Survey: Rising Prices Motivate Buyers to Purchase Now

Thanks to DSNews for this informative article.

Make Yourself at Home - Navigating the Mortgage Process, Part 3

I suppose this might have been the first installment in the “Negotiating the Mortgage Process” series but after giving it some thought I determined that having a point of reference for these terms would make them more understandable. Besides, it promises (though I’m not sure if it’s a promise or a threat) to be the longest post in the series, hence, last.

Let me start with what I feel is the most misunderstood term in the entire mortgage industry: APR. Nine times out of ten there is a startled expression and a “but I thought you said…” when one reaches the disclosure revealing the APR. The most important thing to know about APR is this is not your interest rate.⇔Read that again.

APR – Annual Percentage Rate is an aggregate of all charges related to your loan, including, but not limited to: interest rate, insurance, title fees, HOA transfer fees, appraisals and re-appraisals for needed repairs, closing costs. Please be aware that even after you have locked your interest rate, the APR can change due to the adjustment of any associated fee.

Interest Rate – Your interest rate is solely, the percentage charged for use of the principal loan amount, and includes no other charges.

Lock – The guarantee of a specific interest rate for a specific amount of time. After it is locked, your interest rate will not rise provided the loan is closed on or before the pre-determined expiration date. This date is often very close to the closing date on your contract. Together you and your loan officer will determine the best time to lock your rate.

Pre-Qualification & Pre-Approval – Though very similar, there is a difference. When you request to be Pre-Qualified, the lender collects all of the information necessary, checks your credit, and determines how much you are qualified to borrow. A Pre-Approval may include running your information through an automated underwriting system, or placing your file before an actual Underwriter, so they are able to commit to the loan prior to the borrower identifying a property.

Ratios – or debt-to-income ratios: The rate/relationship of your monthly income compared to your monthly housing expense comprises the Front-end or Top ratio. The Back-end or Bottom ratio is determined by weighing your total monthly living expenses (cars, credit card payment, school loans, etc) against your total monthly income. Lenders use these numbers to determine a borrower’s ability to repay the mortgage.

Mortgage Insurance – Insurance protecting the lender against loss in the event that a borrower defaults on the loan. Generally required for loans greater than 80% of the purchase price of the property. A fairly common misconception about mortgage insurance is that it is voluntary, it is not. Where mortgage insurance is indicated, it is required. MI is paid in two parts, an upfront percentage of the loan generally rolled into the mortgage amount, and a monthly payment incorporated into your mortgage payment. After reaching a loan to value of less than 80% you may request to have mortgage insurance removed.

Appraisal – Written analysis of the estimated value of a property, by a qualified, certified appraiser. The appraiser must be an independent 3^rd party and is not beholden to the lender, the seller, the buyer, or any of their agents. Though subjective, the appraisal is meant to, and generally does, present an accurate accounting of the current market value of a property. It takes into consideration, most heavily, currently sold comparables (similar properties), and to a much lesser extent pending and current listings. Relatively standard adjustments are made for differences in the comparable properties.

Credit Inquiries – You will be asked to explain inquiries that appear on your credit report. These are identified by a date and company name, and are an occasion when your credit was checked by the company stated. This could be a random check by a credit card company that you already deal with, an occasion when you may have requested additional credit to buy a car for instance, or open a new store charge card.

Processing – The scrutiny of all documents you have provided to your lender. A Processor will verify your employment and income, substantiate account balances and availability of funds to close, review contract terms and deadlines, and generally provide an overview of the file for the Underwriter.

Underwriting – This is the final analysis of the complete file. Nothing can be missing from the file at the point of final underwriting approval. Your file must meet certain government laws and industry regulations and this is where that determination is made. Underwriting issues the initial approval, conditional on any incomplete documentation. Final approval is extended when all conditions are submitted back to Underwriting.

Conditions – Additional terms that must be met in order to complete your loan package. Some initial approvals involve conditions for the borrower, some do not. When all conditions are met your file will be cleared to close and documents will be sent to the title company.

Thanks for visiting, hope to see you next time. And as always, if you have any questions just give me a call. Until next time,

Tom

Time Flies ...Navigating the Mortgage Process, Part 2

At the outset it might seem like 30 days is an eternity.  This is the customary time period for a real estate purchase to close. But there’s a lot for you and your mortgage company to accomplish from the day you sign your purchase contract until the day we fund your loan. Believe me, the time will just fly! Your real estate agent is far more qualified to explain what needs to be done in regards to the property you are purchasing . I’ll leave that to them. But the evolution of a mortgage is often a mystery to both agents and clients. I hope to clear that up.
 

The blueprint for the mortgage process rarely varies. Don’t get me wrong, it is possible to accomplish this in a shorter length of time but that usually depends in large part, on the efficiency of the borrower and the availability of their documentation. Below is an average timeline:

Day 1   Executed Purchase Contract delivered to Lender

Day 2-3    Loan Application signed. Buyer gathers required documentation (see previous post)

Day 7    Appraisal ordered, providing all home inspections have been completed *

Day 7-14    Processor verifies applicant information, property information, contract terms

Day 14    Appraisal complete and delivered to borrower

Day 17    Loan submitted to Underwriting

Day 20    Underwriting initial approval. Pending conditions identified

Day 22    Submit all documentation to satisfy underwriting conditions

Day 24    Loan cleared to close. Documents ordered for delivery to Title Company

Day 25-26    Documents prepared by Title Company and ready for buyer’s signature

Day 26-30    Signed documents returned by title to mortgage company. Ready to fund and record. Homeowner get’s their keys!
  

*  Unless otherwise advised by your agent, we usually suggest that you perform all property inspections before your appraisal is ordered. This way if the condition of the property does not meet your approval, you have not needlessly paid for the appraisal.

 

*  Generally the appraisal is due one week from the day it is ordered.

A word about rate locks. At any point after your loan application is signed, you and your loan officer will determine the right time to lock your rate. This is a cooperative decision and it is imperitive that you are given enough information to make this choice.

 

The above is relative to a typical transaction. Occasionally there is a stumbling block or two but we’ve gotten really good at overcoming obstacles, and rarely is there one that baffles us. Short sales are a completely different story so ask your agent how they work. After you have short sale approval the transaction proceeds as above.

 

 

 

 

 

Into the Wild... Navigating the Mortgage Process, Part 1

Let me point out right off the bat that it doesn't need to be complicated or stressful. As a matter of fact, we go out of our way here to make the entire transaction as painless as possible. Our motto is ...simple as that ® and I truly believe that says it all. But I've seen this time and time again. Borrowers, both new and experienced, give me "the look". You know the look. The one that says... Really??, you REALLY need me to get you THAT? Let me assure you that we never ask for anything we don't need. And one other thing, we never ask for anything we don't need.

Whether you're applying for your first mortgage or your 10th, if you haven't been through the system in the last 4 or 5 years, your view of the process is blurry at best. Government and industry regulations have morphed mortgage transactions into a completely different animal. One that is unrecognizable to even seasoned home buyers. So here's a quick rundown of current procedure. I hope this is helpful, but either way I'd really appreciate your feedback. And feel free to let me know if you feel that I've left something out.

 

I can't cover every eventuality, there are many types of mortgages each with their own requirements. But these are the basics. You'll need:

 

• Tax Returns
• W2s and/or 1099s
• Pay Stubs
• Bank Statements, with an explanation for any unidentified large deposits (by government regulation)
• Copy of your Driver's License and/or Social Security Card
• Letter of explanation for inquiries on your credit report
  
  
• Name and contact information for the company you will be using to insure your home

Incidentally, if you bring the above documents with you when you sign your mortgage application it's likely that your transaction could close much quicker.

Don't be surprised if you are also asked for:

 
• Letter of explanation for the disposition of your current home
• Letter of explanation for any derogatory items or AKAs on your credit report
• Current mortgage statement, insurance and HOA statements, if you own a home
• Copies of leases if you own investment property
• Disbursement letters that demonstrate the continuance of disability or retirement income
• Gift Letter and paper trail of funds if you are receiving gift money
• Name and number of your landlord if you are currently renting

I've never done a blog series in the past, but there is so much information that I've been asked to cover, that it's simply not practical to put it in one post. Next time I'll provide you with the 30-day mortgage timeline, typical for real estate transactions. And the 3rd installment will include definitions of some misunderstood mortgage terms.

Thanks for visiting, hope to see you next time. And as always, if you have any questions just give me a call. Until next time,

                                                                                 Tom

Downpayment Assistance Available in Arizona

I'll keep this short and sweet. Home in 5 is a fantastic new program available for purchase of homes in Maricopa County, AZ. This program is on a first-come-first-served basis.
 
 

• 5% Grant / Non-Repayable
• Use for downpayment and/or closing costs
• Military members and veterans get 6%
• Applies to any home in Maricopa County
• You DO NOT have to be a 1st time buyer
• FHA or VA financing / Owner Occupied
• Yearly income cannot exceed $90,000
• No income restrictions for military members or veterans
• Minimum FICO score of 640
• No purchase price restrictions
• Standard loan guidelines for FHA/VA apply
• Can be existing home, new construction, townhome or condominium
• Application must be through an approved lender

If you have any questions at all please feel free to contact me.

Mortgage Lending - one step forward and two steps back

Sweeping reform of residential mortgage financing is no big secret, but were you aware that there is a lot more to come? The Qualified Mortgage Rule, a segment of the Dodd-Frank Act, is largely undefined and only vaguely understood. The premise is solid, that all borrowers should be able to demonstrate an ability to repay the money that they are borrowing. But most analysts believe that in its zeal to cure all the ills, and revolutionize our housing industry, it goes way, way too far. The predominate feeling is that too-tight restrictions on mortgage lending may freeze and possibly even reverse the tenuous progress that our country’s real estate market has been making. There is legitimate fear that this may disable first time homebuyers for years to come. In fact nearly 100 rules laid out in the Dodd-Frank Act are yet to be completely delineated and implemented, and countless others have simply been overlooked. Our country had obvious issues as a result of loose lending practices, but over-correction is alarming many experts in the financial industry, and rightly so.

I can tell you from experience that credit-worthy borrowers are already being squeezed out of the market by new regulations that do not take individual circumstances into consideration. You cannot paint the entire home buying public with the same brush, but this is exactly what’s been happening.

Smart lending is a balancing act, and it’s something that’s worth getting right. With unemployment still at an unnerving high and real estate just beginning to recover, the lending industry needs to proceed with extreme caution, but make no mistake, it does need to proceed.

Short Sales No More?

Lost in the shuffle of our perpetually-floundering economy and Washington's frustrating inability to come to any kind of agreement, there is a small but very important issue on the table, the extension of the Mortgage Forgiveness Debt Relief Act.

A quick bit of history will explain just how important this is. In 2007 this Act was passed, renewed in 2008 and due to expire at the end of this year. Let's be clear, this has nothing to do with the tax cuts that also are expiring at the end of 2012. This is a sole and separate entity. What this does is not immediately apparent from the title, this Act does not actually forgive mortgage debt in any way. It merely allows an underwater borrower to not pay taxes on income that they never received in the first place. A little confusing but then this is government, right?

Let me give you an example. Mr. Seller owes $150,000 on his prinary residence. His job has been downsized and he must move to another state to obtain work. The current market value of Mr. Seller's home is $100,000. Mr. Seller's realtor explains that in order to sell his home and move on, Mr. Seller must employ what is called a Short Sale- selling the home and paying the bank far less than is owed. The sale is successful at $100,000. Mr. Seller will now receive a 1099 for the remaining $50,000 (phantom income) that he was short when paying off his mortgage, the same 1099 that you would use when claiming taxable income. You might feel that there is no income here, Mr. Seller is never going to see that $50,000, if he had he would have paid off the bank, correct?  Here's where the Mortgage Forgiveness Debt Relief Act comes into play. Mr. Seller, under this Act, is not required to pay income taxes on that $50,000 that was never really income to begin with.

If the Mortgage Forgiveness Debt Relief Act is somehow overlooked, if it does not get renewed by the end of the year, Short Sales will likely come to a screeching halt. Folks who are forced to sell an underwater home are probably not in a position to pay taxes on the "phantom income". Doesn't sound all that serious to you? Consider the current shortage of real estate inventory in many markets and that a large chunk of the current inventory in countless areas is made up of short sales. Consider the minute but undeniable (and still very tenuous) value-up that our real estate market has only recently realized. Consider what will happen to your own home's value and ultimately the entire economy if there is another real estate crash.

All this over a tiny, independent Act that might be slipping through the voluminous cracks in Washington as we speak. Whether you agree or disagree I urge you to express your opinion to your congressman, because this is how it's done!

Mortgage rates... Lower still

I'm running out of new ways to say this... I can't imagine that housing prices are going to be any better than they are right now. Mortgage rates are also at an unbelievable low. Will there ever be a better time to buy a home? Actually, I hope not. That would mean our economy has tanked even more dramatically than in the recent past.

Take a look at this article from Mortgage News Daily.

If you've ever considered buying a home I believe it would be wise to jump on it right now. I truly do not enjoy saying "I'm sorry but I told you so".

Mortgage rates continue to an all time low

Courtesy of Mortgage News Daily

by Matthew Graham / Mortgage News Daily Matthew Graham

Mortgage Rates Continue Trickling Lower To New All Time Lows

Jul 10 2012, 2:51PM

Mortgage rates continued lower today, marking the third consecutive day at new all-time lows. Broader Bond Markets continued to benefit from a generally skeptical and negative outlook on the European debt crisis. That skepticism helped push the European currency to it's lowest levels in over 2 years, also exerting downward pressure on stock prices and bond yields.

Read the complete text here.

The silver lining of worldwide financial instability... unbelievably low interest rates.
http://realtytimes.com/rtpages/20120607_rateupdate.htm

HAFA Short Sale updates June 1 2012

HAFA Short Sale rules updated for the better

beginning June 1 2012

1.) Removal of owner occupancy requirement.

NOTE: borrower can not have purchased

another property within the past year. 

2.) $3000 relocation assistance incentive.

Limited to owner occupant or tenant occupying property at time of sale. 

 3.) Mortgage payment during review period
may exceed 31% if borrower remains
current with their payments. 

4.) Junior lien holders are now allowed $8,500. 

This should increase approvals by 2nd mortgage holders.

NOTE: Credit bureau reporting rules regarding Short Sales

are also changing but it is impossible at this time to determine

whether this change will cause less impact on borrower's credit scores.

Shopping for a home? Applying for a mortgage? You can fix your own credit, it's easy and it's free.

As a mortgage loan officer I run into this all the time so I thought this information was worth reprinting. So many folks are struggling with damaged credit in this economy, and most are unaware that they can fix it themselves, relatively quickly and at no additional expense. Carefully consider the advice below. It's possible you could be shopping for a home in a matter of just a few months.

Your credit score can improve faster than you may think. Here are a few tips for establishing good and countering bad credit.  

• Pay down current debt. (it's not always necessary to pay debt off, just work on paying down)
• Make ALL payments in a timely manner. No Late Payments! (this includes but is not limited to rent, utilities, credit cards, car loans, student loans, medical bills)
• Use credit cards very carefully to establish GOOD credit. (only charge what you can pay off at the next billing)   NOTE: you can not repair bad credit without reestablishing your GOOD credit.
• Think twice before applying for more credit. The simple inquiry itself can lower your score, and If you are declined it will count as a negative on your credit report.
• Work on removing items from your credit report that you feel were reported in error, or that are not yours. Check to be sure any closed accounts reflect "closed”. Contact credit reporting agencies and the creditor directly. The credit reporting agencies can explain the procedure. The creditor can provide the required documentation.

AVOID requesting your credit report from advertised services, there are usually strings attached. Only one credit report is truly free: www.annualcreditreport.com. You are entitled to one free report a year (you can pay for additional reports). It will include information from the three major reporting agencies, Equifax, Experian, and TransUnion.

AVOID credit repair and counseling companies. Some are very expensive, some disreputable. You can usually improve your credit score on your own. It takes a little effort but is worth every minute, and it’s free.

Feel free to contact me if you have any questions.

Red Flag for Foreign Nationals buying Real Estate in the US

We have a lot of Canadian buyers in our real estate market right now. As a matter of fact, there are buyers from myriad of different locations. Obviously these people know a great deal when they see one. However, it is not uncommon for foreign nationals to find their great deal turned into a big disappointment when they misinterpret U.S. government regulations. Heck, most Americans don't understand U.S. government regulations. Often real estate agents are unaware, and as a result they put themselves and their buyers in an awkward position.

Let me clear up once such misconception that's been popping up a lot lately. A foreign national may certainly own multiple properties in the U.S., however, only one of those properties can be financed. The fine print in this regulation is where it gets sticky. The regulation states that a foreign national may not obtain a mortgage if they already own another property here. Which means that if they are at any time, considering financing a home in the US, it must be the FIRST one they buy.

Let me say that again, just so we're clear:  If a foreign national intends to finance a property in the U.S, it MUST BE THE FIRST ONE THEY BUY!

I am anticipating your question.. and my answer is "I don't know". I have no idea why this regulation is in place, just please understand that it is. And REALTORS® advise your clients well in advance so that you don't find yourself on the loosing end of a great deal.

Because I Ask. (Are your time and your money important to you?)

How do you choose a service provider? Lots of businesses advertise the best product, the latest technology, the most attentive sales people, the quickest transaction, outstanding, leading, premium, superb... you get the idea. Except you probably don't. After a hail storm of advertising, many times we still can't pinpoint the exact justification for the choices we make. We've learned to be content with this. I guess because it happens every day and mostly it all turns out just fine.

So I'll ask again, how do you choose a service provider? My initial thought would be; always in person. Do I do this? I think I ought to take the fifth here. Can you imagine the time and energy involved in actually meeting with, say... your electric company or the water department? And the internet has fortunately freed us from ever meeting anyone at the DMV! Doing everything in person would be highly impractical if not impossible, and at the very least inconvenient. It would be a return to the 1950s. I love being able to research, compare, and buy without ever leaving the comfort of my La-Z-Boy. And there it is!! Comfort. That seems to be the selling point that most marketing is missing. How do we become comfortable with the companies, people and products that we're considering? Funny you should ask, I've been thinking about this a lot.

I always make the call.

What about technology you say? Why should we ever have to talk to anyone? Comfort. Actually technology has made it considerably easier to talk to people and really, that's the only way I know of to determine who I’m dealing with. We need to be able to ask the difficult questions and get the answers that will help us move forward. I know from experience that in the mortgage industry, a quick conversation can be a HUGE time and money saver.

When I'm choosing a service provider I always KNOW because I ASK, I'm comfortable because I know. We will be confident that we’ve made the best use of our time and our money when we ask.

Zillow Statistics Show Upticks Across Lending Sector

Economic releases in recent days have signaled positive movement, albeit gradual, toward a strengthening economy. The rosier outlook has led mortgage interest rates higher.

The 30-year fixed-mortgage rate on Zillow Mortgage Marketplace came in at 3.74 percent, up five basis points from 3.69 percent at the same time last week. The 30-year rate hovered between 3.67 and 3.73 percent for the majority of the week, rising to the published reading of 3.74 percent early Tuesday morning.

Zillow’s real-time mortgage rates are based on thousands of mortgage quotes submitted daily to anonymous borrowers on the company’s marketplace site. Zillow’s numbers are not marketing rates or a weekly survey, but instead reflect the most recent changes in the market.
The rate for a 15-year fixed-mortgage registered 2.99 percent, up from 2.95 percent one week earlier, while the rate for a 5/1 adjustable-rate mortgage (ARM) is now 2.68 percent, rising from 2.65 percent reported last week.
Experts say conditions are primed for mortgage rates to continue to rise in the coming weeks and months.
“With each piece of positive economic news, we will likely give up a little ground,” Michael Kraus of Total Mortgage Services noted in his Tuesday blog post. “Certainly there will be times that rates will fall, but I think the long term trend will be for rates to increase, at least into the summer.”

Wait times after Foreclosure, Short Sale, or Bankruptcy

Wait times to apply for a mortgage vary from program to program. Please be aware that these can change at any time. Feel free to contact me with any qustions.

Wait Times	FHA	Conventional	VA	USDA
Foreclosure	3 Years	7 Years	2 Years	3 Years
Short Sale	3 Years	7 Years	2 Years	Depends on circumstances
Bankruptcy chapter 13	1 Year (all payments on time)	2 Years Discharge 4 Years Dismissal	1 Year (all payments on time)	1 Year (all payments on time)
Bankruptcy chapter 7	2 Years	4 Years	2 Years	3 Years

Very Welcome News About Appraisals

If you've bought a home, if you've sold a home, if you've refinanced, or are a homeowner of any kind you're likely aware of the very tight pinch being placed on your home's valuation. In my humble opinion this has all been completely unnecessary but unfortunately for me I don't make the rules.

At the point that the banks and their investors stopped being ravenous they suddenly decided that someone needed a diet. The appraisal industry must be to blame so lets reign in the appraisers. Now it would appear they've managed to starve themselves. In all fairness we did have a crisis so a typical government and big business overreaction was in order. Here's what lead to this. Mortgage regulations were way too liberal causing property values to rise way too quickly and way too much. At the height of the economic debacle they dropped like a stone, again too fast and too far. Property appraisers were put on notice. "Walk our very narrow tightrope or we'll shake you right off of it." The result it would appear, is that appraisers have been forced to become so careful, so conservative, that appraised values are now actually hindering the mortgage industry and ultimately the recovery of our real estate market. There have been so many foreclosures and short sales that almost no neighborhood has been left untouched. Most foreclosures and probably all short sales were for a time, selling below fair market value. They were also often the only comparables that appraisers had to work with.

So, here's the good news (you know I always find the good stuff). The Appraisal Institute has issued updated guidelines with the intention of minimizing potential effects of short sales and foreclosures on home values. About time right? As sited in the new guidelines, appraisers may not definitively exclude short sales and foreclosures, but are instructed to turn to less recent sales and extended geographic parameters in order to locate more appropriate comparables. Hopefully this will help neutralize the atypical motivation involved in short sales, and the substandard physical condition of many foreclosures.

As usual, I'm taking a wait-and-see approach toward any announcement regarding appraisals. But this is looking very promising for the long-term value of real estate. Definitely a step in the right direction.

HARP- Now With Something for Everyone?

Just this morning new, and in fact quite positive, changes to HARP were announced. Up until now I've allowed myself only cautious optimism about the extension of HARP, but I really think this initiative could now be headed in the right direction.

Among other things, the possibility that unemployed and underemployed borrowers may be struggling, is finally being addressed with more flexible debt to income criteria. In addition, eligibility could be extended to investor-owned rental properties.

How does this help me you ask? If you are one of the lucky ones who need not consider taking advantage of HARP, there could still be an enormous up-side for you. Your neighbors may have an option other than short sale or foreclosure which would go a long way toward leaving your property values intact.

One small note of caution, the renewed HARP program has not taken effect yet and we can never be certain of what is included until it does. However, I’ve had that 1960’s Beatles song “Getting Better All the Time” running through my head all morning.

A little perc for our Military

This is an awesome site, ALL NON-PROFIT, just for our military members. Financial advice, scam warnings, credit analysis, investor alerts, interactive exercises.

     Save & Invest - Military Center