Wednesday, April 16, 2014

Why Getting A Home Inspection Is So Important

When a buyer finds a great home to purchase, and then negotiates the price and terms with the seller, the next order of business is hiring a home inspector. Let’s discuss why this is a very important step early in the purchase process. Let’s also discuss some other facts about the necessity of a home inspection.

Reason – A home inspection is one way a buyer reduces the risk of buying a house with defects. The seller may not realize the house has problems. Many of the deficiencies that a home inspector discovers occur because of changes in building or safety codes. As an example, a house built to code in 1970 may not have ground fault interrupters (GFI) in the kitchen or bathroom. The GFI provides protection from an electrical shock when there are critical differences between the “hot” and “neutral” wires. While installation of GFI outlets are today’s standards, they were not 40 years ago.

The home inspector does more than just inspect electrical outlets. A house consists of several systems. These include the roof, insulation, plumbing and structural systems in addition to the electrical issues.

Qualifications – During the home preview phase, the buyer has the job of concentrating on finding a house that fits the household needs, wants and desires. Your REALTOR® is an expert when it comes to selling real estate and knowing how to negotiate and close a sale. It is very common for neither the buyer nor the REALTOR® to have the technical experience that qualifies either as an expert in the many systems found inside a house.

The Mississippi Real Estate Commission licenses the home inspectors. Most inspectors have a construction background. During the inspection the home inspector climbs onto the roof to check the grit of the shingle for a determination of the remaining life expectance. While on the top, they also look for other obvious problems, especially near the chimney or exhaust outlets. The inspector crawls into the attic to check the amount of insulation, observe any traces of roof leaks or other potential problems.

How fast the does heating and cooling system change room temperature? How quickly does the water heater provide hot water – and what is the temperature of that hot water? Those are just a few of items evaluated.

Findings – After completing a three to four hour physical property inspection, the buyer receives a detailed written report that includes photographs. The buyer receives the report because the buyer hired the inspector. That’s the way it should be. The inspector works for the buyer, not the seller. That way the buyer has the assurance of receiving a full and accurate report, rather than one filtered by the seller.

Most purchase contracts include language that for the sale to proceed, the house must pass inspection. Identifying potential problems early in the transaction is also important, from two standpoints.

Major Problems – Suppose there are major problems with the house. That is the main reason for completing the home inspection early in the process. The purchase contract may need renegotiation. The buyer may have second thoughts about completing the purchase. Early identification of problems gives each side time to take logical second steps in their best interests.

It is possible that the seller could make all required repairs, regardless of the cost to keep the transaction alive. It is possible the seller could refuse. In this case the buyer has the option of walking away from the transaction without a financial penalty.

Minor Problems – Something as easy to repair as a GFI is a minor problem. Most buyers write language into the purchase contract that the seller makes minor repairs up to the amount indicated in the purchase offer. The buyer uses the inspectors report as documentation for requesting those minor repairs. The buyer prioritizes the minor repairs starting with ones deemed most serious to the least serious.

Validation – The buyer or the seller does not have to accept the word of the home inspector. Either party can hire a specialist, especially if the inspector discovers a potential problem that goes beyond the scope of the inspection, or for a second opinion. As an example, a buyer could find a great house but the geology is one of a shifting Earth. A buyer could want the expert advice of a structural engineer to explain why a wall appears to lean.

Finding A Home Inspector – Your REALTOR® has a list of all area licensed home inspectors. The REALTOR® also receives a copy of the inspection report and prepares the paperwork to send to the listing agent and the seller.
Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail –  He is also available for web video chat.

Tuesday, April 15, 2014

Don’t Wait To Buy A Home

There are some renters that either cannot or will not pull the trigger and enter the home purchase market. As stated in this blog multiple times, the local housing market is recovering. That is good news for a seller. It is still good news for a buyer. However, for the buyer, the sands are quickly running out of the proverbial hour glass. This remains a great time to buy a home. Let’s examine a few situations.

First Time Home Buyers Tax Credit – Five years ago there was a program that offered a first time home buyer an $8000 tax credit to buy a home. That program expired in 2009. There is no prospect of Congress or the Administration renewing it. But let’s turn back the clock and examine what happened to a person that bought a house then.

Let’s assume a person bought a $100,000 home in 2008. Most lenders charged 5.5 percent interest for a 30-year fixed rate mortgage. That means a few things. First, the borrower owes more in interest than on the principal. The mortgage payment (principal and interest only) is about $570 a month.

Second, the borrower repaid about $10,000 on the principal, while still making the same monthly mortgage payment. A renter probably pays at least $100 a month more rent today to stay in the same place he did in 2008. That is how much rent increased.

Last Year’s Home Buyer – Shortly after the tax credit expired, mortgage interest rates began a slow but steady decline. They bottomed out in May 2013. Many homebuyers in May 2013 financed their home at 3.5 percent. That means the monthly payment on a $100,000 house was about $450 a month (principal and interest only). The total interest on that loan is nearly $43,000 less than what the 2008 homebuyer pays.

Today’s Home Buyer – Most lenders charge about 4 percent for an FHA mortgage today. That means the borrower has a monthly payment of about $477 (principal and interest only) on a $100,000 loan. Mortgage interest rates fluctuate based on market conditions. Rates at 3.5 percent were abnormally low. It is possible that they could return to that low point and go even lower. Possible and probably are two entirely different words.

Even if interest rates went under 3 percent, that would still not cause an indecisive renter to enter the housing market. Some renters are very content to pay more in rent for varying reasons.

Tomorrow’s Home Buyer – As the housing market improves, prices will slowly inch up. In the national market, the median home increased about 18 percent in value during the last two years. The best time to purchase house is in the rear view mirror. That does not mean tomorrow’s home buyer will miss the boat entirely. It does mean that they will pay a bit more to achieve the American Dream

How To Act – The first thing to do is make a decision that buying a home is a sound long-range decision. Get solid advice from parents and grandparents. Most will tell you that buying a home was a scary thing for them but as it turned out, it was one of the best decisions they ever made. The reason is scares people is because buying a home is a very complicated transaction. For most people it is the largest capital purchase they make in a lifetime. It’s hard to comprehend the purchase price. Add the interest on the loan and that amount of money is almost mind boggling. Yet, in the long run parents and grandparents believe it was a good decision. Would they intentionally lie or mislead you?

After getting the assurance that buying a home is good long term decision, visit with a banker. Start at the bank where you keep most of your money. All local banks have mortgage departments.

Even if there are blemishes in the credit history, face them. Ignoring a problem does not make the problem disappear. Ignoring a problem leads to complications. Homeowners must face reality every day. Start acting like a homeowner. Face problems and take action to correct the past.

Start deciding on what type of home to buy and the general location. Let the lender set the pricing limit. That is a way to begin the process.  Here is where the assistance of working with a REALTOR® helps.

Don’t believe talk that a REALTOR® drives up the cost of the purchase. The reverse is true. A REALTOR® has the skill and knowledge to negotiate a price based on data in a carefully prepared comparative market analysis. The CMA insures the seller receives a fair price for his house but the buyer does not pay more than the fair market value.

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail –  He is also available for web video chat.

Monday, April 14, 2014

What Is Mortgage Pre-Approval And What It Is Not

Unless a person has the financial capability to pay cash for a house, it is very likely they need a mortgage. Getting pre-approved for a mortgage is the major first step to take. Then decide on a specific house to buy. Why do it that way? Let’s examine the term mortgage pre-approval. Let’s define what it is and also explain what it is not.

Mortgage Pre-Approval – Mortgage pre-approval is nothing more than a written commitment from a financial institution that they are ready to lend a specific amount of money if the borrower decides to buy a house. It’s a promise to lend up to a certain amount of money.

The financial institution reviewed the borrower’s financial history (credit scores). They examined the borrower’s current financial status (debt versus income ratio). They determined that the future should not change much (steady employment).

That is all mortgage pre-approval really is. The potential borrower has no obligation to buy a house. Even if they do buy a house, the buyer can get a mortgage with a different lender.

A pre-approval letter is a badge of honor. It states that the money will be there if the borrower wants it.

What Is On A Pre-Approval Letter – When the financial institution writes a pre-approval letter, there are some critical pieces of information missing. One is an amount. That amount sets the upper limit of the purchase, not the upper limit of the mortgage. That is why pre-approval is not a loan. It’s only a promise to authorize a loan.

Suppose a pre-approval letter contains a $150,000 limit. In this example, the borrower can write a purchase offer on any house costing $150,000 or less. The actual loan amount is irrelevant. It’s the purchase amount that is important.

Let’s make one more supposition. We still have a $150,000 pre-approval limit. The buyer finds a great house for $100,000. What happens to the other $50,000?

The answer is nothing. The buyer chose not to use the full pre-approval amount. Holding down the total purchase cost shows great fiscal restraint.

What Else Is On A Pre-Approval Letter – In addition to the maximum amount of purchase, the pre-approval letter also has a termination date. If the potential borrower decides to buy a house, they need to do so within the next 60-90 days. That is because financial conditions change.

What Pre-Approval Is Not – As stated above, the pre-approval letter is not a loan. The potential borrower incurs no debt. That is because the pre-approval letter is really a promise to loan money.

Here is the proof that a pre-approval letter is not a loan. The mortgage pre-approval letter lacks three very important elements, and with good reason. The pre-approval letter does not have a specific address, a specific purchase price or a final date of sale.

Again, let’s use that $150,000 example from above. Assume the home buyer found a great home with a list price of $144,900 located at the fictitious address of 12345 Main Street. The buyer and seller agreed in writing to a purchase price of $140,000 providing the property legally changed ownership (closed) in 30 days.

Now the buyer has all the information to make a formal mortgage application. He has the address. He has the actual purchase price. He has a closing date. More than that, the borrower now has an important document for the mortgage originator. It’s the written purchase contract, fully signed and legally binding.

Without a pre-approval letter, the seller might have remained very firm with his pricing because of having no assurance that the buyer could get the money for the purchase.

Why Do Things Like This – I’ve Never Done Anything Like That Before – This is a very common question, especially from a first time homebuyer. The truth is that buying a home is the largest single financial transaction most people make in a lifetime. So yes, things are a bit different.

But real estate is a very different type of purchase than any other good or service. That is because there is no such thing as two identical pieces of real estate. Every piece of real estate is unique. There is another piece of information to consider as a reassurance that everything is perfectly legal and above board.

To make a mortgage, the originator needs a state-issued license. Any license requires education, passing a written exam and supervision. That license must be in plain view to customers. That’s a great reason to use a local lender.

The real estate scam horror stories come when buyers take short cuts that seem right. Don’t make that mistake. Stick with reputable lenders and REALTORS®.

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail –  He is also available for web video chat.

Friday, April 11, 2014

Columbus, Mississippi Is A Bee Hive Of Weekend Activity

Moving to Columbus, Mississippi anytime soon? Thinking of visiting here? This weekend is an indication that there are numerous events for just about every type of interest. Let’s get right to it.

This is the final weekend for the 74th Columbus Pilgrimage.  There are five historic homes open this weekend with two being on Friday and three others on Saturday. Each of the five homes is more than 175 years old and recognized for its historic value to the state or nation. The homes serve as the actual primary residence of the owner.

Also on Saturday is the tour of St. Paul’s Episcopal Church.  This tour explains the architectural design of this historic house of worship. The tour does not include a religious service.

Besides being the central point for Pilgrimage ticket sales, the Tennessee Williams Welcome Center on the corner of Third and Main Streets offers two other services.  Ride on the double-decker bus or on a horse-drawn carriage through the historic district. Both depart from the Welcome Center parking lot.

Friday is the final performance of “Tales From The Crypt” at Friendship Cemetery on 4th Street and 15th Avenue South. Don’t let the name or the venue frighten you.

Tales From The Crypt is a dramatic performance by students at the Mississippi School For Mathematics and Science. These academically gifted students spent countless hours researching people interred at the cemetery who might have just vanished into forgotten history. The costumed students tell factual stories about otherwise ordinary people that lived and died during the Civil War.  “Save Our History” recognized the value of this event. The people that attend Tales From The Crypt remember it for a very long time because of its creativity, information and entertainment. Performances begin at 7:00 p.m.

Make history by participating in the inaugural Columbus Pilgrimage Half Marathon - 5K! Whether you're a novice runner or seasoned athlete, don’t miss this race. The half-marathon unwinds on a scenic course along the Tombigbee River bed and ends at the historic river bridge. The 5K loops through some of the South's most beautiful historic neighborhoods. Register on-line or at the Tennessee-Williams Welcome Center. Registration begins at 7:00 a.m. Saturday.

The Farmers Market at the Hitching Lot is open every Saturday in April starting at 7:00 a.m. The market sells produce grown within a 50-mile radius of Columbus. No out of town stuff here. Just the best local farmers raised. The market is on the corner of Second Avenue North and Second Street – just two blocks west of the Lowndes County Courthouse. Purchase locally grown produce, fruits, herbs, plants and much more.

The Mayor’s Picnic is fast becoming a great Pilgrimage tradition. Join Mayor Robert Smith and the entire city council at Riverwalk Park on the west end of Main Street on Saturday starting at 4:00 p.m.  In addition to the food, there is plenty of entertainment. Last year Councilman Bill Gavin played the part of a disc jockey.

Before the picnic is another event. After a one-year absence, a scaled down version of Grillin on the River returns to the Columbus Riverwalk on Saturday. Grillin on the River is a qualifying event for the Kansas City Barbeque Society. The KCBS deems this event at the Magnolia State BBQ Championship. Come join the food fair. There are children's activities and live music. Best of all it’s free.  The fun begins at 9:00 a.m.

More than 100 elementary and high school students at Heritage Academy present their spring musical this weekend. See “Grease” presented by special arrangement with Samuel French, Inc. Book, Music and Lyrics by: Jim Jacobs and Warren.  The performances take place in the HA Student Activities Building on the corner of 7th Street North and Bluecutt Road either Friday at 7:30 p.m., Saturday at 2:30 p.m. or 7:30 p.m. or again on Sunday at 2:30 p.m.

Friends of the Columbus-Lowndes Public Library have their bi-monthly book sale on Saturday starting at 10:30 a.m. on the Library’s second floor. Stop by to purchase some of the best-selling fiction, novels, histories, biographies, cook books, children’s books, sports books, self-help books and audio books at an affordable price. What is an affordable price? Try anywhere from 25¢ to $2.00.  Proceeds from the sale help to purchase new books for the Library and also fund various Library activities. Some of those activities include the children’s summer reading program, the weekly Table Talk lunch and learn series or the exhibits in the Library.

Several families that attend East End Baptist Church on Highway 50 and Holly Hills Road in North Columbus have a giant yard sale and flea market starting at 7:00 a.m. Saturday. Children’s, men’s and ladies clothing, home d├ęcor, and many, many other items are available on a first-come first-served basis.

Ever let your mind just wonder what the world looked like 10,000 years ago. It’s possible to find out at 2:00 p.m. Sunday. George Phillips, the Curator of Paleontology, Mississippi Museum of Natural Science presents a lecture entitled “The Black Prairie 10,000 Years Ago,” as part of the continuing Sunday at the Bluff series.

No region in the entire Southeast, except perhaps the Mississippi Delta, is as rich in agricultural history as the Black Prairie.  Where is this unique region? What makes it so special? What does the fossil record tell us about the biological and physiographic history of the Black Prairie? What was it like 10,000 years or more ago when much of North America was covered by an immense ice sheet? What was roaming these grasslands where so many domestic cattle may now graze, and are any of these prehistoric Prairie animals still with us? Find out how near the Black Prairie is to Columbus and the answers to these and many other questions.

The Plymouth Bluff Center is on the west bank of the Tenn-Tom River. Follow the signs at the first exit on US-82 west after crossing the River. The lecture begins at 2:00 p.m. and is free.

Sunday is Palm Sunday. Abundant Life Christian Church presents annual Easter extravaganza and fellowship dinner on the upper level of the Trotter Convention Center on 5th Street North near the Lowndes County Courthouse starting at 3:00 p.m. Armondo Adams, Tamara Wilson-Tippet, the Noxubee County Mass Choir under the direction of Freddie Poindexter and the Columbus Chapter of the Mississippi Mass Choir perform.

Palm Sunday also means that the Easter bunny cannot be that far away from leaving candy treats for the children. Stop by Leigh Mall on US-45 North between US-82 and 18th Avenue. The Easter bunny visits the Mall Friday, Saturday and Sunday at various times.

Anyone have a housing need this weekend? The buyers are in full purchasing mode. Call your REALTOR® at least 24-hours in advance to schedule a private property preview.

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail –  He is also available for web video chat.

Thursday, April 10, 2014

What You Should Know About Your Home and Your 2013 Taxes

It’s the last year for three sweet home tax benefits, but the first for a way simpler home office deduction.

These days few things start a fight on Capitol Hill faster than taxes. Despite the fact that three important tax benefits used by millions of American homeowners are days from expiring, Congress is unlikely to do anything to re-up them any time soon.

So if you’re eligible, tax year 2013 is possibly the last time to claim the private mortgage insurance (PMI) deduction, the energy tax credit, and debt forgiveness benefit, all of which all expire on Dec. 31, 2013.

At least there’s one piece of good news for homeowners: If you have a home office, there’s a new, simpler option for calculating the home office deduction for which you may qualify on your 2013 taxes.

Meanwhile, here’s what you need to know about those expiring benefits as you ready your taxes:

PMI Deduction – This tax rule lets you deduct the cost of private mortgage insurance, which is what you pay your lender each month if you put down less than 20% on a home. PMI protects the lender if you default on the home loan. Your deduction could amount to a couple hundred dollars depending on your tax bracket and other factors.
Find out if you qualify for and how to take the PMI deduction.

Energy-Efficiency Upgrades – This sweet little tax credit lets you offset what you owe the IRS dollar-for-dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades, from insulation to water heaters. On the downside, the credit is capped at $500 (less in some cases). But on the bright side, the right improvement could lower your utility bills indefinitely.

Debt Forgiveness – When you go through a short sale, foreclosure, or deed-in-lieu, your lender typically lets you off the hook for some or all of what you owe on your mortgage.

That forgiven mortgage debt is income, on which you’d typically have to pay income tax.

Suppose you’re in financial distress and your lender agrees to let you short-sell your home, say for $50,000 less than you owe on the mortgage, and forgive you for the balance. Without the protection of the Mortgage Debt Forgiveness Act, you’ll owe income tax on that $50,000.

It’s likely if you had the money to pay income tax on $50,000, you’d have used it to pay your mortgage in the first place.

New Simplified Option for the Home Office Deduction – This may be the last year for the benefits above, but a new one kicks in for the 2013 tax year. If you work from home, you may qualify to use a new, simplified option for claiming the home office deduction when you file your 2013 taxes.

How much simpler is it? It lets you claim $5 per sq. ft. for up to 300 sq. ft. instead of having to compute the actual expenses of your home office using a 43-line form. To calculate the square footage of your office, just multiply the length of two walls. For example, an 8-by-10-foot room is 80 sq. ft. And at $5 per, that’s $400.

Although using the simplified option is obviously easier, the basic requirements for claiming the home office deduction haven’t changed. Your home office still must be used for business purposes:

 – Exclusively, and
 – On a regular basis.

Why Might the Tax Benefits Not Be Renewed? – Although the expiring tax benefits were renewed retroactively in past years, that may not happen in 2014 because many in Congress would like to see comprehensive tax reform rather than scattershot renewals of individual provisions. This could delay a decision on the homeownership tax benefits until the big picture budget and tax issues are resolved.

So if you can, enjoy them now!

Related: 9 Common Tax Mistakes to Avoid
Dona DeZube wrote this copyrighted article that appeared on National Association of Realtors® web site and is used with permission. She has been writing about real estate for more than two decades. She lives in a suburban Baltimore Midcentury modest home on a 3-acre lot shared with possums, raccoons, foxes, a herd of deer, and her blue-tick hound. Follow Dona on Google+.

Visit for more articles like this. Reprinted from with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail –  He is also available for web video chat.

Wednesday, April 9, 2014

March Real Estate Sales Recap for Lowndes County, Mississippi

National real estate sales always make news. However all real estate is local. So how is the local market performing? Let’s take a quick peek back at activity for March 2014 and also the first quarter of the year for Lowndes County, Mississippi which also includes sales inside the city of Columbus.

When considering this information please remember that the data presented is a representation based in whole or in part on information from the Golden Triangle Association Of REALTORS® or its Multiple Listing Service (MLS) predominantly for the period March 1, 2014 through March 31, 2014 but also for previous months. Neither the Association nor its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Association or its MLS may not reflect all residential real estate activity in the market. Several properties close each month without any involvement with a REALTOR®. These properties include but are not limited to private sales like a For Sale By Owner, builder owned real estate, bank-owned real estate or auctions. Those non-MLS transactions are not included in this summary. Additionally, non-residential sales including vacant land, multiple unit properties, or commercial real estate are not included in this summary.

In March, area REALTORS® assisted in closing 38 real estate transactions. The 38 transactions has a slight increase over February 2014 transactions and over transactions in March 2013. For the first quarter of 2014, real estate sales are about 9 percent ahead of 2013 sales. Real estate in 2013 had its most productive year since 2008. So the early indication is that 2014 will continue to be a good year to buy a home in Lowndes County.

The median house for March for Lowndes County sold for $146,500 or about $70 a square foot. The median sale represents an actual sale that is half way between the house that sold for the most and the one that sold for the least.

The average house sold for about $148,500 or $69 a square foot. The average house sold for 92 percent of the list price and stay on the market for about five months. Remember the average house represents a mathematical computation and may or may not represent an actual sale.

How do those numbers change by eliminating the very top of the market and the very bottom of the market? Let’s remove any house that sold for more than $300,000 or less than $50,000. That leaves a $250,000 range, where most houses sell. 

By removing those eight listings, the median house sold for $150,000 or $66 a square foot. The average house sold for $156,000 or $77 a square foot. Here the average house sold for 96 percent of the list price and took just a bit more than four months to sell.

In addition to the 36 closings in March, another 37 sellers found a buyer willing to write or negotiate an acceptable purchase offer. That means that in the foreseeable future real estate sales will continue to reflect very positive strong numbers for the next 30-60 days.

During March only 18 listings left the market because either the buyer did not emerge or a seller could not accept the terms of a written purchase offer.

Those 18 owners did not discourage 60 property owners from listing their house with a real estate agent. There are more than 350 houses currently listed in Lowndes County. There is now about a 10 month supply of houses in the inventory. In a perfect market, there should be about a 6 month supply. Still having a 10 month supply is a relative low number based on the last few years when there was a 12 month or great supply. That is another positive sign of strength in the housing market.

So what does it all mean? It’s still a buyer’s market, providing the buyer writes an offer at the fair market value and asks for reasonable concessions.

Many sellers realize this and price their homes at a realistic value based on the 2014 market. That is the reason they are getting nearly 100 percent of the purchase price. Sellers understand that a house priced right sells quickly.

One final thought. The data presented above is only a general snapshot of local market conditions. It does not represent the actual fair market value for a specific piece of real estate. Only a local real estate agent with access to the Multiple Listing Service has the ability to provide a comparative market analysis and begin to make some recommendations regarding pricing and terms after considering all the factors that go into the fair market value.

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail –  He is also available for web video chat.

Tuesday, April 8, 2014

Mortgage Pre-Approval Documentation

Obtaining a mortgage is a huge part of just about every real estate transaction. Getting pre-approved is the first step because some of the pre-approval documents carry over to the formal mortgage application.  Let’s discuss what a borrower needs to bring to the mortgage originator.

Identity Proof – The Patriot Act requires that a mortgage borrower provide proof of identification from two different sources.  One proof needs to contain a photograph such as a driver’s license, military identification card or a passport. Most borrowers use their Social Security card as the other ID proof. That’ because validating the social security number is also part of the process.

Tax Returns – It is not enough to provide two years of federal and state tax returns. Those returns must include all schedules and forms attached to the tax return.  These include the W-2 forms or the 1099 forms. These forms validate both income and employment from the previous years.  For those applying for a mortgage today, bring the complete 2012 tax return paperwork filed in spring 2013 and the complete 2013 tax returns filed last year at this time.

The complete tax return corroborates such conditions as writing off income as unreimbursed employee expenses. This is especially important for the self-employed, those working on a commission, or employees receiving bonuses.

Recent Pay Stubs – This is not news. If someone does not have a job, they cannot get a mortgage. Prove current employment by providing pay stubs that cover the most recent 30-day period. Providing 60 or 90 days is even better. Pay stubs do something else.

They validate current income. Remember those W2 or 1099 forms from the previous item. They validate past income. It’s possible a borrower received a promotion or a pay raise since the employer prepared the W2 or 1099. Additional income is important because it can raise the mortgage ceiling.

Bank Statements – Bring the most recent two or three months of bank statements to the mortgage originator. This is the evidence that the borrower has enough assets to pay the down payment, closing costs and other costs associated with buying a home.

Do not stop at just the bank statements. Bring any statements that prove financial assets. This includes IRA accounts, statements from a stock broker, or savings accounts.

Credit Statements – Another part of the mortgage process is to know what recurring monthly bills the home buyer owes. Bring the most recent two or three months of all credit card statements, student loans, automobile loans, and so forth.

The statements show the total credit available, the current unpaid balance, and the amount of credit available. Ideally, all credit accounts should have an unpaid balance of less than 30 percent of the credit limit. Let’s say that another way. Each account should have at least 70 percent of the credit limit available.

If there are any judgments or court orders that require a monthly payment, provide those to the mortgage originator. Combining of all of those helps determine the amount of recurring debt. Most lenders want a borrower to have below 40 percent of monthly household income going toward paying recurring debt. The 40 percent includes the mortgage payment.

Employer and Landlord Contact Information – Despite having pay stubs to prove employment that is not enough for a mortgage originator. Expect a lender to contact the Human Resources department for written proof of employment. That insures there are no imminent lay-off plans. It further validates that the borrower has a permanent full time job in the foreseeable future.

The lender validates a pattern of regular on-time rent payment. If the tenant has a regular habit of paying the rent on time, most lenders assume the borrower will make the monthly mortgage payment on time also. So give the landlord a “heads up” that a lender will be contacting them.

Payment For A Credit Check – Many mortgage lenders have a nominal charge to request a detailed credit report. If a borrower cannot afford a nominal fee for a credit report, that person probably does not have the money to buy a house. Expect to spend less than $50.

Sometime Is Missing – Provide a mortgage originator with all this information. Let the originator review it. In most cases, the originator writes a pre-approval letter that gives the borrower guidance on the upper limit of the home purchase. There is only thing missing at this point. What is it?

It’s the specific address and the specific purchase price of the house. There is no need for that during the pre-approval process. Get pre-approved first, find the perfect house, then make a formal mortgage loan application with the purchase contract.
Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail –  He is also available for web video chat.