You found the “perfect house”, the home inspection went well, and you have started the mortgage processing and suddenly you hit a “bump-in-the-road” and your mortgage processing comes to a slamming stop!
You had a unresolved credit dispute that you had forgotten about or possibility showed up on your credit report in error! This will stop your mortgage loan process from moving forward with Fannie Mae or Freddie Mac.
Are you sure? Yes, just having a notation on any credit account stating that the account is being disputed can derail the loan process immediately. In today’s environment, where a sneeze will slow down the mortgage process and hinder the timetable for closing, you cannot risk having something like this on your credit report.
A good safe guard is to check your credit to make sure this type of thing is not there. If it is, then talk to your bank or mortgage representative and ask who they would recommend to help you remedy it.
Good luck with the closing!
You have spent hours pouring over the computer looking at homes for sale, then you have driven by house after house picking out the ones that had possibilities for you, then you had your Realtor scheduled showings for the ones you had selected to see the inside, then you made an offer on the best one and negotiated long and hard to get it at the best possible price, now you have had the home inspection and there are some issues! Or at least, you and your home inspector think so!
What do you do?
This is where the experience of your Realtor from his or her many years of experience comes into pla! They will know how to tactfully present it to the sellers so they are not offended or insulted! You need them to not feel like you are trying to take advantage of them!
Believe me, they will do the repairs if they are presented to them in the right way. Many times buyers will not be able to understand the value of working with an experienced Realtor until they reach a point in the homebuying process where the experience shows up in an advantage for them.
So when deciding on a Realtor, it might be beneficial to ask how long they have been in the business and how many transactions they have done. It may pay off for you bigtime!
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2. Look at your income and expenses and set up a budget.
3. Start paying all your bills on time.
4. Work on one credit card balance at a time to pay off and then cancel.
5. Start using cash for your purchases. If you don’t have the cash, don’t buy it!
6. An older credit history improves your credit score, so don’t close those credit lines.
7. Don’t open new credit cards.
8. Review your credit report to see if there are entries that don’t belong to you.
9. Work with your local bank support staff to remove wrong information on your credit report. Here is a site that offers credit repair.
10. Review your credit annually. You can obtain one free credit report per year at www.annualcreditreport.com.
FHA Makes Changes
On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund - ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.
By all accounts the new changes are a victory for home buyers. FHA has carefully balanced the need to make financial reforms with the need to keep FHA available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the up-front mortgage insurance premium to be financed.
FHA announced changes in the following areas:
· The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.
· Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
· FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the up-front premium.
· Seller concessions will be reduced to 3 percent from 6 percent.
FHA will make the following lender enforcement changes:
· FHA will implement credit watch terminations at lender underwriting.
· Public reporting of lender performance through scorecard system will be implemented.
· FHA will implement, through notice and comment, indemnification against lenders. Indemnification will be expanded beyond fraud and misrepresentation.
· FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
· FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.
FHA is an integral part to the continued recovery of the real estate industry and the overall economy. NAR will continue to work with FHA, the Administration, and the Congress to ensure FHA can fulfill its mission while providing for the safety and soundness of the insurance fund. NAR is committed to assisting FHA as they balance risk management with creating homeownership opportunities across the country.
For NAR’s one-page summary brief on this issue, click here.
Crazy Job! With People or Alone?
This job of real estate that I have been working at for the past 31 years is a crazy job! From the outside looking in, it seems as though I would be with people all day, driving buyers around to houses, showing them through the houses, writing up offers, negotiating on the offers, spending time at home inspections, sitting through the mortgage appointments, and on and on!
However, the truth of the matter is I spend most of my time alone!
Does that surprise you?
More of my day is spent researching and searching for homes for my different buyers, phone calls following up on showings of my listings for feedback, calling contractors for quotes on repair items, phone calls to the mortgage companies to find out what documents they still need for the mortgage application, phone calls to the buyers and sellers, driving to listings to show buyers and their agents through my listing, and on and on!
The fun part of this job is when you are with people. However, you can’t have one without the other. The time I spend working alone is what pulls it all together.
So if you are thinking of looking into real estate as a career, a question I would ask you is, “How do you do working on your own?” Have you done anything like that before? If you aren’t good at working alone or have never done it before, this job may be very difficult for you. I love this job because I love being with people and have the ability to work well on my own.
Private Mortgage Insurance Backlash
In the old days if you got approved for a loan at the bank for a home mortgage, the private mortgage insurance was an automatic. The private mortgage insurance (PMI) was a protection policy the banks required if you were putting less than 20% down. It would insure the first 20% of the loan so the banks would feel safe in loaning you the money.
This has worked very well for decades to keep the whole system moving. The PMI companies have been making tons and tons of money from you and me on all our home mortgages which we did not default on.
Suddenly because of the banking industry screw up, the PMI companies have displayed a “knee-jerk” policy. You know the concept of the pendulum swing? Well, they are at the extreme right with over-critiquing every application that crosses their desk! Not only is it adding weeks on to the process, but they are turning down solid deals for insignificant reasons!
I could go on and on about this whole craziness going on in the home mortgage process, but I think I have said enough. If you have had a problem with the PMI companies with your home mortgage process, tell me about it.
Sell Before Buying??
I was reading the Saturday morning real estate section from our local paper and the lead article was about move-up or scale-down buyers. The two agents interviewed both felt that they should sell first before they made an offer on another house. The problem I had with this article was not the position the agents had but the reasons they gave for doing so.
There are many areas in our marketplace where the purchase offer with a contingency of selling a house will not make any difference and will not affect the selling price that is negotiated. This is because the sellers are so glad to see an offer that they will readily accept one even with a contingency.
Unless a neighborhood has a shortage of inventory and is in high demand, most sellers, if properly advised by their agents, will accept a contingent offer. In our area, the listing does not have to be changed to reflect a contingent offer and no one knows it has an offer on it except the seller, that buyer and the agents.
This way, the odds are in the seller’s favor, because now there are two houses on the market and if either one of them gets an offer, the seller is good.
So why wouldn’t a buyer make a contingent offer? Yes, there is the possibility that another offer could come into the picture and they would have to do a bridge loan to keep their offer or they would lose it. But generally, if they price their house properly, de-clutter it, and then stage it, the house will sell fairly quickly. To wait until you have sold your home, to then start looking, you may not find something suitable and you will have to move twice, first into temporary rental housing and then into your next house. This would far out weigh the cost of carrying two mortgages for a few months.
The Upside & Downside of Home Inspections
I was sitting in a Board of Directors meeting this past week reviewing a new addendum form to approve for our Association to use for the inspection contingency in a purchase and sale offer. There was considerable discussion as to whether the buyer should have to indicate who they were selecting to do the inspection, whether it was Uncle Harry, a licensed home inspector, an engineer, a builder, etc. After all the discussion, the final decision by the Directors was the buyer did not have to disclose who they were choosing to do the home inspection for them on the addendum form.
The reason there was so much discussion around this rather simple item, was because of the experience all of us have had the past several years with home inspections. There are the home inspections that the buyer has their Uncle Harry do for them and he either talks about the selling price and everything else except the house or he finds fault with everything in the house.
Then we have the inspections done by a builder that compares everything to a new home and nothing is to code in the older home.
It seems that features that are characteristic of an older home are overlooked during the initial visit or even second visit, but with the home inspector, suddenly they aren’t acceptable. And even though the buyer may have negotiated off the sales price to address them after he buys the house, they ping the seller again with the list of repairs and ask for a credit at closing from the home inspection.
Inspections can and are an escape route for a buyer, plain and simple. If they want out of the deal after signing, the home inspection provides the door to escape. That’s the way it is and there is no changing it!
Home inspections are part of the process now and they are here to stay with the upside and downside they bring to the home buying process!
We also had the Secretary of HUD, Shaun Donovan, speak to our Realtor delegation and the outcome was a modification that is going to be a tremendous benefit to the first-time home buyers. It is this: HUD has approved the amount of the Tax Credit to be able to be used for the downpayment, through a bridge loan by the bank offering the loan to the home buyer.
This means the home buyers only need good credit and employment and very little money to buy though the FHA mortgage program. This should definitely bring some extra home buyers into the picture who earlier were short on the downpayment.
We all have heard of the $8,000 Tax Credit that the Administration signed to law to help stimulate the real estate industry in an effort to get the economy going. Over the past month, it has definitely helped to get many first-time home buyers off the fence and out buying houses, but it could be better.
Just received word that the new change is temporarily on hold until some details with the advance for the downpayment are figured out. Click here to go to the Mortgagee letters.