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Understanding Mortgages

What’s the Difference Between a Home Inspection and Appraisal?

There are often misperceptions surrounding home appraisals and inspections and how they fit in the loan process. You've probably heard about these two items and they may be key steps in your home buying journey, but do you know the difference?

They both require a professional to walk through the property. Both tend to happen early in the home purchase process. Both point out potential flaws. So, what is the difference between a home inspection and an appraisal? To put it simply, appraisals are for lenders, whereas home inspections are for buyers. Keep reading for a more detailed description.

Home Inspection
A property inspection primarily benefits the borrower. You hire a professional with a keen eye for trouble spots to go through the property with a figurative magnifying glass and provide you with a report of everything that could cause you grief. A property inspector isn’t going to be impressed by a new coat of paint and good furniture staging. It’s their duty to find the flaws and make you aware of what that could mean for your pocketbook or health. The inspection report is turned over to you, and depending on the findings, can be a negotiating tool between you and the seller.

Property Appraisal
A property appraisal is based on recent sales of similar properties in the area and informs RMS of the estimated retail value (what it could sell for) of the property. Since a mortgage is a loan where the house is used as collateral, RMS needs to make sure that there is enough value in the property for this loan to be a good risk. Some mortgage programs, like FHA, also have guidelines that require certain parts of the property to be in good repair. Depending on the findings, the appraisal can also serve as a negotiating tool with the seller.

In a nutshell, an appraisal is quite different from a home inspection. The inspection tends to be optional; it is generally considered a good idea to purchase one so you won’t be blind-sided by costly or harmful issues that may be hidden from the common eye by a fresh coat of paint. Ultimately, that decision is yours. The appraisal is a necessary step in the mortgage process, so resign yourself to that cost. In the end, as you relax in your new home after move-in day, it can be argued that both up-front expenses were worthwhile.

Contact us today so we can answer any more of your home financing questions!

*This article was originally published 7/18/2017. The information has been updated to reflect data as of September 2021.


Helpful Tips

Best Time to Buy a House

Sep 10
8:00
AM
Category | Helpful Tips

Best Time to Buy a House

RMS knows that buying a house is one of the most important and exciting decisions you can make. A first step is to determine the best time to start both the home shopping and home financing processes.

The housing market can seem like a daunting space to dive into, especially for first time homebuyers. 2020 and 2021 presented notoriously difficult challenges for homebuyers, but there are some tried and true strategies, and indicators, you can use to help time your home search and home financing efforts.

When Should I Start the Process?

Like many financial topics, the answer to this question is based in large part on your personal objectives and needs. It's important first that you consider what you want to get out of the house-hunting process. Do you have a firm deadline by which you need to find, purchase and move into a new home? In this case you may have less flexibility both with respect to available housing inventory and home financing alternatives. If, on the other hand, you aren’t in any rush that provides the opportunity to take more time to locate your “dream home” and consider a variety of home financing alternatives. This will also allow you to take both your local housing market and national trends into account when looking for a home.

High housing inventory months

House shopping activity, and inventory levels, do vary based on geography. According to Zillow, there is a specific time of year that tends to have the highest number of listed houses. Though you may end up paying more, spring and the early months of summer usually give you the most shopping options. The winter months generally offer fewer homes, as a rule of thumb. Zillow’s data suggests that April may be a prime month to buy if you are looking for the greatest range of inventory.

Timing effect on affordability

Mortgage rates fluctuate any time of year. For the price-conscious, it may be best to avoid shopping in the spring or summer if possible. Because of this, if your circumstance allows it, fall and early winter may be good months to start browsing. In addition, there is traditionally less competition on the market at this time, allowing a potential homebuyer more negotiating power. After analyzing information from 23 million single-family homes and condos sales, ATTOM data solutions concluded that a home buyer willing to close the day after Christmas would likely get a below-market-value price.

Best of both worlds

If you're somebody who is looking for a home price that’s within reach and the option to pick from a larger pool of listings, there is a window of time that could give you the best of both worlds. Data from realtor.com suggests that the average house price in large cities increases 9% from January to June, indicating that house prices rise during the warmer months, along with inventory levels. Again, here is where you should evaluate your personal situation. If you live in a rural area, this data set might not impact you as much as someone who lives in a city like Baltimore, for instance. Traditionally, as the cool weather sets in, housing inventory and demand falls, as do market prices. Buyers will avoid the competition that comes with busy real estate seasons and could even have opportunities to save money if they shop in Autumn.

Real estate market fluctuations

You might already know that the real estate market is going through a tumultuous period due to the COVID-19 pandemic. For example, 2020 was a sellers’ market, due to the lack of homes on the market. The rising cost of houses did not dissuade people from buying in 2020. This is made clear by the fact that 5.64 million existing homes were sold last year, the highest number since 2006, despite fewer houses on the market than ever. This is what is known as a seller's market.

The new construction housing market remains volatile, as evidenced by the drop in sales of newly built homes. This is the lowest level since April 2020, when the market was booming. The pandemic affected many different supply chains, and consequently the cost of construction supplies skyrocketed. In turn, this impacts the asking price for newly constructed homes.

Recap of evaluation

Spring/Summer: High inventory and possibly at a premium. The most new-home listings are typically in April.

Fall/Winter: Winter is considered an “off-season” for homebuying, so late fall and early winter is good for buyers on a budget.

August is the best of both worlds, still having plentiful inventory and benefiting from late summer price reductions.

Best time for you: When looking to buy a home, keep in mind that international, national and even local events impact your house-buying experience. The earlier you start the process, the more prepared you will be for a changing market. A professional will be able to guide you through the search, so you do not have to tackle this alone. Depending on your location and circumstances, the home financing process will typically take 30 to 60 days, so be sure to factor that into your home shopping timeline.

Finding the right home financing option

It's essential to start preparing to buy a house before you are 100% ready to buy, to help ensure you understand the process and are prepared to move quickly when the time is right. Some of the most important factors to consider are your credit scores, current interest rates and trends, and the size of the loan you will qualify for. An RMS loan officer can help you understand these factors during the pre-approval process, a vital and first step in your home buying journey.

Factors like location, finances, type of house, and local market conditions are all important to consider when deciding the best time to jump into the housing market. In addition to doing your research, having an experienced mortgage professional and a good real estate agent can make a world of difference in your home buying journey. The experienced team at RMS uses the right balance of communication, technology, and teamwork, providing a home mortgage experience you can feel confident about.

Contact us today to get started.

 

 

 


Helpful Tips

Mortgage Misconceptions: 3 Mortgage Myths Debunked

You may have found that everyone seems to have a tidbit of sage wisdom to share when they learn that you're looking for a mortgage, but not all "conventional wisdom" may be up to speed with the times. It's important to have good information. This is a big decision, and not knowing all your options could greatly impact both your buying power and financing for your new home.

Since mortgages are influenced by financial conditions which change often, what once was mortgage wisdom are now myths that seem to have long outlived their usefulness.
 

Credit Rating Misconception:  "You can’t overcome bad credit.”

  • Fact: Your credit score can change from month to month. One late payment can suddenly set you back, but if you get on track and make the rest on time, you can improve your credit. Set good spending habits and don’t get discouraged, even a bankruptcy won’t prevent you from buying a home in the future.

 

Mortgage Cost Misconception: "Lenders will ‘nickel and dime’ you with fees."

  • Fact: A reputable lender should be up front about the fees that are charged, and though the lender is the one to give you the bill, many fees cover third-party costs, like the appraisal, inspection, and credit review. Your loan estimate will break all this down for you, and if anything was overcharged upfront, it will be credited back to you on the settlement sheet.

 

Housing Affordability Misconception: "You need 20% down payment in cash to purchase a home.”

  • Fact: Several loan programs only require 0% - 3.5% down. Most government loans, such as Federal Housing Administration (FHA), Department of Veteran’s Affairs (VA) and the US Dept. of Agriculture (USDA), as well as state sponsored bond programs are a few of the options.

It can all seem overwhelming, but it doesn't have to be. Through the years there have been plenty of changes to the offerings and laws surrounding the mortgage industry so an experience that your friend had years back may not apply to what it's like to get a mortgage today.  Start a no-obligation application to see what loan program works best for your financial situation.

 


News

RMS Shines in 2nd Quarter 2021 MortgageSAT Customer Satisfaction Quarterly Report

MortgageSAT is the mortgage industry’s market leader when it comes to collecting, analyzing and reporting Customer Satisfaction ratings. This program enables mortgage industry leaders, like Residential Mortgage Services, to compare ourselves with other industry leaders and pull actionable data to consistently improve the borrowers’ experience.

When a borrower completes a feedback survey, the data is compiled and reported across a wide range of dimensions that shape each borrower’s overall customer experience and satisfaction level.   The results are compiled and compared to the National Benchmark, and industry-wide Best in Class ratings across all categories.

MortgageSAT has released its 2nd Quarter 2021 Report, and RMS has, once again, earned impressive rankings.  Some highlights are detailed below: 

RMS 2nd Quarter 2021 Result Highlights:

  • RMS is ranked #1 this quarter in the Online Tools category!
  • 90% of borrowers rated RMS 9 or 10 in Overall Satisfaction
  • 93% Overall Customer Satisfaction Level (7 percentage points above National Benchmark rating)

Helpful Tips

Take a Moment to Relax Around Your Home

In this fast-paced world, there comes a lot of pressure to always be "on" and available. With so many aspects of our lives vying for our attention, it's more important than ever to establish a balance between productivity and the need for breaks from day-to-day responsibilities. According to U.S. News, stress levels are on the rise. Activities to rejuvenate and de-stress often raise your energy level and in-turn take care of mental and physical health.

We often de-prioritize these stress-relieving activities, so take a moment this National Relaxation Day (August 15th) to review a few ways to prioritize relaxation and increase the tranquility in your home.

Get Cozy - sit down with relaxing music and a cup of tea.

Aromatherapy – match your mood or choose scents that evoke relaxation like lavender and chamomile. You could even spray your pillow with a sleep mist each night.

Add Some Plants – bring some of the outside in! Choose some that give you joy. Whether it is hanging plants with tendrils, or tall towering plants, just find a nice spot with lots of light.

Put Down the Tech – your eyes and mind need a break from all the screen time. If you can’t let it go during the day, at least set aside 30 minutes before you go to bed to unwind your scrolling hand and your eyes.

Yoga and Meditation – schedule time each week to stretch and breathe. Take a class or just find a quiet spot.

Light Candles – the soft illumination helps us to calm down and even achieve a meditative state. A scented candle offers additional benefits, bringing in another one of your senses. By choosing a scent you find relaxing, you can enhance your candlelight experience.

Get Some Air – take moments outside every day to soak in the sun or breathe the fresh air. Work in your garden, or just sit on the porch and watch the sunset.

This is just a sample of the serenity that awaits. And if you’re stuck at your computer, here’s a pro tip: take a breather, search on Google for breathing techniques, stretches or meditation. You could even download the Mindful Break Extension through Chrome that gives you tips and guides you through some short breathing exercises. Take some time to plan a few moments during your week to make yourself a priority.


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