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So here you are a few days before settlement -the movers are scheduled, the utilities switched over in your name and the post office has the order to forward your mail – a call comes in from your lender: OOPS!  Your loan is not approved and that gorgeous home that you and your agent negotiated so hard to get at an awesome price slips away. . .

Unfortunately, this scenario will become more common with Fannie Mae’s new Loan Quality Initiative that requires lenders to run a borrower’s credit score a second time a few days before closing along with other last minute verifications before final loan approval is granted.  If there’s been a dip in the credit score (perhaps the borrower took out a new credit card) the lender will be required to delay closing, ask for more down payment, increase the interest rate, or at the worst – cancel the closing.

Many lenders have already been running these last minute verifications – the difference now is that Fannie Mae requires that all lenders do so.

Here are 7 tips for consumers who are in the process of buying a home and want to settle on time:

1. Don’t change your employement status

2. Don’t make major purchases (car, furniture, home theater, vacations, etc.)

3. Don’t increase your credit card debt or miss any payments

4. Don’t change bank accounts or make undisclosed large deposits

5. Don’t apply for a credit card, co-sign a loan, or make a credit inquiry

6. Don’t spend money you have set aside for closing – not any, not ever

7. Don’t delay in providing all paperwork asked for by the mortgage company

SDLP (Settlement Downpayment Loan Program) has received new funding, and will go live in July!

Not too many programs out there that give home buyers money for down payments:  The

This program provides for $15,000 to $40,000 (income dependent) in down payment and closing cost help to qualified buyers who are purchasing in Howard County.  Also, you don’t have to pay it back unless you sell or refinance.

Hurry and call now for a referral to a lender who can take your application for these funds – just like the last batch of money, this too will run out!   

Image by bredgur via Flickr

A few years ago banks would give a loan to just about anyone that applied for one – the rules were lax or non-existant.  You could get a loan by just stating your income and without verifying that was in fact what you earned!  Many other loans were made with no documentation from the borrower whatsoever.  While these types of loans were nice for the self-employed and others who have difficulty proving their earnings, they became known as “Liar Loans” because they almost asked the consumer to lie so they could qualify for a bigger, better house.

So now we’re seeing short sales and foreclosures everywhere.  People just got themselves in too deep to dig out.  If they needed to sell, prices dropped well below what they owed.  When they lost a job, all of a sudden that house payment was too much to handle.  Or sometimes it was an adjustible rate mortgage that adjusted to way more than they could pay.

What does all this mean to us today? It means that the underwriters who approve loans for mortgages have become very, very careful and the standards have tightened up to such a point even well qualified buyers can have difficulty getting financing, or conditions are put on loans at the last minute that delay settlement until they can be met.

Consider:

1. Credit Scores (FICO) – in 2006 you could get into a home with a 680 FICO score.  Today the magic number is 740.  Loans are made if credit scores are lower than this, but they come at a hefty cost in interest rate, or points.

2. Anything that looks “iffy” can send loan approval into a tizzy – underwriters are scrutinizing everything – each deposit into your bank account, withdrawals, and anything else that catches their eye.  Loan officers have to verify, re-verify and verify again.  Soon Fannie Mae and Freddie Mac loans will require the lender to run the borrower’s credit score 3 days before settlement – better hope that score didn’t dip too far in the 30-60 days from loan application!

3. Lending guidelines are changing so fast that lenders can’t keep up with them.  If a buyer was considering a particular loan a month ago, it may no longer be available, or the parameters have changed to a point they would no longer be able to get that loan.  Sometimes these changes happen the day of settlement – end result: no loan, no closing, no house!

4. Condos and any attached home (townhome, rowhome, duplex) that is part of a PUD (Planned Unit Development) that has an HOA or Condo Association has additional requirements that must be met before the loan is funded.  While all of this is certainly do-able, it just makes the process longer and more arduous.

5. Appraisals can be tricky after the Home Valuation Code of Conduct changed how appraisals are ordered and completed. Most lenders still use a company that employs appraisers who are knowledgeable in their region, however, once and awhile an appraisal will come in way under where it should be – for whatever reason – and that can derail a purchase.  Other times the appraiser will tag repair items in the home that must be completed before the buyer can get their loan (mostly with FHA and VA loans).

About now you’re probably thinking “no one can buy a home!”  But that isn’t true.  It’s definitely harder now and there are a few more hurdles to clear, but people get loans and buy houses all the time.  They have great credit (over 740 FICO), have a small amount of debt, have stable employment, and are bringing some cash to the table for the down payment.

But the most important thing they have is a good Realtor® to guide them through the hoops to home ownership.

Every so often a new report is released that measures the state of the housing market based on the average price of homes sold nationwide.  Then they chart that number to see if it’s gone up or down over the last time they looked (monthly or quarterly).  The media loves to headline the result with a lot of drama – particularly if the number goes down – and then provide dire predictions from economists or other analysts. 

One of the most important rules about real estate is that it is LOCAL  The thing to keep in mind is that the numbers they measure are averages nationwide that may or may not reflect the trend in your region.  For example, nationwide there was a pretty big drop in home prices over the last few years, yet some areas were barely effected and others ended up completely under water.  Interestingly, the first markets to crash are now the earliest ones to show signs of a solid recovery (northern Virginia for example).

A housing market like none other in history is hard to predict because so many factors come into play.  Think of the last few years as a large ball that was dropped from up high.  The first bounces are big and then they get smaller and smaller until the ball eventually stops and rolls along the ground.  This is what the housing market is doing.  We are past the steep price drops and are now seeing the smaller peaks.  Eventually everything will calm down (if someone thinks they know when that will be, ask them where they got their crystal ball).  A “normal” market is balanced and overall realizes a modest yearly increase in home prices.

Image via Wikipedia

Ball goes up – NAR released stats showing resale home prices have gone up 7.8% in April 2010.

Ball goes down – Prices fell 0.5 percent in March from February, according to the Standard & Poor’s/Case-Shiller 20-city index released Tuesday, May 25, 2010.

Regional Maryland statistics for Howard, Baltimore, Anne Arundel and Carroll Counties show that these markets are up over the same time last year.  The number of homes for sale and the numbers of homes sold indicate that these markets are balanced - neither a buyer’s nor a seller’s market.

It may come as no surprise that the crooks have figured out how to scam people looking for a home to rent online. 

Basically what happens is the data for a home listed for sale or rent is copied into a bogus Craigslist ad (unbeknownst to Craigslist of course).  Often the listed rent is way under market to attract attention.  Prospective tenants make contact and are told to wire the money for the security deposit and first month’s rent.  When the tenant shows up at the home the owners (if it isn’t vacant) have no idea what is going on.  Identity theft occurs when the prospective tenant emails the rental application to the fake “owner” thus giving them their social security # and other private information.

In our area this has been happening on Craigslist for sometime.  Most agents are aware of the situation and are savvy to what’s going on, but even then it can be hard to catch if your listing shows up on some website somewhere as a tool for scammers.  A home I had listed for sale and rent a couple of years ago appeared on Craigslist at a much lower rent (without my information to contact) – fortunately I caught it and had it removed, but it was impossible to trace who placed the ad.

This same scam is being done on other rental sites such as forrentbyowner.com.  So the bottom line is: beware and whenever possible use a Realtor® for all of your real estate needs.

For more information go to: http://www.fbi.gov/page2/july09/housingscam_072909.html

Condo Sellers and Buyers who are looking at purchasing a condo with an FHA or VA loan need to be aware of the new guidelines put into place by the Federal Housing Administration (FHA) last December.  Here is a  list of some of the new rules:

• The seller must have the condo management company fill out a questionnaire which can cost between $50 and $200 depending on the management company.  Some Associations are slow or not easy to work with in getting the form done which can seriously impede the buyer’s loan approval.
• No more than 15% of the total units can be in arrears (more than 30 days late) of their association dues.
• At least 50% of the units must be owner-occupied or sold to owners to intend to occupy the units.
• No more than 25% of the property’s total floor area can be used for commercial purposes.  In addition the commercial portion must be homogenous with residential use and free of adverse conditions to occupants.
• No more than 10% of the units may be owned by one investor – which also applies to developers/builders who rent vacant and unsold units.  If there are 10 or fewer units in a project, no single entity may own more than one unit in the project.
• Common elements within a facility/project must be 100% complete.
• The project must be covered by adequate insurance (hazard, flood, liability, and others as required by law) that meets the requirements of coverage established by FHA with adequate reserves.
• The condo project must not be in litigation.
• Purchaser must have contents insurance coverage – called an HO6 policy.

If the HUD website shows that a particular condominum project is “approved” each individual unit must be “re-certified” under the new guidelines when a contract for purchase is received.  Every FHA loan must meet the new guidelines regardless if another unit in the same building/development was recently sold and approved.

Keep in mind that if one or some of the new guidelines (I’ve given only a partial list here) are not met, financing will not be available.  Please check with your lender for more information.

According to Forbes, Howard County, Maryland ranked 3rd richest in the nation based on median household income!  Montgomery County, MD comes in 10th.  Other area counties in the Top 25 are Calvert, MD, Charles, MD, Louden, VA (No. 1), Fairfax, VA, Arlington, VA and Alexandria, VA counties.

To check which other counties made the top 25 visit: http://www.forbes.com/2010/03/04/america-richest-counties-lifestyle-real-estate-wealthy-suburbs_slide.html

NAR, National Association of Realtors, has a phenomenal website for homeowners loaded with great information on home maintenance, upgrades and more.  This site will help you plan and organize home projects, give you ideas for home improvement as well as timely information on taxes, insurance and finance.

If you register on the site you can save the information you find, create to-do lists and set project reminders.  You can also customize the site based on where you live, how much money you want to spend (or save) or how handy you are with power tools!

There is even a section that helps you help your community with how-to’s on starting a Neighborhood Watch program, building a local playground and participating in city/county planning projects.

Click here to check it out for yourself –  HouseLogic .

Recently, I reported that the IRS did not have a form for applying for your tax credit.  Well, the wait is over.  Welcome Form 5405!

Click Here for Form 5405 and Instructions 

Thinking of buying a home?  You need an agent of your own!

Why?

As your buyer’s agent, I:

• come free of charge!  That’s right. . .the seller pays all selling commissions!
   
• will know the very day your dream home comes on the market and can get you in to see any home quickly – this is very important if you are looking at short sale or foreclosure “deals.”
   
• work for YOU not the seller – I can’t stress enough how important this is – many times buyers go directly to the listing agent thinking they will get a better deal that way.  Rarely is this the case, because the listing agent works only for the seller not the buyer.
   
• am best equipped to negotiate with the listing agent a good deal wtih terms that benefit you.
   
• will make sure that your interests are protected when writing a purchase contract.
   
• can guide you to lenders who are honest and have good rates and loan programs.
   
• will remain your trusted real estate advisor long after your transaction is complete.
   
• am an Accredited Buyers Representative (ABR) which means I have completed extra criteria and coursework that focuses on providing the best results for home buyers. 

This is just a short list of the many things I will do for you as your buyer’s agent.  

Call me at 410-715-3261  to set up a customized buyer consultation!