Today's Mortgage Market

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Why Your Home May Have to be Sold Twice to get to Settlement

Gap Between Homeowner’s & Appraiser’s Opinions Widen

 Tuesday March 15th, 2016  For Sellers, Pricing

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. One major challenge in such a market is the bank appraisal.

If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.

Every month, Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation in their Home Price Perception Index (HPPI). Here is a chart showing that difference for each of the last 12 months.

The gap between the homeowner vs. appraiser’s opinion had been heading in the right direction (closer to even), until this past month, when the gap widened again to -1.99%.

Bottom Line 

Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let's meet up so I can guide you through this, and any other, obstacle that may arise.

To see what this may mean to your unique situation, call, text or email.

Never too busy for your referrals

Why Leasing Your Car Could Keep You From Buying a Home?

Getting a mortgage can be difficult. Sometimes, to increase the odds of being approved or to qualify for a larger loan, prospective borrowers will pay down debts or eliminate existing loan obligations. Often, the process for doing so is simple, but there’s one type of financing that could trip up your efforts: a car lease.

Here’s a breakdown of why—and what you can do to avoid any snags.

What’s your debt-to-income ratio?

When you apply for a mortgage, a broker is going to tally up all of the monthly payments you make on existing obligations, including credit cards, student loans, personal loans, car debts, and other mortgages. That number gets measured against your income. This debt-to-income ratio helps determine your monthly mortgage payment. (So does yourcredit score. You can see where yours currently stands by getting your free credit scores, updated each month, on Credit.com.) Sounds easy and simple enough, right?

Well, the concept is, but if more than 25% of your income is already going toward debts, you may not be able to buy as much home as you think. When you have other existing obligations, your ability to borrow can be reduced tremendously. That $300 per month car lease, for example, can be severely hampering your buying power.

Mortgage tip: Remember, lenders will use only what you’re obligated to pay on existing loans in calculating your debt-to-income ratio. Choosing to pay more onyour debts can be a good financial move, but mortgage lenders generally don’t give you any benefit for choosing to do so.

Why a car lease can trip you up

Unlike an auto loan, a car lease can be trickier to work around if you’re trying to pay off debt to qualify for a mortgage. Let’s say your credit report shows a car lease payment of $300 per month. There is a balance on the credit report of $6,000 due, which is the remainder of the lease. If you had a car loan with these exact terms, you could write a check to pay off the $6,000 obligation. Case closed.

Unfortunately, that option doesn’t apply to a car lease. You can give the car back and pay the $6,000 balance that is due. However, to qualify for a bigger mortgage, the lender will need to verify there is no obligation due for car. If you give the car back, the mortgage company may ask what you’re going to drive instead—especially if there is a commute time from where you work to where you plan on residing.

Should you find yourself in this predicament, here are some options to consider.

• Call your car dealer. You can ask if it has any specific options for getting out of the lease. You’ll need to make it crystal clear that you must be out of the lease obligation completely.
• Transfer the lease to someone else. Your mortgage company should be OK with this option as long as you can show and verify the obligation is completely out of your name and that there is no obligation associated with it. You can search online for options if your car dealer doesn’t have any transfer suggestions.
• Pay out. Give the car back, pay the balance due, and either buy a new vehicle in cash, removing any debt-to-income ratio predicament, or finance a car that has a lower monthly payment. The key here is that the payments need to be reduced or totally removed if you want to maximize your buying power.
• Consider your priorities. A great deal on your car lease may not matter if you are serious about buying a home, plain and simple. Ask yourself: Is the car more important than the house?

Paying off debt for a mortgage

Paying off debt to qualify for a mortgage usually needs to be documented in the following ways.

• Money used to pay off the obligation cannot come from the reserve requirement your lender almost certainly has. Lenders usually want you to have at least three to four mortgage payments in the bank, called reserves, as a cushion when granting your loan request.
• You’ll need to produce a paper trail showing money leaving your bank account and going to the creditor to pay off debt or provide a copy of the canceled check to show you no longer owe the obligation.

All of these steps may seem unnecessary and overly repetitive, but they are a byproduct of the current mortgage lending world. Remember, stringent underwriting requirements help to ensure lenders are making good loans and, more importantly, that you can actually afford the house you are looking to buy.

———

This article was written by Scott Sheldon and originally published on Credit.com.

Before you do anything be sure to get in touch so we can discuss your unique situation face to face with a lender.

Call, text or email.

I'm never too busy for your referrals

Obstacles to Home Ownership - Perception v Reality

Obstacles to Homeownership: Perceived or Real?

Studies have shown that many of the obstacles mentioned are perceived, not real.

A recent study by Fannie Mae, What Do Consumers Know About The Mortgage Qualification Criteria?, revealed that many consumers are either unsure or misinformed regarding the minimum requirements necessary to obtain a mortgage. Let’s break down three such challenges.

Down Payment

Perceptions

Many renters have mentioned that the lack of an adequate down payment is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

• 40% of all renters don’t know what down payment is required
• 15% think you need at least 20% down
• An additional 4% think you need at least 10% down

The Reality

There are programs offered by Fannie Mae, Freddie Mac and FHA that require as little as 3-3.5% down. VA and USDA loans offer 0% down programs. According to the National Association of Realtors, the typical down payment for a first time buyer is 6%.

Credit Score

Perceptions

Many renters have mentioned that the lack of an adequate credit score is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

• 54% of all renters don’t know what credit score is required
• 5% think you need at least a 740 credit score

The Reality

Many mortgages are granted to purchasers with a credit score of less than 700. According to Ellie Mae, the average credit score on a closed FHA purchase is 687 and the average credit score on all loans is 722.

Back End Debt-to-Income Ratio (DTI)

Perceptions

Many renters have mentioned that they carry too much debt which is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

• 59% of all renters don’t know what DTI is acceptable
• 25% think you need at under 25%
• 7% think you need under 39%

The Reality

Lenders like to see a back-end ratio that does not exceed 36%. Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% based on credit score and other requirements.

Bottom Line

A lack of knowledge or misinformation may be keeping some families from buying a home even though they are actually qualified to purchase.

When you are ready to see how this applies to your unique situation, call, text or email.

Remember I am never too busy for your referrals

What You Need for a Mortgage

What You Really Need To Qualify For A Mortgage

 Tuesday December 8th, 2015  Down Payments, For Buyers

A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.

1. Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 5% or less.

Below are the results of a Digital Risk survey done on Millennials who recently purchased a home.

2. FICO Scores

The Ipsos survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower.

Below are the numbers from the latest Ellie Mae report.

Bottom Line

If you are a prospective purchaser who is ‘ready’ and ‘willing’ to buy but not sure if you are also ‘able,’ let's get together and discuss your options.

Why so much mortgage paperwork?

Applying For A Mortgage: Why So Much Paperwork?

 Tuesday October 20th, 2015  First Time Home Buyers, For Buyers, Interest Rates

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about usand requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably at or below 4%.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <4 backwards="" bend="" easier.="" make="" much="" over="" p="" probably="" process="" the="" they="" to="" would="">

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

What have been your experiences with lender paperwork?

When you want to see how this applies to your unique situation, just call, text or email

Qualifying for a mortgage continues to get easier

Is Qualifying for a Mortgage Getting Easier?

 Wednesday September 23rd, 2015  First Time Home Buyers, For Buyers, Interest Rates, Move-Up Buyers

There has been a lot of talk about how difficult it is to get a home mortgage in today’s lending environment. However, three recent reports have revealed that lending standards are beginning to ease. This is great news for both first time buyers and current homeowners looking to move or buy a second vacation/retirement home. Let’s look at the three reports:

The MBA’s Mortgage Credit Availability Index

This index, issued by the Mortgage Bankers’ Association, measures the availability of credit available in the home mortgage market. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit. We can see that the index has been increasing nicely this year:

Fannie Mae’s latest Mortgage Lender Sentiment Survey

This survey revealed that more lenders report that mortgage lending standards across all loan types are easing. The survey asked senior mortgage executives whether their company’s credit standards have eased, tightened, or remained essentially unchanged during the prior three months. The gap between lenders reporting easing as opposed to tightening over the prior three months jumped to approximately 20%. This represented a new survey high of "net easing." In addition, the share of lenders who expect their organizations to ease credit standards over the next three months also ticked up this quarter.

Doug Duncan, senior vice president and chief economist at Fannie Mae, addressed this easing of standards:

"For the first time in seven quarters, we see a pronounced increase in the share of lenders, particularly medium- and larger-sized lenders, reporting on net an easing of credit standards … This is a significant result in light of public discourse on credit availability and standards … Overall, we expect that lenders' tendency toward easing credit standards, together with relatively low mortgage rates and a strengthening labor market, will continue to support the housing market expansion."

Ellie Mae’s latest Origination Insights Report

The easing of credit standards is also confirmed in this report which showed that the average FICO score on a closed loan fell to its lowest point in well over a year. Here is a chart of average FICO scores on closed loans so far in 2015:

Just keep an eye on interest rates…

Although this is all great news, there was one challenge in the recently released data. Ellie Maereported that the average interest rate on closed loans is beginning to inch upward:

What this means to you…

If you are a first-time buyer or a current homeowner thinking of moving up to a bigger home or buying a vacation home, now may be the time to act. Mortgage lending standards are beginning to ease and interest rates are beginning to inch up.

YOU DO NOT NEED 20% DOWN

One More Time…You DO NOT Need 20% Down

 July 2, 2015  Down Payments, First Time Home Buyers, For Buyers

A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.

1. Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less and the number has increased through the first quarter of the year as shown by the graph below:

2. FICO Scores

The survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower:

Bottom Line

If you are a prospective purchaser who is ‘ready’ and ‘willing’ to buy but not sure if you are also ‘able’, let's get together and discuss your options.

DON'T HOLD OFF THINKING YOU NEED PERFECT CREDIT TO BUY A HOME

Despite what you may hear on the news, you don't need perfect credit or a large down payment to buy a home today.

Some Highlights:

• The average FICO score of Approved Conventional Loans was 757 in May
• The average FICO score of Approved FHA Loans was 688 in May
• Since April 2013, the ability of Americans to obtain a mortgage has increased substantially!

When you are interested in how this applies to your unique situation, please call text or email.

Mortgage Confusion? Where to Start

Which are you? First time buyer who has never before gotten a mortgage, would like to buy but have heard mortgages are hard to get, have some dings in your credit which you think may make you unable to to get a mortgage.

STOP!!

You owe it to yourself and your family to find out where you really stand.  Don't rely on the news media or instant online.

Talk to a real live human being.  A loan officer with whom I (and more importantly my clients) have had excellent experience is Pam Hopper at HomeSale Mortgage.  

First time buyer? - Pam will walk you through the entire process

Hear horror stories about lenders not being ready to close on time? - ask about Pam's guarantee to close on time.

Credit issues?  Let Pam tell you if they are really so bad you can't get a mortgage now.  Even if they are Pam has a credit repair program that has a great track record so you can repair any issues in the correct way and in the right order. You don't have to go it alone.

New construction? Pam worked for builders for many years.

Second opinion?  It never hurts to get a second opinion even if you already think you have a good deal.

So now you want to know how to get in touch with Pam.

Call her at 717-649-8576

Visit her website.

Take the first step now.

Getting a mortgage doesn't have to be scary if you have the right team

Getting a mortgage doesn't have to be scary if you have the right team