Mortgage

Arm’s Length Transaction - What The Heck Is It?

A person's arm with an arm's length transaction tattoo in front of a house for sale.

If you're not familiar with the term, you may be wondering what an arm’s length has to do with the sale of a home? Well, this is the United States, and we do use feet to measure distance, so… Maybe the arms sounded like logical choice when the phrase was first coined; who knows?

I’m not sure where the term originated, but it’s become a means of describing how close (relationship, not distance) the parties of a transaction are to each other. These days, whether or not the sale of residential property is an arm’s length transaction must be disclosed, and it may even impact the terms of the sale. It may also be referred to as arm’s length negotiation, depending on who you’re talking to.

Definition Of An Arm’s Length Transaction

When it comes to buying and selling real estate, an arm’s length transaction is one where the parties involved in the contract have no relationship to each other that would otherwise influence their decisions during the purchase/sale of a property. A “relationship” can include: family members by blood, family by marriage, business associates, beneficiaries, or even parties that share a common business interest with each other.

In an arm’s length transaction, all parties are considered to have equivalent bargaining positions, a clear mind, and equal knowledge of the property being sold. Without the presence of a pre-existing relationship or undue duress, it’s determined that buyers and sellers will act in their own best interest. This also means, pressure or coercion...

Trended Credit Data: Fannie Mae’s New Credit Scoring Model

What is trended credit data?

One of the first things most credit challenged homebuyers ask me when beginning their home search is: “What credit score do I need to have to get a loan?”. I’m not a mortgage broker, so my typical response is: “it depends on many different factors” and “typically, at least a 600-620 credit score”. For many of them, this is music to their ears. You see, there are many potential buyers right on the cusp of being able to qualify, and they’ve been monitoring their credit for months while attempting to increase it.

In the past, a credit score was one of the major deciding factors for determining whether or not a homebuyer can get a loan. Either you meet the credit requirement for the type of loan you’re seeking, or you don’t get the loan. However, the future of the lone credit score in determining a borrower’s eligibility for financing appears to be fading. In comes trended credit data, a more in-depth approach to evaluating a borrower’s past challenges, and future ability, to repay a loan & manage credit.

Trended Data F.A.Q. (VIDEO)

 


What Is Trended Credit Data?

Trended credit data is an expanded explanation of...

Student Loan Debt: A Hurdle For Many First-Time Buyers

College students at graduation with student loan amount on their caps.

It’s the American Dream – graduate from college, get a job, get married, and buy a house. What the dream doesn’t take into account, however, is the increasing amount of student loan debt that many young graduates are faced with. How does this kind of large loan affect first-time homebuyers that are necessary in the real estate world?

Most recently, first-time homebuyers have composed a smaller percentage of the housing market in recent years; the National Association of Realtors (NAR) counted first-time homebuyers as only 1-in-3 of properties sold in the United States. In fact, many potential homebuyers aren’t even entertaining the thought of buying, because of near-impossible debt.

In addition, recent changes to underwriting guidelines have made it even more challenging for those with student loan debt to obtain a mortgage. However, despite these disheartening statistics, student loan debt doesn’t mean home ownership is out of the question.

Favorable Financing & Down Payments Options

For starters, mortgage rates are at an all-time low, and that’s not changing anytime soon. Furthermore, there are a number of programs and loans available for first-time homebuyers; most require a very low down payment and some require none at all.

Let’s start at the beginning. Mortgages are approved because of three main things: a down payment amount, a credit score, and income. Student loans affect a person’s debt to income ratio (DTI), which makes many believe that they simply can’t afford both student loan payments and a house payment. Generally, a DTI must be 43% or less to get...

Important Questions To Ask Yourself Before Buying A Home

A young man in deep thought with many questions.

Make Sure You’re Truly Ready To Buy

Are you planning on purchasing a home in the near future? If so, get ready for one of the most exciting and stressful times in your life. To reduce that stress, there are some important questions you need to ask yourself before making the decision to buy a home.

How much home can I afford?

A very important question. Normally, a home should cost between two and three times your gross income. You should also factor in extra costs that you don’t pay as a renter, including property taxes, homeowner's insurance, maintenance, and community association fees. There are numerous online mortgage calculators that can help you with the math and determine an appropriate purchase price. Regardless of how much you qualify for, you should determine a maximum monthly payment you’re comfortable with and stay within that range.

How much do I want to devote to a down payment?

A down payment used to be a solid 20%, but with the numerous loans available today the down payment can be as little as 3.5%. Remember, the larger the down payment, the more likely you will be approved for the loan you want and the lower your monthly payments will be, so shoot for 20% if you can. Mortgages with less than 20% down typically require you to pay monthly mortgage insurance, which adds to your costs. However, you should avoid putting too much down and completely draining your savings.

What do I want in a home?

Make a wish list! This is the fun part. Have you always dreamed of a sunroom? Do you want a huge finished basement to watch the game every Sunday? Know exactly what you want, what you...

Atlanta Real Estate Market Trends | December 2014

A bar graph showing median real estate sale prices and days to contract for the past 13 months.

Median Home Prices In Metro Atlanta Up 12.9% YOY

Sale prices for Metro Atlanta residential properties in November were up nearly 13% compared to November 2013. This massive jump in prices is a continuance of the price appreciation trend that started in late 2012. Despite a winter “cool down” in prices from the 5-year high experienced this past June, median sale prices have remained constant the past three months and appear poised to increase again in 2015.

Market Signals From November

November’s numbers show positive signs for metrics such as: closed sales, new pending sales, median & average sold prices, price per sq/ft and foreclosure inventory. We have experienced a trend of increasing inventory and days on market, which could mean the supply of homes for sale will continue to grow. The increase in supply in conjunction with a dropping sale price to original list price ratio may mean less of a seller’s market as we move into 2015.

Positive Outlook Moving Forward

With mortgage rates remaining low, strong stock market gains and dropping unemployment numbers, all signs point to a strengthening real estate market and overall economy moving forward.

Average Price Per Sq/Ft & Avg Sale Price Comparison

A graph showing increases in home sale prices and price per square foot over the past 13 months....