Tips To Present a Stronger Mortgage Application
October 6, 2011 § Leave a comment
As underwriting guidelines for lenders become more stringent, we need to re-examine what a good mortgage application looks like. As home buyers begin their search for a home, there are a few items they should be aware of that they can do to help get their loans approved (with the best possible terms), and, at the same time, lessen some of the stress that goes along with the mortgage process.
1. Income documents
Most lenders want to see a full month of paystubs and two years’ complete Federal Tax Returns. Assembling them ahead of time and holding on to every paystub you get is a good idea even before you find a home and/or submit your mortgage application because it will save you time later. Moreover, looking at those documents and being prepared to explain any deductions that show up is crucial. Child support, alimony, garnishments, and Unreimbursed Employee Expenses are often crippling factors that, if explained and dealt with upfront, can make your loan approval smoother.
2. Asset documents
Most lenders will scour your bank accounts for the two months prior to going to contract. They are looking for large deposits because large deposits can signal a new loan that wouldn’t show up on your credit report yet. What’s a “large deposit”? Typically, any deposit that would represent more than your income can support. If you make $5000 a month, after taxes you likely net $3800 (or $1900 a bi-weekly pay period). Therefore, deposits in excess of that will need to be explained and documented. Sold a motorcycle? Have a paid receipt and motor vehicle documents in place. Received a gift? You will need a Gift Affidavit, proof of the donor’s ability and transfer of the funds. Any and all questions should be discussed with your loan officer.
3. Credit Score Optimization
Do your best to curtail your use of credit as it relates to your available credit lines. Target a cap of 30% of usage of available lines to get the best scores. Do NOT cancel credit cards. That will lower your amount of available credit, thereby raising your percentage of usage. That will damage your score. Do NOT shop for a car, explore life insurance, apply for a new credit card or increase the limits on your current cards because the running of your credit by people in other industries will also lower your credit score. Most importantly, don’t do anything that will require having your credit run without first discussing it with a mortgage professional who knows the impact it could have.
4. Appraisal Concerns
It’s unlikely you will make an offer to purchase without checking out comparable home sales. It’s also likely you received that type of data from the real estate agent you are working with. Make sure your agent prepares the same information for the appraiser. Data about similar sales, similar homes currently on the market and maybe even cost estimates for any repairs or improvements anticipated can preempt future problems with appraised values and conditions.
Overall, it is recommended that you hold onto copies of everything financial, think before allowing your credit to be run and work with an agent and loan officer who can use their experience to put your loan application in its best possible light…as soon as you start thinking about buying a home.
Picking the Right Agent is Crucial
October 5, 2011 § Leave a comment
The National Association of Realtors (NAR) released their Existing Sales Reporttwo weeks ago and in the report they discussed a troubling trend: cancelled contracts are increasing dramatically. NAR defined the issue:
“Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price.”
NAR explained that 18% of all contracts were cancelled in August. This compares to 16% last month and 9% in August of 2011.
The percentage of cancelled contracts has doubled in the past year!!
It is extremely important that both buyers and sellers pick the right real estate professional to assist them with their real estate needs.
BUYERS
Make sure your agent can not only help you find the home of your dreams but also find you professional assistance with all aspects of the transaction (mortgaging, title, etc.)
SELLERS
Realize that your agent must sell the home twice:
- to a qualified buyer
- to the bank (through the appraiser).
The second sale may be more difficult in this market than the first.
Bottom Line
It is imperative in this housing market that both buyers and sellers use a true real estate professional to guarantee that the deal will actually reach the closing table.
Open House – Sunday October 2nd, 2011
September 30, 2011 § Leave a comment
Open House – Sunday October 2nd, 2011 12pm – 2pm
This beautiful 3 bedroom ranch home is a families dream. Located close to schools, parks, library, and everything you would ever want. The first floor includes a large living room, eat in kitchen with dinette area, and 3 bedrooms. The finished lower level provides a large family room, office, and huge storage area with shelving. Fenced back yard is an excellent play area and comfortable for pets. The large deck and patio are perfect for entertaining. Priced to sell quickly. HSA Home Warranty is Included.
Full Details
Sun Prairie Homes for Sale in Sun Prairie Wisconsin 53590.
Find more Sun Prairie Real Estate at http://www.findmadisonhomes.com/community/area/Sun+Prairie or Search the MLS NOW at http://www.findmadisonhomes.com
(608) 616-9555 to contact The Baker Realty Group, Madison Wisconsin Real Estate Agent Team with Keller Williams Realty Crossroads
How to Pick Your Lender
September 20, 2011 § Leave a comment
In the whirl wind that surrounds the home buying and mortgage process, how can a consumer be sure that they are working with the right lender? I mean there are so many choices…here’s some things to consider:
What type of company is it?
There are mortgage brokers, mortgage bankers and banks/credit unions. Mortgage brokers have been hamstrung by many of the recent regulatory changes and typically lack the actual ability to approve and/or lock a loan. Banks are usually limited in program choices and hamstrung by tighter underwriting. Mortgage bankers have the financial stability and direct lending capability of the bank coupled with the wide product menu and expertise of the mortgage broker. From a global perspective, I see mortgage bankers as a clear winner.
How does the company operate?
Many people are dismayed when they find out where their loan is processed or underwritten….or where the appraiser is from. It is important to work with a company (and their affiliates) who understand the nuances of your local market. Asking the questions up front can save you headaches down the road.
What about the individual loan officer?
Your relationship with your LO (and their processor) becomes the most important ingredient to a successful transaction. How well do they educate you about the process, the requirements…the factors that determine your approval or the interest rate you will get? Many LOs are “order takers”. Others are weak in follow up or communication. This is difficult to determine on your own which is why the referral from another person who used them or your real estate agent has far more value than most people know (until it’s too late).
Too many people stay focused on quoted rates and fees and neglect to see the whole picture of what is needed from a lender. Look for great communication, superior information and education, understanding of the local market and someone who looks at your application as something more than a number. Be prepared to pay a little more to get a better experience (even though it might not cost you any more)….in the long run, lowering stress can be more important.
5 Insider Secrets for Coming Up With Cash for Down Payment
August 16, 2011 § Leave a comment
Most home buyers’ biggest hurdle is coming up with the cash for a sensible down payment. Gone are the days of zero-down loans, so if that was your plan, you’re going to need a new one! Coming up with a down payment for a home is a challenge because it’s not chump change we’re talking about, here. The down payment on a $200,000 house, for example, will run you anywhere from $7,000 (on an FHA loan) to $40,000!
That might seem like an insurmountable amount of coin to come up with, but it’s actually more doable than you might think. Some buyers will simply save up their own cash, even if it takes many, many moons. The good news is that if you still need some help to boost your down-payment savings, there are resources you can harness to power your home-buying pursuit:
- The FHA Bridal Registry. Yes – you read that right! The FHA Bridal Registry Program enables wanna-be home buyers to apply their families’ wedding gifts toward their down payments. And although it’s named a “bridal registry” program, you don’t have to be a prenuptial couple to use it. You could also use this program to collect gifts for graduation, the arrival of a baby or some other major life event in which people want to give you gifts.
The FHA Bridal Registry works like a traditional registry, but is more flexible. The registrants visit their choice of FHA mortgage lenders and set up what essentially is a custodial savings account for the sole purpose of funding their down payment. The couple’s (or individual’s) family and friends can either deposit funds directly into the account or give the cash or check to the couple or individual, who then deposits it into the account. The account’s flexibility also goes beyond that of traditional down payment gift rules that are applicable to FHA loans, which are detailed below in insider secret #2. With the FHA Bridal Registry Program, the only gift documentation required is “lender and borrower certification of the funds.”
- Family gifts. Most lenders will allow home buyers to apply gift money from family members toward their down payment – within guidelines, that is. First, the lender will require a letter from the giver verifying that it in fact is a gift and not a loan. (They generally frown upon it being a loan because it would add to the buyer’s debt and change their debt-to-income ratio.) And second, the person giving you the money must be a relative. The reasoning here is that a friend will most likely expect you to repay the money, whereas a relative won’t.
FHA loans will allow the gift to make up any portion or all of the buyer’s down payment, many conventional (non-FHA) loan programs will restrict the proportion of a buyer’s down payment that can come from gift money. The lender may also have specific ways they want to see the money go into and out of your accounts. Before you accept a gift toward your down payment, be sure to check with your mortgage broker or loan rep to be sure that you’re dotting all the right i’s and crossing all the right t’s.
- Your Employer. Some companies offer assistance programs to employees. Most are government, university, large company and financial industry employers. One example is safety workers: n some areas, safety workers like firefighters and police can have access to down payment grants from their employers if they buy properties in the city where they are on-call as first responders. Also, many large colleges and universities, very large companies and banks and lending institutions offer down payment help and have below-market-rate mortgages set up for faculty members and staffers. Check with your Human Resources department to see if any such program is available to you.
- City/County/State Programs. Some states, counties and cities still offer programs that lend or give home buyers some assistance for down payments. These programs vary widely in scope – for instance, many target buyers with low and moderate incomes, while some seek to help the buyers of foreclosed or fixer-upper type homes. Some don’t have to repaid – meaning they are given as grants and are forgiven entirely if the buyer lives in the property for 30 years, but must be repaid if the buyer sells or rents the home out before the 30 years elapses. The programs pretty much all have some sort of homeowner education component that requires applicants to take personal finance and homeownership preparedness classes before they can receive funds. To learn more, visit your city, county and state websites to learn about programs that might be able to help you.
- Your Retirement Funds. Many financial advisors would advise against this, but if you have a 401K or Roth IRA account and some years to go before retirement, you might be able to tap into it or even borrow against your own funds for your down payment. Currently, you can take up to $10,000 out of your Traditional IRA with no penalty to put toward the purchase of your first home, but you will be taxed. You can take as much as you want out of your Roth IRA contributions with no penalty or taxes, though, and as much as $10,000 from your earnings penalty-free for your down payment. The rules get a little tricky, here, so definitely check in with your tax and financial advisors.
And while you can’t similarly draw from your 401K, many retirement and pension plans will allow you to borrow the money against your funds, then repay it to yourself – at interest. So the choice there comes down to paying your lender back with interest or paying yourself with interest. That choice should be you! But first, get some advice from your CPA or financial planner. This option might not make financial sense for your particular situation.
P.S. – You should follow Baker Realty Group on Facebook!
JUST LISTED – 3281 Gilbertson Rd, Windsor, WI
August 15, 2011 § Leave a comment
Executive Estate on 7 rolling acres. Professionally landscaped, minutes from Madison. Over 4500 sq ft of luxury and relaxation. Granite counters, imported tile and deep pile carpeting, library, office, formal dining and living room with Marble foyer and custom stain glass. Large master suite with hot tub. Lower level entertainment area and wet bar, plus a lot more. Large partially heated outbuilding is for large toys or horses. In ground Pool for summer months, hot tub for cool nights.VPR $589000-$650000.
Full Details
De Forest Homes for Sale in De Forest Wisconsin 53598.
Find more De Forest Real Estate at http://www.findmadisonhomes.com/community/area/De+Forest/ or Search the MLS NOW at http://www.findmadisonhomes.com
(608) 616-9555 to contact The Baker Realty Group, Madison Wisconsin Real Estate Agent Team with Keller Williams Realty Crossroads
Recieve Cash at Closing! – Teachers, Nurses, Doctors
July 18, 2011 § Leave a comment
Savings Programs for Heroes
Homes for Heroes Real Estate Savings Program
Substantial home buying and selling savings are available and/or discounted lender fees. We offer full service
at a discounted rate. We are able to offer more savings than anyone else because of our strong business relationships — with our Home for Heroes Affiliates.
Here is the Homes for Heroes Promise:
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Don’t wait! Visit our website to sign up today!
The Only Thing “Lousy” Was the Advice!
July 13, 2011 § Leave a comment
We read an interesting article in the Wall Street Journal on Monday titled A Home Is a Lousy Investment. It was written by Mr. Bridges, a professor of clinical finance and business economics at the University of Southern California’s Marshall School of Business. The essence of the piece is that owning a home is not a good financial investment for younger generations. The subtitle:
“Today’s young people would be foolish to imitate their parents and view ownership as the cornerstone of personal finance.”
Today, we would like to counter some of the points made by Professor Bridges. The professor looks back on California home values over the last thirty years and begins with the assumption:
“If a disciplined investor who might have considered purchasing that median-price house in 1980 had opted instead to invest the 20% down payment of $19,910 and the normal homeownership expenses (above the cost of renting) over the years…
There are several challenges with these givens. Let’s break them down.
“a disciplined investor”
There is no doubt that discipline in savings is important. However, studies show that homeowners attain greater wealth because of ‘forced’ savings.
The Joint Center for Housing Studies at Harvard University released a study, America’s Rental Housing: Meeting Challenges, Building on Opportunities. They explain:
“In addition, renters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”
“invest the 20% down payment”
The professor’s math supposes a 20% down payment. What about the people who put 5% down or 10% down. What about those who purchased a home with an FHA mortgage putting 3% down; or our veterans who used a VA mortgage to purchase a home with no down payment? (For those who think low down payments have caused the current foreclosure challenge, the difference in default rate between a 5% down deal and a 20% down deal is less than 1%).
“normal homeownership expenses (above the cost of renting)”
It’s great that Professor Bridges looked at data over the last 30 years. History is important. Foresight is much more valuable than hindsight however. In most parts of the country, homeownership is currently less expensive than renting. There is not MORE money to invest if you rent. There is LESS.
In their report mentioned above, Harvard University found:
“Rental markets are now tightening, with vacancy rates falling and rents climbing. With little new supply of multifamily units in the pipeline, rents could rise sharply as demand increases.”
Trulia, in its second quarter 2011 Rent vs. Buy Index, stated that buying a home has become more affordable than renting in nearly four out of five (78%) major cities. Ken Shuman, Head of Communications at Trulia said:
“With home prices nearing a double dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying.”
The premise of Professor Bridges article doesn’t apply to the current market. Even some in the academic world agree that now is the time to buy.
Business School professors Eli Beracha of East Carolina University and Ken H. Johnson Ph.D. of Florida International University have done extensive research on which makes more sense financially: to rent or own a home. They published a sensational paper on this issue: Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise?. In their paper, they explain:
“[F]undamental drivers now appear to be in place that favor homeownership over renting in the near term future…
[This] finding might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting.”
They conclude their research paper with this sentence:
“Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”
If Professor Bridges’ assumptions are incorrect, how much value can the conclusions hold?
Bottom Line
The best advice given in the Wall Street Journal article was in the last paragraph:
“Owner-occupied homes will always be the basis for healthy and stable neighborhoods.”
And, in today’s market, a home is also a fabulous investment!!
Open Houses this Weekend!
July 8, 2011 § Leave a comment
Saturday, July 9th – 12pm – 2pm
Located in the popular Northeast side neighborhood, this 4 bedroom home offers many possibilities. Large Kitchen, with Laundry room located just off kitchen. The large fenced back yard is perfect for pets and would make an excellent play area. Home has 2 family rooms, office, and shop area located in basement. Priced to sell quickly, so don’t miss out. All measurements should be confirmed by the buyer.
Full Details
Sunday, July 10th – 11am – 1pm
What a find! Rare home with rights and access to beautiful Lake Ripley. Enjoy the sandy beach at Shore Place and two parks maintained by the neighborhood association. This home has loads of amenities including granite counter tops throughout, 2 fireplaces, walk-in closets, finished storage area over the garage, an Iron Curtain water system and so much more. Natural back and side yards are teaming with birds and other wildlife. Check this out!!
Full Details
Bow Tie News 