Jean And Jude Own A Townhome That Was Purchased For 165000 On 6302 ✓ Solved

Jean and Jude own a townhome that was purchased for 5,000 on 6/30/2007. Current property values in the area have not substantially recovered to their pre-2008 values. They believe that their current mortgage balance exceeds the townhome's current market value by ,000. Their family has grown from 2 to 4 (twins, boy and girl) and as a result they need more living space. The children will be starting school within the next 6 months.

They are not pleased with the quality of the current school system. They need more living space and want their children to attend school in a better school district. Jean and Jude have decided to look for a different home. They would like a detached single-family home with at least 3 bedrooms, 2 full baths, a 2-car garage and a ¼ acre back yard. After interviewing several Realtors, Jean and Jude have selected you to find them a new home and discuss the options of either selling or renting their current home.

Jean and Jude have asked for you to provide the following. How would you respond? 1. Explain the three methods used to appraise the value of our townhouse and recommend the most appropriate method to use. 2.

Explain and describe the information included on the TRID form and how it benefits the home buyer? 3. If we decide to rent out our home, we would like to exclude tenants that have a pet of any kind or for any purpose. What, if any, government regulations will impact this decision? 4.

List the steps in the loan process used to qualify us for a mortgage and explain how our current mortgage balance may impact the qualification decision? 5. Explain the advantages and disadvantages of selling or renting our townhouse. Assume that we would have to take an early distribution from our individual 401Ks to make the down payment on a new home. 6.

If we stopped making the monthly mortgage and escrow payments, what action(s) would the bank take? 7. Regarding our townhouse, which course of action would you recommend: selling the townhouse, renting the townhouse, or stopping the mortgage and escrow payments? This assignment must include properly formatted APA-style citations.

Paper for above instructions

Title: Homeownership Decision-Making for Jean and Jude: Options and Recommendations
Introduction
Jean and Jude are at a critical juncture in their lives, as they seek to transition from their current townhouse to a new, larger single-family home. As their family grows from two to four members, their housing needs have evolved, necessitating a reassessment of their living situation. This report will address the appraisal methods for their current property, discuss relevant forms and regulations, explain the loan qualification process, and examine the advantages and disadvantages of selling versus renting their townhouse. We will also consider potential consequences of defaulting on their mortgage and provide a final recommendation on their best course of action.
1. Appraisal Methods
Three primary methods are commonly used to appraise real estate values: the sales comparison approach, the cost approach, and the income approach.
- Sales Comparison Approach: This method evaluates the property's value based on comparable sales in the area. It analyzes recent sales of similar properties (comps) to determine a fair market value. Adjustments are made for differences in features like size, location, and condition (Floyd, 2019).
- Cost Approach: This method calculates the cost to replace or reproduce the property while subtracting depreciation. This approach is often used for unique properties where comparable sales are hard to find (Appraisal Institute, 2020).
- Income Approach: Primarily used for rental or investment properties, this method determines value based on the income a property generates. It is less relevant for homeowners as Jean and Jude plan to live in their next house (Rosen, 2018).
Recommendation: Given that Jean and Jude seek a clear understanding of market value to sell their condo, the Sales Comparison Approach is the most appropriate method. It provides a market-driven perspective based on actual transactions, giving them an accurate estimate to aid in selling or renting their property.
2. TRID Form Explanation
TRID, which stands for TILA-RESPA Integrated Disclosure, consolidates disclosures required under the Truth in Lending Act and Real Estate Settlement Procedures Act into two forms: the Loan Estimate (LE) and Closing Disclosure (CD), which must be provided to borrowers (Consumer Financial Protection Bureau, 2020).
- The Loan Estimate outlines the key terms of the mortgage, including estimated monthly payments, loan fees, and additional costs like taxes and insurance.
- The Closing Disclosure provides finalized details about the loan, including terms and closing costs when the transaction is nearing completion.
Benefits to Home Buyers: TRID aims to enhance transparency and help buyers understand loan terms more clearly. It allows them to compare costs and ensures they are not caught off guard by unexpected fees (Hurst, 2019).
3. Tenant Pet Regulations
If Jean and Jude specify no pets allowed in their rental agreement, they should be aware of local and federal regulations regarding discrimination:
- Fair Housing Act: This U.S. law permits certain restrictions but prohibits discrimination based on race, color, religion, sex, disability, familial status, or national origin (U.S. Department of Housing and Urban Development, 2021).
- Emotional Support Animals: Landlords cannot outright refuse tenants with emotional support animals, as these can be classified as a reasonable accommodation under certain conditions (Nolo, 2020).
Jean and Jude should thus carefully consider whether to allow pets while ensuring compliance with applicable laws.
4. Loan Qualification Process
The typical steps for qualifying for a mortgage include:
1. Pre-Approval: Lenders assess Jean and Jude’s creditworthiness, income, and debt-to-income ratio prior to house hunting.
2. Application: After identifying a property, they complete the mortgage application and provide necessary documents.
3. Credit Check: The lender evaluates their credit history and score, which influences loan conditions.
4. Appraisal: The lender orders an appraisal to ensure the property's value aligns with loan amounts.
5. Underwriting: The lender reviews the application, assessing risks before granting approval (Mayo, 2019).
Impact of Current Mortgage Balance: Their reported mortgage balance exceeding market value by ,000 can negatively impact their loan qualifications because it may present a high loan-to-value ratio, potentially leading to costs like private mortgage insurance (PMI) if they qualify at all (Freddie Mac, 2022).
5. Selling vs. Renting
Advantages of Selling:
- Immediate liquidity for down payment: Selling the townhouse provides funds for purchasing a new home.
- Market capitalizes the property’s value: If the market rebounds, they may sell closer to pre-2008 prices.
Disadvantages of Selling:
- Loss of potential rental income.
- Transaction costs, including agent commissions and closing costs, can diminish profit.
Advantages of Renting:
- Retain asset appreciation if property values increase.
- Generate passive income through rental payments.
Disadvantages of Renting:
- Responsibilities of being a landlord, including maintenance and tenant management.
- Difficulty attracting tenants due to pet restrictions.
Considering the necessity for a down payment from their retirement fund, selling may be the more prudent action, allowing immediate and straightforward access to cash.
6. Consequences of Default
If Jean and Jude stop making their mortgage payments, the bank will begin the foreclosure process, which may include:
1. Late Fees: The bank will impose penalties for missed payments.
2. Default: After 30 days, they will be considered in default.
3. Foreclosure: The bank may initiate foreclosure proceedings, leading to property auctions, which can further damage their credit score and more (Institute for Financial Literacy, 2022).
7. Recommended Course of Action
Given their urgent need for more space, the dissatisfaction with local schools, and the desire to ensure financial health, I recommend selling the townhouse. This decision will provide Jean and Jude with the funds necessary for a larger home in a better district, fulfilling their immediate family needs while managing financial risk.
Conclusion
Navigating the transition from their current townhouse to a more suitable family home is critical for Jean and Jude. By employing the recommended appraisal method, understanding the TRID benefits, recognizing regulations regarding pet policies, and weighing their loan qualification status, they can make informed decisions tailored to their changing needs. Ultimately, selling the townhouse appears to be the best choice to facilitate this next chapter in their family’s journey.
References
1. Appraisal Institute. (2020). The Appraisal of Real Estate. Appraisal Institute Press.
2. Consumer Financial Protection Bureau. (2020). Understanding the TRID Rule. Retrieved from [CFPB website](https://www.consumerfinance.gov)
3. Floyd, W. (2019). Real Estate Appraisal Explained. Wiley.
4. Freddie Mac. (2022). Loan-to-Value Ratio. Retrieved from [Freddie Mac website](https://www.freddiemac.com)
5. Hurst, C. (2019). Comparing Loan Estimates and Closing Disclosures. Financial Planning Association.
6. Institute for Financial Literacy. (2022). Understanding the Foreclosure Process. Retrieved from [IFL website](https://www.financialliteracy.org)
7. Mayo, D. (2019). Fundamentals of Mortgage Financing. Mortgage Bankers Association.
8. Nolo. (2020). Tenant Rights and the Fair Housing Act. Retrieved from [Nolo website](https://www.nolo.com)
9. Rosen, A. (2018). Real Estate Investment Analysis. Routledge.
10. U.S. Department of Housing and Urban Development. (2021). Fair Housing Act Overview. Retrieved from [HUD website](https://www.hud.gov)