Home Appraisal Guide

One of the most important aspects of getting a mortgage is the appraisal.

Mortgage appraisal— a professional opinion of a property’s market value, determined by a licensed appraiser.

An appraiser will visit the property and examine the interior and exterior of the property. They will take pictures, measure rooms, note upgrades and examine other aspects of the house for functionality.
Once they finish looking at the property, they will research similar homes through various assessor databases and local real estate portals.

Appraisal guidelines protect consumers. Lenders are required to give you copies of all appraisal reports and other written valuations. If you have questions, talk to your lender. Open and honest communication will help you better understand the mortgage process.

May I choose my appraiser?

No. Your lender must request the order. Lenders, realtors and appraisers must follow Appraiser Independence requirements to ensure the appraisal is fair. You can read the guidelines on Fannie Mae’s website, fanniemae.com.

Why are appraisals important?

An appraisal is important because it provides you with valuable information about the property so, as a buyer, you do not pay more than the home is actually worth. It can also play a big role in determining the amount of money you may borrow when purchasing or refinancing your home.
I got a home inspection; do I still need an appraisal?

Yes. The home inspection does not replace an appraisal and vice versa. A home inspection is an in-depth, objective examination of the physical structure and major components of a home. A home inspector will not determine the value of the home; they help you assess potential risks that may affect your investment.

How long before I receive my appraisal?

Appraisals can take anywhere from a few days to a few weeks to complete due to many variables that may affect the time frame. For instance, during the peak of real estate season, it may take longer due to the backlog of requests. Rural, luxury or complex properties also take more time to complete based upon availability of comparable sales data.

We are to here to help, even if you are not an RCB Bank customer. Connect with a local RCB Bank lender to get answers to your lending questions.

Invest in yourself. RCBbank.com/GetFit

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, With approved credit. Some restrictions apply. RCB Bank is an Equal Housing Lender and Member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934.

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3 Ways to Finance Vacation Property

With loan rates still low, now may be time to buy

Vacation home lake front mountains

When I take a family vacation, I typically rent a home versus a hotel for the home-like atmosphere and amenities. This has me wondering why I don’t invest in my own vacation property. With mortgage rates still near historic lows, now may be the time to buy property in your favorite vacation destination.

Since government loan programs (FHA, VA, USDA) are not available for second home financing, let’s look at other options for financing vacation property.

Cash-Out Refinance

Cash-out refinance involves refinancing your primary residence mortgage and receiving cash for the remaining equity. You need sufficient equity in your home for this to be an option. For example, if you owe $100,000 on your home worth $500,000, you may be able to cash out up to 80% loan-to-value (LTV), which would be $400,000 minus the $100,000 you owe. This leaves you with $300,000 in cash to purchase your vacation property. You can choose term options from 10-30 years fixed or adjustable, plus you’ll have one monthly payment, not two.

Home Equity Line of Credit (HELOC)

HELOC involves attaching your loan to your primary residence. Typically, this loan will not pay off your current mortgage, but be a second lien adding to your monthly expense on top of your current mortgage. Depending on the lender, this loan may go to a LTV higher than 80%, which helps if you need more funds than what 80% will allow. The drawback is this type of loan is typically adjustable and at a higher rate than today’s conforming loans.

Conventional Financing

Conventional Financing obtains a loan on your vacation property, not your current primary as discussed in the prior two options. The loan process is similar to purchasing a primary residence with small differences in minimum down payment and reserve requirement. Second homes require at least 10% down. The lender will need to verify you have sufficient funds for closing and between 2-6 months’ worth of reserves to cover both your primary and second home loan payments.

Defining a Second Home

There are specific requirements for defining a second home, e.g., needs to meet minimum distance requirements from your primary residence, or located in a recreational area, such as a lake or ski resort. Fannie Mae’s second home requirements are:

  • Occupied by the borrower for some portion of the year
  • Restricted to one-unit dwellings
  • Suitable for year-round occupancy
  • Borrower must have exclusive control over the property
  • Must not be rental property or timeshare arrangement
  • Cannot be subject to any agreements that give a management firm control over the occupancy of the property

Purchasing a second home in the same city where your child is going to college does not qualify as a second home; it is defined as an investment property, which has stricter guidelines and higher down payment requirements.

Scouting a Second Home

One way to start scouting for a second home is to find a real estate agent who is familiar with your desired location. They can fill you in on weather and traffic patterns, help you evaluate the location and amenities of a property and provide information about comparable sales, resale prospects and long-term property value.

Before you start your search, talk with a lender so you know upfront what you can afford and your specific financing options.

We are to here to help, even if you are not an RCB Bank customer. Connect with a local RCB Bank lender to get answers to your lending questions.

Invest in yourself. RCBbank.com/GetFit

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only. With approved credit. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934.
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Q&A: Accepting Mortgage Gift Funds

accepting gift funds

Gift Funds 101

If you plan to accept a monetary gift to help you cover homebuying costs, familiarize yourself with how gift funds may be used and who are acceptable donors.

May I use gift funds on all types of purchases?

Borrowers seeking a mortgage to secure a principle residence or second home may use funds received as a personal gift from an acceptable donor. Restrictions vary between loan types as to how gift funds may be used, for down payment, closing costs or reserves subject to minimum borrower contribution requirements. Gifts are not allowed on an investment property.

Who can give a gift?

Gift funds can only come from acceptable donors. A gift can be provided by a relative, fiancé or domestic partner.  A relative is more closely defined as the borrower’s spouse, child, dependent or any other individual who is related to the borrower by blood, marriage, adoption or legal guardianship.

What documentation is required?

Gifts may be evidenced with a gift letter signed by the donor. The gift letter must specify gifted dollar amount, date funds were transferred, donor statement that no repayment is expected and donor identification, including name, phone, address and relationship to the borrower.

How are gift funds verified?

Lenders will gather documentation to confirm sufficient funds are in the donor’s account or have been transferred to the borrower’s account. There are three different ways to verify funds:

  • Copy of the donor’s check and borrower’s deposit slip
  • Copy of the donor’s withdrawal slip and borrower’s deposit slip
  • Lender can document donor gave closing agent the gift funds in the forms of a cashier’s check, certified check or another official check.

Can equity be gifted?

Gifts of equity are allowed by the seller to the buyer on principle residences and second home purchases. The gift represents a portion of the seller’s equity in the property, and is transferred to the buyer as a credit. This still requires a gift letter and the settlement statement listing the gift of equity.

Gift donors also should familiarize themselves with the IRS annual gift tax rules.

Taxes may be owed if the gift amount exceeds the annual exclusion. Please consult with a tax professional.

We are to here to help, even if you are not an RCB Bank customer. Connect with a local RCB Bank lender to get answers to your lending questions.

Invest in yourself. RCBbank.com/GetFit

Opinions expressed above are the personal opinions of April Bow and meant for generic illustration purposes only. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. April Bow NMLS #1446997.
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Homebuilding Financing Simplified

Building a house is a two-loan process.

First, you need temporary construction financing to cover the building costs. Then, you need permanent financing for your mortgage. Eliminate unnecessary stress by obtaining both loans at one location. Here are three reasons why.

No. 1. Cost Savings

Financing both loans at one place, like a bank, streamlines your loan process. You provide information to one place, which uses it to prepare both loans. You may save on appraisal costs too. By using the same bank for both loans, you may only have to pay for one appraisal and then a less expensive appraisal certificate to certify the construction is complete.

No. 2. Mortgage Pre-Approval

Securing both loans through the same bank may reduce your risk of mortgage delays by allowing you to get pre-approved early for permanent financing. A pre-approval is based on documentation you provide at the time, assuming your situation does not change.

No. 3. Efficiency

During construction, your lender works with the builder or contractor to ensure invoices are paid based on the work done and materials provided. Your lender monitors the progress of the project so payments are only made for work completed.

By financing both loans through the same bank, the lender can schedule closing on your mortgage to occur quickly once the contractor gives the okay to move in.

You can have as much or as little involvement in the construction process as you want. Some customers prefer the builder to work directly with the bank. Others prefer to be hands on.

Find a lender you trust. At RCB Bank, we are flexible and adapt to your needs. We’re reachable, by phone, in person, or at the job site, if necessary. Let us help you save time, money and hassle on your homebuilding project. Connect with a local RCB Bank lender to get answers to your lending questions.

Invest in yourself. RCBbank.com/GetFit

This article is published in Value News, April  2019 Issue, valuenews.com.
Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Jake Dwyer NMLS #1413664
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How to avoid delays in your mortgage process

Get$Fit Tip: Limit financial changes

Proceed with caution Mortgage Matters

Obtaining a mortgage requires a lot of documentation, multiple forms, financial records, third-party paperwork; not to mention multiple layers of inspection to verify your information is accurate. Financial changes during your loan process can invalidate paperwork and delay your loan closing. Here are four ways to avoid delays in the loan process.

No. 1: Inform lender of a job change ASAP.

You submit pay stubs and W2’s to your lender, but, right before closing, your lender may request employment verification from your employer. If your job or income status changes, this can potentially create a holdup in the loan process; or worse, your loan may be denied, even if you were pre-approved. A job change requires updated documentation and approval verification. Some jobs have a probationary period, which too may affect your loan approval process. If you are planning a job change, let your lender know as early as possible as this can also help you avoid delays.

No. 2: Resist increasing debt.

A few days before closing, your lender runs a final credit check to check for new debt. If you open a new credit card, finance new appliances or furniture, buy a car, co-sign on another loan or take on more debt, new documentation is required. Resist the urge to make big purchases during your loan process. New debt may affect your loan qualification.

No. 3: Avoid big financial changes.

Most lenders require up to two months of bank statements for proof of funds used for your home transaction. Changing banks during your loan process may cause a delay in obtaining the necessary statements. Moreover, any large deposits made into your account need explanation. Most loans will allow a gift, but these funds require additional documentation signed by you and the person making the gift.

No. 4: Keep credit card balances low.

A large portion of your credit score reflects your credit utilization. Keeping credit card balances under 20 percent of your available balance helps your credit score. When it comes to your mortgage, your credit score helps determine both your interest rate and mortgage insurance (if required). A higher credit score helps you qualify for better rates, saving you money over the life of your loan.

Before you make major financial changes, talk to your lender first. This will help you avoid delays or setbacks during your mortgage process.

We are here to help even if you’re not an RCB Bank customer. Connect with a local RCB Bank lender to get answers to your lending questions.

Invest in yourself. RCBbank.com/GetFit

This article is published in Value News, November 2018 Issue, valuenews.com.
Opinions expressed above are the personal opinions of Kenneth Wohl and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934
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Ways to save at closing

Get$Fit Tip: Compare lender fees for better savings.

Woman dreaming about house holding piggy bank.

Did you know closing costs vary between lenders? If you want to save the most money on your closing costs, it pays to shop around. Here’s why.

Interest rates are restricted by market conditions. Your options are limited.

Buyers often shop interest rates, choosing the lowest rate possible to help their overall savings over the life of the loan. Yet, rates change daily, sometimes more than once per day depending on different economic factors.

When comparing lenders’ rates for secondary market financing, all lenders base their rates off the same market trading; therefore, all quotes should be similar, typically within .125 percent, .250 percent at most.

Lender fees vary from lender to lender giving you more options to lower your costs.

Lender origination charges, application fees, processing and underwriting fees can vary significantly between lenders. The best way to compare lenders is to request Loan Estimates. Their fees will be listed under Closing Cost Details on page 2, section A.

You can also cut costs by comparing homeowner’s insurance coverage and premiums.

Oftentimes, the largest expense on your Closing Disclosure is homeowner’s insurance, another expense that varies between companies.

Generally, you will need 14 months of homeowner’s insurance set aside in your escrow account paid at closing. If you choose a policy that charges $1,800 annually versus a $2,500 annual policy, you can save $800 at closing.

Know where your money is going.

Ask your lender plenty of questions. A good lender can answer all your questions and make you feel comfortable about your spending decisions. Buying a house is one of the most expensive things you will buy. Why spend more than you have to?

Talk to a lender to explore your options. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Invest in yourself. RCBbank.com/GetFit

Opinions expressed above are the personal opinions of Alex Penny and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Alex Penny NMLS #1535836.
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Financing options for new home construction

Get$Fit Tip: Plan short-term and long-term financing before you build.

home under constrcution

When it comes to financing the construction of a new home, you have two options.

1. Let a builder finance construction.

Common with larger building companies. The builder may ask you to put down a deposit while the company carries the cost of the construction. You get to choose floor plans, paint colors, fixtures and so on.

When construction is complete, you will obtain a typical mortgage, as if you purchased an existing home. Construction costs are built into the purchase price.

2. You finance construction.

Typical with smaller building companies or individual builders. You may choose to the carry the construction loan yourself. This type of financing is usually offered only at your local or regional banks and credit unions.

Your lender will determine the value of your home during your loan application by ordering an appraisal on the building and design specs.

Construction loans are short-term loans, generally 12-18 months. Costs vary by lender, so do your homework.

The majority of lenders will finance up to 80 percent of the property’s value.

Once approved, your loan is a closed line of credit. You can withdraw from the account as certain construction stages are completed. For example, after you acquire the land, you will need to pay for dirt work, then the foundation, the framework and so on.

Your lender will likely prepare a payment plan – a draw schedule – to guide the disbursement of funds through each stage. Periodically, the bank will send someone to check on the progress and verify draw schedule and budget.

Plan before you build.

Cost overruns

There will always be cost overruns or change orders. You may decide to add a larger patio or extra lighting. These items seem small individually, but they add up quickly. When planning your budget, conservatively allow for a 10 percent overage.

Variable monthly payments

Construction loans are short-term loans with adjustable interest rates. Think of it like a credit card payment. You pay the interest each month on the amount you borrowed. Prepare for payment fluctuation.

Permanent financing

Make sure you are qualified for permanent financing before taking out a construction loan. Some lenders may do construction loans but not permanent mortgages. Others do both.

Get pre-qualified for your permanent mortgage before you build.

Make certain you are pre-qualified for long-term financing before you build to avoid a potential financing nightmare when your new home construction is complete.

Talk to a lender to explore your options. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Invest in yourself. RCBbank.com/GetFit

Opinions expressed above are the personal opinions of Alex Penny and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934.
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Rural Development Home Loan Advantage

Get$Fit Tip: Know all your financing options before you start home shopping.

Rural Neighborhood

USDA Rural Loan Requirements

If you feel like homeownership may be out of reach because you don’t have a large down payment, look into the U.S. Department of Agriculture Rural Development loan (RD) program, which provides up to 100 percent financing to qualified households in eligible areas.

Fun fact: Rural America includes 72 percent of the nation’s land mass, according to the USDA RD 2017 Performance Report.

Rural Development Loan Advantages

100% financing

Rural Development loans may only require you to pay closing costs. The majority of other loan programs may require at least 3 percent down.

Lower Interest Rate

Because Rural Development loans are backed by the government, they typically are lower interest rate loans than most conventional loans.

Keep in mind, interest rates vary daily and depend on a number of factors, such as loan amount, credit score and rate lock.

Seller Concessions

Rural Development loans allow the seller to contribute up to 6 percent of your closing costs, which may cover your out of pocket needs entirely.

Mortgage Insurance Reduction

Most loans require mortgage insurance (PMI) if you pay less than a 20 percent down payment. PMI covers the loan in case of default and may require an upfront fee and/or is included in your monthly loan payment. With a Rural Development loan you may be able to finance the upfront portion and receive a discounted rate on the monthly fee.

Talk to a lender to explore your options, and to find out if you qualify for a Rural Development loan.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of Alex Penny and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB, RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Alex Penny NMLS #1535836.
Source: USDA, https://www.rd.usda.gov/
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Guide to defining your second home

Vacation home

When it comes to buying a second home, understanding how to define the property will help you better understand your mortgage options.

Let’s go over the basic home types defined by Fannie Mae.

Principle Residence, a property the borrower occupies as his or her primary residence.

Second Home, a property that must be occupied by the borrower for some part of the year, restricted to residences suitable for year-round occupancy. Borrower must have exclusive control of the property, must not be rental property or timeshare, and cannot be subject to any agreements that give management firm control over the occupancy of the property.

Investment Property, a property owned but not occupied by the borrower.

The property types seem straightforward, but here are a couple examples of when it gets tricky.

College homes

Many parents planning to purchase a home for their kids while they attend college will often apply for a second home mortgage.

If a home is considered as someone’s primary residence, regardless if that person (or student) is obligated or not on the loan, the home cannot be someone else’s secondary. In this case, the college home is an investment property.

Vacation homes

Another area of confusion are timeshares or homes managed by a management group, e.g., rental company. Most often, these do not qualify for conventional financing.

Your vacation home may qualify as a second home if it is in your full control and not generating income.
Remember, second homes are a second residence for the borrower to enjoy or use when not occupying their primary residence.

If you plan to rent the property while you are not using it, it may not qualify as a second home.

If you’re planning to purchase a vacation home or second property speak to a lender before you start the mortgage process.

The more you know about your loan options and your individual qualifications, the more satisfying your homebuying experience is.

Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only.  RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934. 
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Benefits of an escrow account

A home ownership payment manager

House and calendar

It should be no surprise that as a homeowner you are responsible for expenses beyond your mortgage payment, such as property taxes, homeowner insurance and mortgage insurance, to name a few.

Benefit #1: Escrow is a personal payment manager

An escrow account is a service provided by your lender to help you manage and budget home-related costs. A benefit of an escrow is you make one monthly payment that includes your mortgage principle and interest, plus a percentage of your insurance and tax expenses. Your lender takes care of paying the various bills due throughout the year.

Most lenders require escrow accounts on mortgages greater than 80 percent loan-to-value and are set up at closing.

Benefit #2: Escrow lets you spread out annual costs over time.

Another benefit of an escrow is you don’t have to stress to come up with large lump sum payments.

How escrow works

Your lender adds up your additional home-related costs outside your mortgage payment – taxes, homeowners insurance, mortgage insurance, flood insurance, etc. – They divide the total cost of these payments by 12 (months) and add it to your monthly mortgage payment.

Generally, a cushion of 1/6 of the total escrow charges is collected at loan closing to account for any unexpected increase in premiums when it’s time for the lender to make the yearly payment.

Your escrow account builds with each monthly payment. Funds are withdrawn from your escrow to pay for bills as they are due.

Can your escrow payment change over time? 

Yes, if there are changes in insurance costs and taxes, your escrow payment will also change.

Annually, your lender will review your escrow. The review looks at updated taxes and insurance costs to ensure the amount paid into the account is enough to cover costs. If costs have decreased, due to a change in insurance for example, there may be an overage and you would be issued a refund. If costs have increased, you will be required to make up the shortfall.

There are usually two ways to cover a shortfall.

1. Pay the shortfall in one lump sum.

Your full payment covers the past payments and brings your account to balance. An increase in monthly payments is necessary to cover the increased costs for future payments.

2. Divide and pay the amount over the next 12 payments.

Paying back your shortage over time will increase your monthly payment more than paying a lump sum because you are paying the shortage plus the increase in costs over the next year.

It’s important to understand, if insurance costs and taxes increase, your monthly payment will also increase going forward.

Get$Fit Tip: Shop around for insurance.

If you want to keep your monthly payment as close as possible to what you pay now, an annual check on your homeowner policy or other insurance plans may help. It is your responsibility to review your policy and shop around for the best deal, not your lender.

Make sure your policy is in line with current market rates and has not increased more than a few percentages, which is typical for some insurance companies. It’s always a good idea to comparison shop and request quotes. If you find a better deal, contact your lender to update your escrow account information.

Opinions expressed above are the personal opinions of Kenneth Wohl and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. RCB Bank is an Equal Housing Lender and Member FDIC. RCB Bank NMLS #798151. Kenneth Wohl NMLS #453934.
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