Why doesn't my appraisal show that my house is worth more than the dump down the street.

 When you buy or refinance a Metro Detroit Michigan home and get a Michigan mortgage you are usually required to pay for a mortgage.  The lender wants to know whether the collateral (the home your are buying) is worth loaning against.

But an appraisal doesn't really cover the little things.  An appraiser doesn't care if the house is freshly painted, or has new carpet, or a new roof.  The appraiser does not care about all the little touches and upgrades you put into your Metro Detroit Home.  

Don't believe many of those things like tile, cement block windows, or built in bar, or  type of counter tops really add appraisal value.  Sure it adds to homeowner value in terms of buyers and sellers value.  But to a bank and appraiser little updates like garage organizers add little or no value.  The additions and subtractions on an appraisers sheet are usually things like sq footage, number of bathrooms, bedrooms, how many car garage, finished or unfinished basement, quality of construction, condition, actual age, heating/cooling, porch/patio/deck, energy efficiency items, functional utility.

Appraisers will compare your house to another Metro Detroit house  within a square mile that has sold within the last six months.  Sure that one might be a four bedroom and one car garage where your Michigan home is a three bedroom and two car garage.  The appraiser does additions and subtractions to make the homes equal. So he can figure out the estimated value of the home based on recent sold homes that are similar in style and are in the general area.  

Now days if an appraiser would state that this house is worth more because it has tile over carpet or new paint versus a house that needs paint will raise scrunity with lenders.  They will give value additions to a very superior house will lots of updates but one room with crown molding most likely won't make the appraiser additions and subtractions. 

That is why your Metro Detroit home may appraise for the same amount as the dump down the street that just sold.  They may both have 3 bedrooms, 1700 sq ft, 2 car garages, finished basement.  It is hard for an appraiser to justify a huge value difference on little upgrades.

Sure your Metro Detroit Michigan home will sell quicker and for more money but appraisal wise they look at the big items.  For more on Michigan mortgages or Metro Detroit Michigan home buyers tips go to the categories on the side. 

My little laugh of the day is:

A little old lady that was 104 years old was asked by a reporter what she liked best about being 104 years old.   She replied "no peer pressure"

I will be up front.  I dislike negative amortization loans.  They are only to be used by sophisticated borrowers.  Don't use them if you do not fully understand the loan.  Many borrowers used them to refinance their Metro Detroit homes or to buy their Michigan homes.

Negative amortization loans are also called pic-a-payment loans, option arm loans, option payment loans or smart loans.

The bank or lenders offers a loan at a very low introductory rate.  For years option arms were at 1% or 1.99% introductory rate.  Depending on the bank the introductory rate lasted from 1 to 3 years.  But here is the catch the 1% is not the real rate.  That is just an introductory rate.  The actual rate is much higher.  Usually the actual rate is higher than a 30 year fixed rate.  So a 1% introductory rate option arm may have an actual rate of 7%.

So how an option arm works is that you have 4 choices each month you make a payment.  You make the low introductory rate (1%) payment, or a interest only payment (7%), or a 15 year payment (7%), or a 30 year rate payment (7%).

If you make the 1% payment the other 7% -1% = 6% goes on the back of the mortgage.  So if you have a $400,000 loan and you pay the minimum payment of 1% for the whole year you only pay $4000 in interest for the year.  The other 6% gets added to the back of the loan.  So now the borrower owes $420,000.  That is why they call it a negative amortization loan.

The problem with the option arem loan or negative amortization loan is that many loan officers never fully explained the loan.  It was sold as an inexpensive loan.  Many times borrowers bought Metro Detroit homes that they really could not afford.  They were banking on the Metro Detroit Michigan homes appreciating more that the balance that was being added on the back of the loan.  When Metro Detroit home prices fell it had disastrous results for many homeowners in Michigan and many home across the country.

One more thing that is did not discuss is that the actual rate is not a fixed rate.  It is a variable rate that is based on a variety of different indexes depending on the bank that offered it.  So your payment or the amount added to the back of the loan could go up or down.

So if you are thinking of buying a Metro Detroit home and a loan officer offers you a Option arm so you can afford it.   Run, if you can't afford a 30 year fixed rate you can't afford that Metro Detroit home.  Be a smart home buyer.  Don't buy more home than you can afford in monthly payments 

Buying a new home and getting a mortgage

When getting a mortgage on a new home purchase in the Metro Detroit real estate here are some things to not to do.

1. Don't quit your job
2. Don't take out any new loans.
3. Don't borrow from your 401K
4. Don't go out and buy a new car
5. Don't go out and charge a bunch of stuff for the new house. 

The bank does a calculation called the debt ratio.  It is what you make versus what you owe.  So going out and getting a new car, charging new furniture, borrowing from your 401k will throw your debt ratio out of whack.  I have had buyers not be able to close on their home because they went out and spent too much.  It is a tough call to make to tell buyers that their deal fell apart because they spent money

As for quitting your job or getting laid off you can't buy a house then.  Tell everybody as soon as possible.  This is mortgage fraud and the bank will find out.  They do phone checks of your employment.  Don't  buy a house if you don't have a job.   Even if it is your dream house.

You can search Michigan homes for sale on this website by clicking on the search for homes button.

When buying Metro Detroit Real estate you will encounter many different fees on  the HUD settlement.  Mortgage closing costs can be very confusing.  Under the title company fees you will see a category called recording fees. 

When you have a mortgage the title company records the mortgage down at the county records.  The county usual charges are $15.00 for the first page and then a per page fee.  The usual cost for recording is $90.00 to $110,00  Having your mortgage recorded is a necessary step for the title company to do.

If you have a second mortgage there will be a second set of fees to record the second mortgage as well as the first.  Remember that when I say this is the usual fee doesn't mean that a $150 fee is outrageous.  Every county has different fees.  Many title companies don't add any of there own fees to the recording fee.  But some do for the labor and time involved when dealing with the county.

For more on title closing costs, Metro Detroit real estate, Michigan mortgages go to the mortgage section on the side of this page or you can go to my other site www.RussRavary.com

My quote of the day:

All my life, I always wanted to be somebody. Now I see that I should have been more specific.

Lily Tomlin

This is the second installment of Metro Detroit mortgage closing costs.  Usually closing costs are around $2000.  Banks or what ever lender you are going through charge for underwriting your loans.  "Underwriting fee" is  the charge that banks and lenders charge for overhead of hiring processors and underwriters to approve your loan.

The range of "underwriting fee" goes from $400 - $600 depending on the company.  Almost every bank and lender charges this fee.  Sometimes you also see a "processing fee".  Again those fees range from $200 - $900 depending on the company.  Many times banks will not charge this fee where as a mortgage broker might.

Michigan mortgage closing costsvary from lender to lender, mortgage broker to bank.  Every company has there own set of fees.  That is why it is important to compare Good Faith Estimates, and Truth in Lending forms.  That way you can compare fees. 

However many loan officers play the game of leaving off a fee.  So sometimes you can't get an accurate figure for Metro Detroit mortgage closing costs.  Have them put on letter head how much your total closing costs will be.  Total fees in writing.  

Email me at info@russRavary.com to get your mortgage interest rate comparison.