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New home construction WAY UP

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Any one with half an eye open knows these monthly housing reports bounce like a yo-yo.  This month up, last month down, so the long term average is where to focus. New home sales are up 21% over the past 12 months ending October 2013.  That is a good sign!

After a drop in Sept. 2013, sales of new single-family homes in October 2013 saw their biggest month-over-month increase since May of 1980, according to data released today by HUD and the Census Bureau.

New single-family home sales were at a seasonally adjusted annual rate of 444,000 in October, according to a report by the Census Bureau and HUD. That’s 25.4% above the revised September rate of 354,000 and 21.6% above October 2012’s rate of 365,000.

The October rate is also considerably higher than the 425,000 projected by economists. However, new home construction is still less than half what it was at its pre market crash – which arguably was artificially high, and not a valid comparison to today’s market

Prices on new homes also fell slightly, but this is attributed to smaller average home sizes compared to just a few years ago.

The seasonally adjusted estimate of new houses for sale in October was 183,000, according to the Census Bureau. At the current sales rate, that equates to a supply of 4.9 months. The median sales price of new houses in October was $245,800. The average sales price was $321,000.

Selling your home in the winter – Myth or Fact?

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tree_snowI hear it all the time.  Homes don’t sell in the winter.  Sounds legitimate, but the facts simply do not bear this statement out to be truthful.

Are there less homes on the market in the winter?  Yes.  Statistics show about a 30% drop in active home buyers versus the peek summer months.

Big deal…

Realize this… There are fewer homes on the market for sale, so when the more serious buyer comes out in the wintertime to buy a home,  YOUR HOME gets more showings because you have LESS COMPETITION!

Good homes priced right sell quickly all year round.

Interest rate forecast for 2014

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Everyday, I am asked “what are mortgage rates going to do?”

Minnesota mortgage ratesNo one has a crystal ball, but here are a few reasons we should expect mortgage interest rates to be higher in 2014.

1) New mortgage rules starting in 2014 are going to make getting mortgages harder, take longer, and cost you more money to obtain.  Lower debt to income rations, new forms, qualified mortgages, the CFPB, and more are all expected to take a significant toll.  Remember, Barney Frank, Chris Dodd, and all the others said their brilliant financial reforms would save you money…  All I’ve seen is high costs!

2) Economists at Freddie Mac have indicated they expect interest rates to be in the 5’s throughout 2014 because the economy is getting better (albeit slowly), and the Federal Reserve is expected to stop artificially propping up the mortgage market, with their buying of mortgage backed securities

3)  Affordability indexes are falling.

The good news is, there’s still time to take advantage of low refinance rates and new home purchase programs now if you’re a consumer.

What you should know before buying a home in MN or WI

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What should I know before buying a home in MN or WI?

Real estate - Home Buying tips in MN and WIHere are some tips that could save you a lot of time, money and trouble.

  • Plan ahead. Establish good credit and save as much as you can for the down payment and closing costs.
  • Get pre-approved online before you start looking. Not only do real estate agents prefer working with pre-qualified buyers; you will have more negotiating power and an edge over homebuyers who are not pre-approved.
  • Get a REALISTIC housing budget and stick to it. Talk to your Loan Officer about debt-to-income ratios
  • Know what you really want in a home. How long will you live there? Is your family growing? What are the schools like? How long is your commute to work? Consider every angle before diving in.
  • Make a reasonable offer. To determine a fair value on the home, ask your real estate agent for a comparative market analysis listing all the sales prices of other houses in the neighborhood.You don’t want to over pay, and you don’t want to waste everyone’s time with unrealistic low ball offers.
  • Choose your Lender carefully. Roughly 80% of Loan Officers are simply unlicensed application clerks.  Only work with a licensed Loan Officer.  TIP: An Loan Officer NMLS # is NOT a license. Ask them if they are licensed or simply registered.  Verify a Loan Officer at www.NMLSConsumerAccess.org.  At the bottown of the page, if one or more state licenses are listed. They have a licensed.  If it says Federal Mortgage Originator, they are NOT licensed.
  • Choose your real estate agent carefully:  A real estate license legally allows someone to practice real estate – it doesn’t mean they are good. Check experience, references, etc.  Also, under NO circumstances should you ever use the homes listing agent as your buying agent.
  • Consult with your lender before paying off debts. You may qualify even with your existing debt, especially if it frees up more cash for a down payment.
  • Save for down payment: While some first time home buyer assistance programs are available, you are much better off, and have many more options if you have your own money for down payment. Try to have at least 3.5% for an FHA loan, but 5% for a conventional loan is much better.
  • Keep your day job. If there is a career move in your future, make the move after your loan is approved. Lenders tend to favor a stable employment history.
  • Do not shift money around. A lender needs to verify all sources of funds. By leaving everything where it is, the process is a lot easier on everyone involved.
  • Do not add to your debt. If you increase your debt by financing a new car, boat, furniture or other large purchase, it could prevent you from qualifying.
  • Timing is everything. If you already own a home, you may need to sell your current home to qualify for a new one. If you are renting, simply time the move to the end of the lease.

 

Jobs Report Sends Mortgage Rates Jumping

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Borrowers faced slightly higher mortgage interest rates this week due to a stronger-than-expected jobs report.

The benchmark 30-year fixed-rate mortgage rose to 4.48 percent from 4.35 percent last week, according to the Bankrate.com national survey of large lenders. The mortgages in this week’s survey had an average total of 0.36 discount and origination points. One year ago, that rate stood at 3.52 percent. Four weeks ago, it was 4.42 percent.

READ THE FULL REPORT from BankRate.com

 

Minneapolis Refinance activity still low – but should it be?

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Since spring of 2013, the number of home owners refinancing to lower interest rates has dropped dramatically, but according to a survey release Tuesday, people who refinanced their home in the third quarter will see about $6 Billion dollars worth of savings over the next year alone that can be used for better things, like paying down credit card or student loan debt – or just to put into savings.

So why are more people not refinancing?

Minnesota mortgage ratesFirst, many people already have… and with 30-year fixed mortgage rates hovering +/- 4.50%, there is little incentive for people to do it because they already have good rates.

The rest appear to not be doing it because they either can’t because of poor credit or other approval hurdles, or they simply think they can’t – but have never tired.

The think they can’t refinance but have never tried group is clearly missing out.

Many who think they can’t, think that because their homes have lost value.  But with programs like HARP (Home Affordable Refinance program), FHA Streamline Refinance Program, and the VA Streamline Program (also knows as an IRRRL Loan), the vast majority of people can.  Never assume you can’t. Pick up the phone or surf over to your local mortgage brokers web site.  It only takes a few minutes to determine if you can refinance, and if you do, what are the savings.

Advantages of refinancing

The obvious big advantage is lowering your monthly mortgage payment.  But there are other significant advantages like paying off other debt, or shortening the term of you loan to pay it off earlier. According to recent reports, an amazing 37% of homeowners shortened the remaining term of their loan.

At the moment, 15-year fixed-rate loans averaged around  a full percentage point below 30-year loans.  That is a big incentive all by itself.  But many people are wanting to go into retirement house payment free, and realize that the low rates on shorter term loans helps them achieve that goal.

 

Mortgage rates move slightly higher – Week ending 11/7/2013

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upFreddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving higher for the first time in three weeks amid more positive economic data out of the manufacturing and non-manufacturing sectors.

News Facts

  • 30-year fixed-rate mortgage rates averaged 4.16 percent with an average 0.8 point for the week ending November 7, 2013, up from last week when it averaged 4.10 percent. A year ago at this time, the 30-year FRM averaged 3.40 percent.
  • 15-year fixed rate mortgages this week averaged 3.27 percent with an average 0.7 point, up from last week when it averaged 3.20 percent. A year ago at this time, the 15-year FRM averaged 2.69 percent.
  • 5-year adjustable-rate mortgage (ARM) averaged 2.96 percent this week with an average 0.5 point, unchanged from last week. A year ago, the 5-year ARM averaged 2.73 percent.

Quotes
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Fixed mortgage rates rebounded slightly this week on more positive economic data releases. Production in the manufacturing industry expanded for the fifth month in a row in October to the strongest pace since April 2011. Similarly, the non-manufacturing sector grew for the second consecutive month in October and beat the market consensus forecast of a decline. These increases were widespread across the nation, from Minneapolis, to Milwaukee to New York.”

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Freddie Mac’s survey is the average of loans bought from lenders  last week, including discount points. Applicants must pay all closing costs at these rates. No cost loan rates higher.

What your Loan Officer DOESN’T tell you can be costly

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First Time homebuyersI just got off the phone with a client… She was very happy with me, but extremely pissed at “her” Credit Union.  It’s not that her Credit Union is a bad place, it is just that she isn’t a mortgage professional, and the unlicensed application clerk she had been talking to for a mortgage loan was only selling what the Credit Union offers.

A good mortgage customer

This client banks at a Credit Union.  She wants to buy a home.  She believed the Credit Union would be a great place of get a mortgage loan because “they know her”, and “she is comfortable” with them.  She is a good credit client, has good income, a low debt ratio, and 10% of her own money for down payment.

The Loan Officer told her she didn’t qualify. He said she needed 20% down to get a loan. She left disappointed, but determined to save more money and come back again

Not All Lenders Offer All Mortgage Loans

What the Credit Union Loan Officer told her was true.  She needed 20% down.  What he didn’t tell her, was that was only THEIR guideline.  He failed to mention that she could have gone to a lot of other lenders, who would have been easily able to offer her a loan right away.

As a sales person, the Loan Officer was selling what he had to offer. Was he wrong in not telling her the competitors may have something different?  I’m not sure. But if you go to a VW dealer and ask to see their pickup trucks – which they don’t offer.  Is he going to tell you to go to the Ford dealer? Not likely. He is going to try and sell you a VW.

A second opinion

While most mortgage lenders offer the basic mortgage products, a second opinion, especially if you are dealing with a Bank or Credit Union may be wise. I know of many lenders who do not offer VA Loans, or FHA Loans.  I know many lenders who do not offer USDA Rural Housing Loans, or community down payment assistance programs like the Minnesota Housing Finance Agency loans.

Furthermore, even if a lender does offer a product, that doesn’t mean the Loan Officer is familiar with it, or will mention it.  This is again especially true from banks and credit unions because their Loan Officers do NOT have to be licensed.

Licensed Loan Officers versus Application Clerks

Mortgage lending rules put into place after the real estate crash have many people believing the industry is better than before, and they would be correct.  But there are still major gaps.  The most sickening to me personally is the educational and licensing gap between the various Loan Officers at Banks, Credit Unions, Mortgage Companies, and Mortgage Brokers.

Loan Officers at Banks, Credit Unions, and mortgage companies owned by a Bank or Credit Union DO NOT need to be licensed.  There are no State or Federal testing or educational requirements for depository lender loan officers. Most of these type of Loan Officers are little more than an application clerk.

Loan Officers at non-depository mortgage companies or at mortgage broker companies ARE REQUIRED to have a personal license.  They MUST take mortgage education, they must take State and Federal testing, they must have yearly continuing education, and the must be fully vetted for criminal histories.

Verify your Loan Officer

Verify a Loan Officer has a LicenseAll Loan Officers must have a tracking number. This number must be displayed on paperwork, business cards, web sites, etc.  It is NOT a LICENSE NUMBER.

To verify if a Loan Officer is licensed, or simply an application clerk, go to www.NMLSConsumerAccess.org.  You can then enter the Loan Officers Name or Tracking number to see their information.

Once you have the Loan Officers data in front of you, look towards the bottom.  It will say either State Licenses/Registrations, or just Registration Name.

If one or more states are listed, this Loan Officer has a license.  If you look me up, you’ll see I am licensed in MN and WI.  My tracking number is 274132.

If it says Federal Mortgage Originator, this person is NOT LICENSED.

The Bottom Line

Every Loan Officer can go get a license. There is nothing preventing them from getting one.  It is just that banks and credit unions are not required to have a license. The fact someone doesn’t have a license doesn’t automatically mean they are bad. But in my humble opinion, I am only going to allow a fully licensed and vetted by the Government Loan Officer handle my largest financial transaction.

Who are you using?

By the way, I was able to qualify my customer…  She now had 20%, but we are only using 5% down.

Expect low mortgage rates well into 2014 – Here is why

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According to the latest weekly Freddie Mac Rate Report,  the average rates for a 30-year fixed-rate mortgages hit the lowest levels seen since June last week after the Federal Reserve stated they will not taper their $85 billion per month mortgage bond purchase program anytime soon.

Until the Federal Reserve does start to taper, and then stop buying bonds,  expect to see low mortgage rates for some time to come. We’re going to be enjoying some very attractive interest rates well into 2014. The question is, is it going to be a 3.875% interest rate or a 4.25% interest rate? Either way, historically speaking, these are still great mortgage rates. People should be taking advantage with a new home purchase, or refinancing their existing mortgage loan.

Minneapolis Low Mortgage RatesThe general market still widely believes that the Federal Reserve won’t begin talk of tapering their massive bond purchases until at least June of 2014. Keep in mind that Congress just kicked the budget ceiling down the road until February,  where they are going to have to renegotiate again, so the Federal Reserve will also have to react to that budget battle too.  If  Congress comes up with a good long-term agreement, mortgage rates should move up, but we still anticipate under 5%.

Low mortgage rates well into 2014.

Really, there’s no way to know until February.  Until then, mortgage-backed securities are operating at a very thin range.  Low mortgage rates are here today. Better interest rates, over and above what we’re seeing right now, are remote. On the other hand, worse rates than what we’re seeing right now are remote too.

With current mortgage rates for FHA loans in the upper 3% range, and Fannie and Freddie loans in the low 4% range, there really isn’t any room to lower rates further to spur the housing markets.  What the county needs is jobs, and stable jobs.  When people feel good about their financial situation, they have no fear buying homes.

 

Tips when buying a fixer-upper

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In the market today, many homes are in need of a little tender loving care.  Buying one of these properties can be a great deal, while the next one could be a money pit. The following are some tips to make sure the fixer-upper you are looking at is a great opportunity.

Know your limits

I’ve bought and sold homes needing repair, and I’ve learned a lot over time.  A big item to consider is knowing your limits.  Not everyone is Bob Villa.  Know what sort of repairs jobs you can safely handle, and which ones will require a professional.

Inspect, inspect, inspect

Having a home looked at by an experienced second set of eyes is paramount before buying.  Many people skip this step, thinking they can save a few hundred dollars. I counter that it is some of the best money spent.  Would you rather spend $300 to find out it is a money pit, or buy the house and find out later?

Bones vs Cosmetics

Walking into a home that is in desperate need to paint and carpet is one thing. Attempting to handle a home with serious foundation or structural problems is something different.  Bad leaky roofs are expensive. So is completely replacing a kitchen, and replacing all the old windows.  Leave these type of homes for experienced home flippers.

Dated vs Dud

Homes with good basic bones that just looked dated are excellent homes for a fixer-uppers.  Look for something that is habitable today. Something where you’d like to renovate, yet you wouldn’t “need” to do anything to move right in. Then over time, you can update one room at a time until finished.  Smaller projects that are lighter on the budget spread over time is key.

Don’t over improve

A common big mistake is over improving a home for the area it is in. FHA 203k loan lender in MN WI Putting in a $50,000 new kitchen with granite counter tops and stainless steel appliances in an older neighborhood of  standard appliances and standard counter tops may look great, but you’ll never recover what you paid.  Just the opposite is also true.  Putting in a standard counter and appliances in a newer neighborhood where everyone else has stainless steel is also a problem

Be realistic with a repair budget

Working in conjunction with not over improving the property, make sure you set a realistic affordable budget – and expect to go over it.  If your budget is $25,000 – don’t factor anything higher than $20,000.  Believe me, surprises will crop up, and by the time you are done, you will have spent the full $25,000.  Also get a few bids for each job. The total final cost will usually be somewhere between the low big and the high bid.

FHA 203k Repair Loans

Finally, consider using the popular FHA 203k repair loan.  This mortgage loans allows you to buy it and fix it all with one standard loan.  There are two types of FHA 203k loans, known as full or streamlined.  I suggest buyers work within the streamlined version, which allows for repairs up to $35,000.

Click here for more information on FHA 203k loans in MN and WI.

 

Losing offers to cash buyers? Here is how to win with a loan

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You are fully pre-approved, and actively looking for homes with a Real Estate Agent.  You find the perfect home, but there are multiple offers, and one of them is cash.  Panic sets in, but don’t worry.

Sellers love cash buyers for two main reasons. The first one is super obvious – quick closings.  The second, but bigger scare, is any lender related issues.  Is the client “really” qualified?  Will the house appraise OK? Will the lender require something to be repaired?  How long will it take to close?

Real Estate, Minnesota, Minneapolis, for sale, mortgage rates, interest rates
Get Pre-Approved Today – Click HERE

Ways to beat cash offers: 

If possible, try these tips to make you are your offer as good, or better than a cash offer.

Bigger Down Payment

While it has no bearing in reality, both Real Estate Agents and sellers think you are a more qualified buyer if you put more money down.  So try a bigger down payment if you possibly can afford it.  Interesting, the #1 best performing mortgage loan with the least foreclosures in the market is a zero down payment VA Loan.

Forget the Official Inspection

Most buyers opt to have a home inspection done. Most official inspections find no major items that you likely didn’t see already yourself.  Most buyers end up nit-picking minor little items, then ask the seller to “fix” everything. This is very annoying to sellers.  Look the house over good by yourself, and then skip the official inspection.

Change your price point

Are you constantly being out bid?  Everyone else seem to be willing to pay more?  Consider looking at homes in a slightly lower price point. By looking at less expensive homes, you can be the one that puts in an offer over the asking price, and winds the deal.

Closing Costs

All loans have closing costs.  It is very common to ask the seller to pay your closing costs. The seller isn’t really paying anything, rather it is just a way for the buyer to pay the costs over time, versus paying up front at closing.

For example: If you offer $205,000 and ask the seller to pay $5000 on your behalf, the sellers net is $200,000.  If you offer $200,000 without asking for anything, the sellers net is still $200,000. Unfortunately, most sellers feel like you are ripping them off when you ask for seller concessions. They add up in the sellers mind, which works against you. Try not to ask for ANY concessions, not even a “Home Warranty” (99.9% of the time you’d never need anyway).

Try to talk to the seller

Buying and selling a home can be very emotional.  Talking to the seller about how you’d love to raise your three kids there, just like the seller raised their kids there has serious emotional pull.  It goes a long way when fighting against a typically lower cash offer from someone who just plans of flipping the home.

Winning a bid with a loan

Fighting cash buyers can be discouraging. But, just because they’re dealing in cash doesn’t mean they win. Many investors think they can low-ball with cash.  Show you are super serious with these ideas, and you’ll have a winning bid!

Average Home Prices Now Equal to April 2005

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There is some great news in real estate… The FHFA (Federal Housing Finance Agency) reported that home prices posted a 19th consecutive monthly gain in August.

welcome2_FTHB_1On a year-over-year basis, the August report was up 8.5 percent.  This means average nationwide home prices are now equal to what they were in April 2005.

We are getting there, but this report also shows that the average market level is still 9.4% below the price peek of April 2007, right before the housing market crashed.

Values increased in seven of the nine Census Divisions in August with the South Atlantic and East North Central divisions experiencing declines.  The South Atlantic region, which encompasses all coastal states from Florida to Delaware, was down 0.5 percent and the East North Central (Wisconsin, Michigan, Indiana, Ohio, and Illinois) division saw prices go down just 0.3 percent.

The largest value increases were in the Mountain (Utah, Montana, Colorado, Nevada, Arizona, New Mexico, Idaho) and West North Central (North Dakota, South Dakota, Minnesota, Iowa, Nebraska, Kansas, and Missouri) divisions which rose 1.3 percent and 1.2 percent respectively.

The August 2012 to August 2013 changes were largest in the Pacific Region (Oregon, Washington, California, Alaska, and Hawaii) where homes appreciated 18.2 percent and the Mountain division with a 13.8 gain.  The smallest annual increase was in the Middle Atlantic division is Pennsylvania, New Jersey, and New York, where prices were up 4.0 percent.

As values continue to rise, more and more sellers can safely sell their homes – which should help with inventory issues.  It also means that potential first time home buyers really need to jump into the market to buy a home TODAY, as those gains for sellers equals less buying power for buyers.

 

Lastest Mortgage Rules changes

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The mortgage industry is constantly changing. Keeping up with the rules, even for a 20+ year experienced Mortgage Loan officer like myself is very difficult.  The following is a quick breakdown of recent changes for both potential home buyer or real Estate Agents to know:

FHA Loans with Collection and Charge Off Accounts on Credit Reports:

This is a big one. This new FHA rule is going to disqualify a lot of potential home buyers.  Your credit report is going to be even more important than ever before.  Under the old rules on FHA loans, old collections and charge off items did not have to be paid off or dealt with as long as your credit score was OK enough to qualify.  With the new guidelines, FHA is now requiring lenders to include estimated monthly payments on collection and charged off accounts based on 5% of the outstanding balance.

Adding a “mythical payment” of 5% of the balance will dramatically raise these buyer’s debt ratios, resulting in either significantly lower purchasing power, or potentially preventing some from purchasing a home at all.

No More 3% Down on Conventional Fannie Mae Loans:

Fannie Mae has been the last holdout for 3% down conventional loans, but they are switching to a minimum of 5% down.  Freddie Mac switched some time ago. Home buyers will now need at least 5% down payment. The 3% down conventional loan had been a very popular alternative to the 3.5% down FHA loan because of cheaper mortgage insurance and less stringent home condition requirements. Note, in MN we still can offer a 3% down conventional loan tied in with the MHFA Start Up down payment Assistance program.

Debt-to-Income rule change:

During the housing boom, lenders could allow debt ratios well into the upper 50% range.  After the housing crash, Fannie Mae and Freddie Mac dropped that to a maximum of 45%.  The Frank-Dodd Financial Reform and the Consumer Financial Protection Bureau laws are dropping that to a maximum of 43% starting in January 2014.

New Three Percent Rule:

Closing costs and Points paid by the borrower will not be allowed to go over 3% of the total amount of the loan. cfpb_logoWhat fees are included in the 3% have not been clarified. This rule may sound great on the surface – the government is protecting homeowners from lenders charging outragious fees – the reality is just the opposite.  This new rule will have a very serious effect on those looking for smaller loan amounts (typically under about $100,000). As a lender, we already have trouble with loans under $50,000, and this rule is just going to make it worse. A great example is an appraisal. Regardless if you buy a $40,000 home or a $400,000 home, the appraisal fee is the same. About $400 in my area (Minneapolis, MN). On the $40,000 home, that appraisal fee alone is a full 1% of the purchase price, while on the $400,000 home, it is only 0.1%.

Qualified Mortgage (QM):

More new rules because of the Frank-Dodd Financial Reforms laws, and the creation of the Consumer Financial Protection Bureau.  Lenders will be given “safe harbor” from homeowner lawsuits if the loan they provide you fits the more restrictive definition of a Qualified Mortgage.  They are still hammering out the final details of what a QM loan will be, but bigger down payments, lower debt ration quidelines, and more “proof” of income are just some of the items that will be in the final QM rule. The end result means more and more people will NOT qualify for a mortgage as lenders tighten guidelines even more to fit the Qualified Mortgage rules.  An article I just read said only 1 in 5 current loans would meet the new definition.

Common home selling mistakes to avoid

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Selling your home?  Here are some common home selling mistakes to avoid

Minneapolis area Home selling mistakes
Selling your Castle? Tips to have a smooth transaction

Minneapolis, MN:  The time has come to sell your home.  Sadly, I still see a lot of people make these very common mistakes.   Hopefully this quick article is full of tips to help you have a happy and successful sale of your home.

Sideline your Emotions:   Sentimental value?? Forget it. A buyer doesn’t care how much you love the house or anything about your memories there.  Be realistic.  Treat the sale of your home like any business transaction.

Setting an unrealistic price.  It’s important that you’re not married to your price.  Most people who are do so because of emotions (see first item).  Regardless of what you feel, the local market sets your price.  You need to be competitive with the same or similar homes in your neighborhood in order to sell your home.

Not hiring a Real Estate Agent.  FSBO, or For Sale By Owner may sound like you are saving money by not paying listing fees.  More often than not, after months of frustration, you will end up with an unsold home, then listing with an agent anyway. Real Estate Agents exist for a reason.  They are licensed and trained. They know how to properly set sale prices, market, and negotiate the deal with all legal requirements met.  Sure, some people can do it, but the other 99% can not.

Skimping on listing photos:  Photos sell homes!  Everyone looking on the internet these days will “see” your house if they are searching for your neighborhood and price point.  What makes them stop at your listing and want to see the house?  PHOTOS!  Make sure your agent takes great pictures, and that they put as many as their local MLS will allow online.  It is also worth hiring a professional photographer, and isn’t very expensive

Trying to sell a dirty or cluttered home:  We know you need to live in the home until it sells, but when viewing your home, buyers want to envision how their furniture would look.  Cluttered houses and a “lived in” look will simply detract the average buyer.  Move out clutter, put it in storage if you have to, and keep the house as shiny and spotless as possible for showings!

Hiding problems:  Don’t try hiding problems with the house.  Most people have an official inspection. It just wastes everyone’s time to start the process, only to have it discovered later.

Not getting pre-approved for your next house:  If you are going to be buying a new home, don’t assume.  Talk to a local licensed mortgage professional BEFORE listing your home.  The rules have changed.  You may assume you’ll be able to get a new mortgage loan, and you may be right.  But knowing for sure, what possible payments will be, how much money you’ll need, and current underwriting rules just reduces one more level of stress.

By keeping these common mistakes in mind and doing your best to avoid them, selling your home should be relatively quick, and free of problems.

 

New FHA rules allow new home purchase just 1-year after foreclosure

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​The Federal Housing Administration (FHA) recently announced a significant mortgage rule change that will allow some borrowers to get a new FHA loan as early as just  one year after short-sale, deed-in-lieu, full foreclosure, or bankruptcy as part of their new “Back to Work – Extenuating Circumstances” program.

Back to Work Eligibility guidelines are pretty strict. 

FHA Back to Work Program in MNPotential borrowers must be able to prove that a major economic event, such as a job loss, or severe reduction in household income (20 percent for at least six months) was the main catalyst in losing their home.

Potential new homeowners will also need to document and prove their income has since fully recovered, and that their credit score are now satisfactory. Finally, potential borrowers will need to complete a one-hour one-on-one housing counseling session.

Borrowers will need to meet all other standard FHA eligibility criteria for an FHA mortgage loan.

To be deemed with “satisfactory credit,” borrowers will need to meet the following guidelines for a minimum of 12 months:

  • No collection accounts or court records reporting (other than medical and/or identity theft).
  • No history of delinquency on rental housing payment.
  • No more than one 30-day late payment due to other creditors.

Prior to the major economic event, the borrower’s credit must have been satisfactory and in good standing.

With that all said… my company, Cambria Mortgage, will be happy to review you for approval under this new program.  The first steps are:

  1. Have borrower document the 20% drop in income.
  2. Have borrower take counseling
  3. Then take full FHA mortgage application

A list of acceptable housing counselors can be obtained by calling 1 (800) 569-4287 or online at www.HUD.gov

 

Mortgage Underwriting Red Flags – Things to avoid

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Getting a mortgage loan?  Does it feel like the underwriting process is over zealous?  It is… but the reasons why are justified.  During the real estate boom from around 1999 to 2007, fraud was rampant.   A big reason for the fraud was that the lending industry was a bit too trusting.  So today, when the industry verifies everything, it feels a bit intrusive.

I simply ask this:  If you were to give a stranger hundreds of thousands of dollars, what would you ask for to be comfortable?Mortgage Fraud

These days every Mortgage Application is examined very carefully for any sign of possible fraudulent activity.  There are several high areas of possible fraud activities that Underwriters look for in all loan applications:

  • Mortgage Application fraud
  • Occupancy fraud (really a rental)
  • Credit Reports
  • Employment Fraud
  • Down payment money fraud
  • Income documentation fraud
  • Appraisal fraud
  • HUD-1 (Settlement Statement shows suspicious items)

Underwrites also look very closely at  the Purchase Agreement.  We deal with numerous issues on the contract that Realtors may just be sloppy, or are trying to hide something. Being aware of what these Red Flags may be can help to avoid underwriting nightmares.

  • Any item that has been whited out.
  • Numbers appear to be squeezed together due to alterations.
  • Different handwriting and signatures for the same individual.
  • Earnest Money Deposit equals the whole Down payment or is an odd amount.
  • Earnest money check not from the actual buyer
  • Non Arms-Length transaction.  For example the Seller is a Real Estate Agent, Broker, Relative, Employer, etc.
  • Seller is not presently listed on Title.
  • Seller has only owned the home for a short period
  • Multiple buyers on contract but only one applying for mortgage
  • Buyer has been added to, or deleted from the Sales Contract
  • Power of Attorney transactions.
  • Personal items on contract (boats, lawn equipment), then “removed”
  • Earnest Money Checks have inconsistent dates.  For example Check #101 is dated 11/12, but Check #103 is dated 10/28.
  • Contract is filled in, in very few areas with several areas left blank which is not typical of a normal Sales Contract.

The above list is not all inclusive, but it gives a good idea of how closely Underwriters Look For Red Flags During The Loan Approval Process.  The more aware Realtors are of what Red Flags Underwriters are looking for in a Sales Contracts, the more questions they can help eliminate, and reduce issues and closing delays.