Have a special Thanksgiving holiday with your friends and families!
The bond market is closed today and tomorrow it will close early. Most lenders will be closed until Monday, so interest rates will not be issued until then.
I appreciate your loyalty and readership and wish you all the best!
I saw some unbelievable interest rates this week and they’re still going strong. My experience is that they don’t last long, so if you can, I definitely recommend taking advantage.
And remember, if you can’t refinance traditionally because you have less than 20% equity in your home (or even if you’re underwater in some cases), check these two sites to see if your current loan is owned by Fannie Mae or Freddie Mac:
http://loanlookup.fanniemae.com/loanlookup/
https://ww3.freddiemac.com/corporate/
Make sure that you plug in the information exactly as shown on your mortgage statement.
If the site says “Match Found,” you may be able to refinance into these low rates without any penalties. Call me if you would like to do an assessment.
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The $8000 federal tax credit has been extended and expanded! The credit, which was supposed to expire 12/1/09, has now been extended to 4/30/10. In addition, there will be a 60-day extension if you go into binding and official contract prior to April 30th.
In addition to extending the $8000 1st time homebuyer tax credit, it has been expanded in many ways:
Another highlight is that taxpayers can claim the credit on their 2009 tax returns for purchases made in 2010.
The other details remain the same, in regards to the definition of a first time homebuyer (must not have had ownership in the previous 3 years) and how long you must own the home in order to avoid paying back the credit (the home must remain your primary residence for 3 years after the purchase).
Congress voted and approved a one-year extension on the temporary FHA, Fannie Mae and Freddie Mac loan limits. The loan limits vary by county, but are established by taking 125% of the county’s median home price and determining that as the upper limit, with $729,750 being the absolute maximum. The majority of the Bay Area falls into this upper limit of $729,750. This is good news for many homeowners. It was only a short time ago that the secondary market was not purchasing loans above $417,000. We’ll see what a year brings us …
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There are rumors that the 1st time homebuyer tax credit will be extended, but at this moment, it is technically expiring on November 30th (must close escrow before 12/1/09). In fact, I think that Congress will be voting this week on whether or not to extend it, but I’m not sure if this is just a rumor as well.
At this moment though – assuming the credit will not get extended – it means that if you’re not in contract yet, it is going to be a tight move to close by the 30th. Escrow and lock periods are conducted by calendar days, but bank turntimes are conducted on business days, so with the Thanksgiving holiday coming up, that presents more of a challenge.
I will let you know when I hear about the extension (if any).
This is the time of year when the 1st installment of property taxes are due. Their due date is November 1st and their “late” date December 10th. If you’re like me, you want to hang on to your money as long as possible, so a lot of people wait until close to the late date to pay their taxes. If you’re closing around this time, and especially on or after 11/1, the lender will require that you pay them. After all, they are due.
It is in September that I start giving my clients a “heads up” to be prepared for this. We all plan differently and our debt management can be very fine. Generally, here are your options, but some may depend on when you expect to close and when you naturally pay your taxes to the county:
1. You can cut a check for them in escrow.
2. Value-permitting, you can roll them into the loan amount so that you don’t have to pay them out of pocket.
3. You can pay them online to the county via credit card (I think there’s a small charge for this), but PRINT the receipt and keep a copy!
The main concern is that the escrow officer/title company is able to verify that they have been paid. The worst situation for you to be in is if you write a check and mail it off to the county. It’s somewhere in the system, but perhaps it takes the county a few weeks to register it in the system. If you need to close between now and that time, and since the escrow officer is unable to verify they’ve been paid, you will have to cut another check for the taxes. You will end up being reimbursed at some point down the line, but we’re talking about a bureaucracy here, and everything bureaucratic takes a long time. And that also means you have to assure you have the money for both payments in your checking account.
Just a heads up! Talk to your lender/broker about the timing and strategies.
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I’m seeing some listings that tout a “bonus room,” suggesting that you get an extra room included in the purchase price. What you need to know is that this is another way of saying that the addition (or conversion) was unpermitted, meaning that the previous homeowner did not go through the proper channels or permits through the county.
If you’re going to buy a home that has a bonus room, make sure you run this by your lender immediately. Not every bank will lend on a home with unpermitted additions or conversions. In fact, I only know of one that does not have a problem with it (and that’s one out of MANY), which also means we’re subject to their interest rates and turntimes.
This particular lender requires the unpermitted addition or conversion to be addressed by the appraiser, commenting that “everything was done in a workmanlike fashion and the improvements do not have an adverse effect on the property or pose a liability.” So this may cause an additional hiccup in that the appraiser needs to be on board. With the new HVCC law, there isn’t much we can guarantee anymore.
After your initial conversation about prequalifying and after determining what you feel comfortable with as your “max purchase price,” it is strongly recommended, if not necessary, that you get preapproved for a loan. This is not just getting credit-approved, like some banks like to call it.
In a preapproval, you go through the entire loan process. You complete and submit an application, your credit report gets pulled, and your complete income and asset profiles are reviewed and documented. This full loan package then gets submitted to a lender for an underwriter to review and either approve, suspend, or deny. If we receive a loan preapproval from the underwriter, we will be issued a written commitment letter from the bank. This will state that you as a buyer are preapproved to purchase a home up to x amount with a max loan amount of x. The preapproval will reflect the conditions of the loan, usually pertaining to property (fully executed purchase agreement, preliminary title report and appraisal, among a few other standard conditions).
At this point, you will be armed and ready with this letter to make offers, showing the sellers that you have a loan from a bank backing up your offer.
It is also a good idea to go through the preapproval process before looking at homes because you get to take care of the financial aspect ahead of time, without scrambling and rushing to take care of it while you’re trying to deal with the details of the home situation. Trust me, you’ll have enough to deal with on that end; it will be nice to take care of this ahead of time, while you can do it so that you will feel totally confident in your decision to buy, both practically and emotionally, and without feeling rushed.
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It is much better and much more important to get preapproved. Let me start out with the details of a prequalification first. The first thing you are going to do when you start thinking about buying a home is to call a bank or a mortgage broker to see what you can afford and what you can qualify for. If you were to make this call to me, we would start out with an initial conversation about your goals, your knowledge of the financial aspect of homeownership (if any), and your expectations. At this point, I would then ask you some financial profile-related questions, such as:
After answering these questions, I can run some preliminary qualifying numbers to give you an idea of your total monthly payment responsibility and the max you would qualify for. It is important for you to digest this information carefully: what a bank tells you that you may qualify for will not always be what you will be comfortable paying. Only you can determine what you can handle.
This is the prequalification. Essentially, you have verbally given me information, and based on that information, I ran some numbers for you.
A preapproval goes two steps further. These two steps are crucial to your negotiating power in putting offers on homes. I will explain how a preappoval differs from a prequalification in an upcoming post.
Right now, this is a rumor, but when I hear rumors like this, I’m pretty sure it will happen:
Effective 10.2.09, you will be required to put 15% down on a condo for a conventional loan. FHA loans still allow for the minimum of 3.5% down, but there are stringent development requirements on condominium projects, which makes it very difficult to get a loan through if it is not already FHA-approved. (Also, the seller may flat-out reject your offer if you only qualify for an FHA loan on a condo, since FHA condo requirements are so strict).
As a side note, if you’re seeking information online or from an online bank, make sure that they’re aware of the rules pertaining to the state you are buying in. California is a declining market and thus does not allow for 10% down come October 2nd.
Here are the changes that we’re expecting in the industry in regards to the latest down payment guidelines for conventional loans (FHA remains 3.5% minimum):
Up to $417k Loan Amount:
SFR/PUD: 10% down minimum
Condo: 15% down minimum (effective 10/2/09)
$417k – $729,750 Loan Amount:
SFR/PUD: 15% down payment
Condo: 15% down payment
$729,750+:
SFR/PUD: Call me; there are too many variables for FICO and exact loan amount
Condo: If this is your loan amount range, I hope you’re not in the market for a condo! 
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