great, but the flip side is that you will have a higher mortgage and you will have  VA fee as well. The VA doesn’t lend the money. Just like the FHA, they guarantee a portion of the loan. That’s right, you pay the premium for the protection.

In some areas, the USDA guarantees loans. It is very similar to the VA in that, you don’t have to put any money down. Again, remember your loan amount will be higher and your payments will be higher as well. This is a great program if you are purchasing a home in an area where these loans are available.

Of course there are all sorts of hybrid loan types out there. There are terms that vary with lenders.

Things to know.  An ARM is an adjustable rate mortgage.  Simply put, the interest rate is fixed for a short term and then it can go up or down depending on the market. Usually, there is a cap on the interest rate (i.e. the highest amount the interest can be).  Lenders offer these loans at attractive rates. You should always consider what you can afford at the market rate today, that means the size mortgage you are comfortable paying at market rates.  Use the lower rate as a saving not a method to qualify for more home  (if variable rates are lower, borrow less and invest the saved money). NOTE: that is just my opinion. I really believe borrowing money, hoping that your income will go up when the rates go up is a fast track to foreclosure.

An interest only loan is another product some lenders offer. Not a bad deal for the lender. You move in. You pay interest on the loan until the interest only term runs out and then your payment shoots up like a rocket ship on rails. Oops. You can’t pay and the home goes into foreclosure. Interest only loans only have the interest of the lender at heart.

So it is not really confusing. There is a conventional loan and then there are other products available to those that do not have sufficient money saved to buy a home. Lots of people have used the FHA guaranteed loans and VA guaranteed loans and USDA supported loans. They are good loans. As a matter of fact, all loan products are good products if they are used by the right borrower.

Buying a home is a major step. I think it is wise to have some money set aside to invest in your purchase.  Of course, you may use a loan product that does not require that you put that money into the purchase of the home. Home ownership is not cheap. The money should be set aside for maintenance and upkeep. It will be your home after all.

If you have any questions, talk to your lender. If you are in the DC area and do not have a lender, I will provide you with a list of three names. You can call them all.

Once you have been pre-approved and are ready to begin the search, well, that”s my area of expertise. Once you are in my hands, I will review where you are with the lender, offer some advice about fine tuning the financing and then I will listen to you tell me a tale of your dreams and set out to assist you in making those dreams come true.

As always, I am only a phone call away…. 301-509-5111

Frankly My Dear, WE do give a Damn !

Oh Rhett, you said we would always have Tara

                    I don’t suppose being a real estate agent carries the same frustrations shared by Rhett Butler in “Gone with the wind”.  It does have it’s moments.  Buying and selling real estate often includes challenges that threaten the serenity we all seek in our professional lives.  It happens.  There are agents that do leave you with the thought that maybe, just maybe, they “didn’t give a damn”. Some of you reading this have felt that way and you know exactly what I am talking about. To be fair, most agents care. The problem often is the result of inexperience.  Paralysis by analysis gives way to a deafening silence when clients expect answers.  The real or potential liability of “messing up” seems to cause agents that haven’t done many transactions to crawl into a “hypothetical cave” and wait for the storm to pass.  Clients are left wondering if letting their nephew, whom is just starting a career, handle their transaction was the wisest course to take.  Some are left to ponder if choosing their agent just because the agent works for a “name brand” company didn’t leave them with a well manicured, practiced script spouting novice. It may be hard to care about clients when you are struggling to understand the intricacies of your new profession or when you have not “done the dance” in a real ballroom.

         Frankly, my dear, we do give a damn.  It matters to us that every potential buyer is counseled at the beginning of their adventure and that they keep receiving advice and counsel throughout the process. Knowing exactly what to do and when to do it is important. Knowing why is comforting.  Our strength was not developed by attending more classes to generate fancy alphabetical designations on our business cards.  Our ability to take processes and language inherent in real estate and translate and explain them in layman’s terms is the cumulative result of handling hundreds of transactions as an agent and as a manager.  Experience is the birth place of understanding, actual skill development and knowledge.  I am not the first to share, knowledge is power.  Moving a transaction smoothly from start to finish takes power.

Experience has taught us valuable lessons.  It has also led us to make a significant change in our business model.  You see, there are practices that occur in real estate that have never settled well with us.  We have spent our entire career under the umbrella of the largest brokerages in the DC market.  There was a time when we actually bought into the theory that the branding offered by those firms was necessary to gain credibility with potential clients.  Experience has taught us otherwise.  The public is inundated with glitzy commercials that are long on statistic bending but short on reality.  We have spent time behind the curtain and would prefer to continue our practice in the light of day.

Our new home


         We have moved our practice.  You see, the big firms have chosen what they advertise as a “consumer friendly, one stop shopping environment”.  They have developed a model that offers agents, lending and settlement services under one roof.  The move caused the government to step in and require them to disclose their relationship to consumers.  Another part of the model uses “preferred partners”  in areas like home warranties, home inspections and insurance.  “Preferred partners” have been vetted and give the consumer one more choice when seeking assistance.

          Century 21 New Millennium is not a one stop shop.  We are free to offer recommendations for lenders, title companies, home warranties, home inspections and insurance.  In addition to the firms that have been vetted and established a relationship with Century 21, we can actually give our clients choices (if they ask) based on our experience with firms.  We receive no kick backs or other considerations for our recommendations.  The companies we recommend have performed in the past and have proven to be worthy or our trust.  Our clients are not charged a “transaction fee”.  We are  quite comfortable operating on the commission earned on sales and prefer to pay any additional fees out of our commission.  Working with us, you will get what you pay for… experience that makes a difference.  Give us a call or text us at 301-509-5111.

Momma said there’ll be daze like this

“I’m not sure you understood me”

When you think back, momma had a lot of advice.  Sadly, a lot of it went in one ear and out the other.  Advice shared was not heeded and lessons learned the hard way followed. Momma said this and momma said that.  Sometimes, we heard and other times we thought we heard what was being shared.  There were many times when words were spoken and we assumed we heard exactly what was being said.  Not so fast grasshopper. Momma never said “there’ll be days like this”.

Momma said “there’ll be DAZE like this”.  Of course it was easy to misunderstand.  You had just suffered some calamity and were at a loss to understand how it happened.  At that moment, your world was upside down and in your heart you were sure things would never get better.  Momma would hug you and whisper “there’ll be daze like this”, and you would think she was saying bad days happen. Not so.  Momma was sharing that life is confusing and often when bad things happen, we did not have a clear picture of reality.  Momma said “there’ll be daze like this”.

Momma could have been referring to the process of buying a house. Even the most well informed buyer is faced with a dearth of information that at times seems contradictory.  Where do you begin?  How do you sort out all the homes that are on the market?  What is the difference in things that need to be disclosed?  What does all the paperwork I am asked to sign really mean?  It seems like every time you take two little steps forward, confusion erupts and you take three steps back.  It is so confusing you end up in a daze.  Momma said “there’ll be daze like this”.

More times than I can remember, if I asked for more information, I was directed “ask your father”. Momma always had the best advice on matters of the heart.  When it came to dealing with the world and finances and things of that nature, she always pointed us towards our dad.  If dad did not have the answer, he would go get the answer from an expert in the field. If you are confused about the steps to take and the pitfalls to avoid in the home buying process, you are not alone.

Remember, Momma said “there’ll be daze like this”.  In this situation, she would also share, “Real estate questions? Let’s ask an expert! Call that John MacArthur fellow. His number is 301-509-5111.”

Momma said..Don’t talk to strangers

I know. I know. It seems like I am often quoting Momma.  In the past, I shared that Momma always warned you not to go out without protection.  That was pretty important advice and those that heeded it are much better off today.  Another important admonition shared by Momma was “Don’t talk to strangers”.

Let’s say you are thinking about buying a home.  You sign on to the internet (you are reading this, so you are a pretty savvy internet used) and begin a search for homes in your area.  It doesn’t matter which search terms you use as long as you get the general area correct.  If you are using your google machine, you will get around 164,000 sites to view within but a fraction of a second.  Other than the few paid for sites at the top of the list, it is a real techno crap shoot as to which sites appear next.  You can click on any of them and find pretty much the same information.  Most people check out two or three as they search. The layouts are different and you may have the illusion that one site will have properties that another does not have.  That is not the case, but folks check a few out anyway.

Most of the sites offer you a chance to save the homes you viewed.  Some promise to send you listings that meet your criteria, thereby helping you avoid signing in and starting a search from scratch.  If either of those options appeal to you, you fill out the minimal information.  The request seems innocent enough.

Pretty soon you will receive a phone call or two or three or more.  Strangers will be calling, offering to help you in your search.  The will seem pleasant enough.  By the time you wonder, how did they get your number, you will possibly feel obligated to give them a chance.  They bought your name. They bought your number. They bought your email address.  They bought every piece of information you entered in the form. They bought you.

Most of you did not even know you were for sale. Most of you did not know that a stranger could buy the information and then act like “they were assigned to assist you“.  Illusions created in phone conversations often hide the fact, your information was bought and paid for.

We think you deserve the opportunity to get to know a little bit about an agent before they are acting on your behalf.  We think you are the buyer and you deserve the respect and consideration of those that work in our industry. You should have the ability to check out someone before you start sharing personal information.

We are not gong to buy you.  Nope, it is our belief that you deserve a rebate on the purchase.  Why should some stranger running a website benefit from your purchase?  You probably need the money a whole lot more than the folks running some slick website.  So we rebate a portion of our commission right back to you after the sale. We do it above board and in compliance with Maryland Law.

Check us out. Have a conversation with us. Get to know us. Like Momma said..Don’t talk to strangers.  We have a contact form that can be reached by filling out this LINK.  We have no hidden agenda.  We want to represent you in the purchase of a home and we are willing to put a portion of what we earn right back in your pocket.

I am John MacArthur and I invite you to “experience the difference.”