Are First Time Home Buyers Missing Out?

December 11, 2012 by Leave a Comment

A recent survey shows that those buying their first home are making up a smaller percentage of home buyers. From US News:

The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, released last week, found that first-time home buyers were purchasing only 34.7 percent of the homes sold in October. That’s down from 37.1 percent in September, and is the lowest percentage ever recorded by the survey.

This decline surfaces as purchases of non-distressed homes—houses that are not in foreclosure—have increased dramatically in 2012. The report shows that the vast majority of the homes being sold are regular purchases—accounting for 64.7 percent of all houses sold in October, up from 55.7 percent in February. The increase is a sign of strength in the housing market, as fewer people are buying homes in foreclosure.

The article continues to speculate that part of the reason why first time home buyers are not participating as much as other buyers is partly due to tightening underwriting guidelines. If someone has been considering buying their first home, I highly recommend they get started with the pre-approval process early. 

Lenders want to avoid another mortgage meltdown and want to make sure that borrowers qualify for the new mortgage. That might sound like a silly or obvious comment, however during the “subprime era” many home buyers did not qualify for the mortgage. Ultimately, underwriting guidelines are intended to measure a borrowers capability to repay the mortgage and to not have the home become a “distressed property”. 

Underwriters are looking for a borrowers financial strengths and weaknesses when reviewing an application for a mortgage. In an article I wrote a few years ago, I compared this to a chair with each leg of a chair representing a financial quality that underwriters consider: credit, employment, income and assets.

First time home buyers don’t need to be discouraged, they do need to be prepared. Mortgage rates are extremely low making this a great opportunity to buy if one wants to.

I’ll share some tips on what first time home buyers can do in a follow-up post.

Stay tuned!

Filed Under: First Time Home Buyer, Residential Purchase Tagged With: , ,

What Do You Need for a Preapproval?

February 16, 2012 by 5 Comments

preapprovalIf you’re considering buying a home, many real estate agents and/or sellers will require a preapproval letter. A preapproval letter is different than being “prequalified”. Being prequalifed means that you have provided verbal information to a mortgage originator to get an idea of what you qualify for. Being preapproved means that you are providing documentation that supports the information you have provided. Income, employment, assets and credit are verified for a preapproval.

Some preapproval letters aren’t worth the paper they’re written on. Especially if the mortgage originator you’re working with does not require supporting documentation before preparing the letter. If you have not provided supporting documentation (listed below) to your mortgage originator – you’re probably just prequalified and not actually preapproved.

Here is a list of documents you may be required to provide in order to obtain a preapproval:

[Read more…]

Filed Under: First Time Home Buyer, Residential Purchase, The Mortgage Process Tagged With: , , , , , , ,

FHA Loan Limits for homes located in Washington State for November 18, 2011 and 2012

December 5, 2011 by Leave a Comment

A few days ago, HUD confirmed the 2012 FHA Mortgage limits which have been restored to the higher “temporary” higher loan limits effective November 18, 2011. This morning, HUD’s site is reflecting the revised loan amounts.   

Here are the 2012 FHA loan limits which are retroactive for case numbers obtained November 18, 2011 or later for homes located in Washington:

King County, Snohomish County and Pierce County

  • 1 Unit: $567,500
  • 2 Unit: $726,500
  • 3 Unit: $878,150
  • 4 Unit: $1,091,351

Benton and Franklin Counties:

  • 1 Unit: $275,000
  • 2 Unit: $352,050
  • 3 Unit: $525,550
  • 4 Unit: $528,850

Chelan and Douglas Counties:

  • 1 Unit: $342,700
  • 2 Unit: $438,700
  • 3 Unit: $530,300
  • 4 Unit: $659,050

Clallam County:

  • 1 Unit: $384,100
  • 2 Unit: $491,700
  • 3 Unit: $594,350
  • 4 Unit: $738,650

Clark and Skamania Counties:

  • 1 Unit: $418,750
  • 2 Unit: $536,050
  • 3 Unit: $648,000
  • 4 Unit: $805,300

Island County:

  • 1 Unit: $381,250
  • 2 Unit: $488,050
  • 3 Unit: $589,950
  • 4 Unit: $733,150

Jefferson County:

  • 1 Unit: $437,500
  • 2 Unit: $560,050
  • 3 Unit: $677,000
  • 4 Unit: $841,350

Kitsap County:

  • 1 Unit: $475,000
  • 2 Unit: $608,100
  • 3 Unit: $735,050
  • 4 Unit: $913,450

Kittitas County:

  • 1 Unit: $328,750
  • 2 Unit: $420,850
  • 3 Unit: $508,700
  • 4 Unit: $632,200

Mason County:

  • 1 Unit: $310,000
  • 2 Unit: $396,850
  • 3 Unit: $497,700
  • 4 Unit: $596,150

San Juan County:

  • 1 Unit: $593,750
  • 2 Unit: $760,100
  • 3 Unit: $918,800
  • 4 Unit: $1,141,850

Skagit County:

  • 1 Unit: $373,750
  • 2 Unit: $478,450
  • 3 Unit: $578,350
  • 4 Unit: $718,750

Thurston County:

  • 1 Unit: $361,250
  • 2 Unit: $462,450
  • 3 Unit: $559,000
  • 4 Unit: $694,700

Whatcom County:

  • 1 Unit: $375,000
  • 2 Unit: $480,050
  • 3 Unit: $580,300
  • 4 Unit: $721,150

Adams, Asotin, Cowlitz, Ferry, Garfield, Grant, Grays Harbor, Lewis, Lincoln, Okanogan, Pacific, Pend Oreille, Spokane, Stevens, Whakiakum, Walla Walla, Whitman and Yakima Counties:

  • 1 Unit: $271,051
  • 2 Unit: $347,009
  • 3 Unit: $419,425
  • 4 Unit: $521,250

Related post:

2012 Conforming Loan Limits

Filed Under: FHA, First Time Home Buyer Tagged With: ,

How Disputes on Your Credit Report May Impact Obtaining a Mortgage

October 20, 2011 by 1 Comment

Reviewing your credit report and disputing information that is being wrongly reported about you is your right under the Fair Credit Reporting Act. Obtaining your credit report and making sure that it’s accurate is financially responsible and your duty to protect your credit. And the Federal Trade Commission provides you tips on how to dispute items on your credit report.  Did you know that lenders may not accept a credit report where it indicates there is a disputed item? 

It doesn’t matter if you have perfect credit or a low loan to value, Fannie Mae and Freddie Mac guidelines are forcing lenders to provide a credit report without disputes. I’ve recently had transactions where the borrower doesn’t recall disputing anything and the debtor doesn’t have record of the dispute yet this “dispute” needs to be removed from the credit report or the lender/bank will not accept the loan. This is one reason why anyone considering a mortgage for refinancing or purchasing a home should obtain a copy of their credit report very early on. It can take a great deal of time to have disputes removed if a borrower does this on their own.  

The other option is for a “rapid rescore” which whittles down the process to days. The irony in this is that rapid rescore is not free and it is the credit bureaus and reporting agencies who profit when this service is done – I really have a problem with this when my client and the creditor state there are no disputes of record yet somebody has to pay to have these items quickly removed to accommodate a closing date. Often times, the lender absorbs the cost of the rapid rescore however this eventually drives up the overall cost of doing business and eventually, the consumer pays.

In my opinion, this is something that Fannie Mae and Freddie Mac need to change pronto. Well qualified borrowers should not have to go through these hoops or have their mortgage denied. A simple written letter of explanation signed by the borrowers and possibly the creditor *should* suffice instead of requiring the credit report not show any sign of a dispute. Apparently back in 2009, Fannie was reviewing their policy however, I’m not aware of any significant changes.  

If our government wants to help the housing industry and our economy, this practice needs to stop now.

Filed Under: Credit Scores and Reporting, First Time Home Buyer, Rant Tagged With: , , , ,

The Low Down: Comparing FHA to Fannie Mae Homepath Mortgages

September 13, 2011 by Leave a Comment


EDITORS NOTE: Fannie Mae is no longer offering the FannieMae HomePath mortgage program. If you are considering buying a Fannie Mae HomePath property (foreclosure that is owned by Fannie Mae) in Washington state, I’m happy to help you. 

If you’re thinking about buying a home with minimum down payment requirements in the greater Seattle area, you may be considering a property that is owned by Fannie Mae and eligible for the Fannie Mae Homepath Mortgage or using an FHA insured loan which most properties qualify for.  When home buyers contact me about a Fannie Mae Homepath mortgage, they often ask how it compares to an FHA insured loan. Both are great programs and the benefits may vary depending on credit score, down payment and the type of property.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Homepath, Residential Purchase Tagged With: , , ,

Shallow Credit can leave you in the Deep End when Qualifying for a Mortgage

August 5, 2011 by 2 Comments

Shallowcredit When in comes to qualifying for a mortgage, lenders are generally looking for borrowers who have established a history of paying their obligations on time. Ideally this would consist of four accounts that have been open and used for the last one to two years.  When someone does not have active accounts, or when their accounts are all new, their credit history appears “shallow” to some lenders. [Read more…]

Filed Under: Credit Scores and Reporting, First Time Home Buyer Tagged With: , , ,

How much can Sellers contribute towards Closing Cost?

May 12, 2011 by 10 Comments

If negotiated in your purchase and sales agreement, a Seller may agree to chip in towards some or all of your bona fide closing costs, prepaids and reserves.  They cannot contribute towards your down payment.  The amount the seller can contribute varies depending on the program type and the amount of home buyer’s down payment. The percentage is based on the sales price and if the credit exceeds the closing cost, the mortgage originator can often use it towards discount points to buy down the interest rate.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Underwriting and Qualifying, USDA, VA Mortgage Loans Tagged With: , , , , , , ,

Fannie Mae’s HomePath Program

October 15, 2010 by Leave a Comment

EDITORS NOTE: Fannie Mae is no longer offering the FannieMae HomePath mortgage program. If you are considering buying a Fannie Mae HomePath property (foreclosure that is owned by Fannie Mae) in Washington state, I’m happy to help you.

Fannie Mae’s HomePath program is available to purchase qualified foreclosed homes (owned by Fannie Mae) with expanded conventional guidelines, competitive mortgage rates and often times, with special incentives.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, First Time Home Buyer, Homepath, Investment Property, Residential Purchase Tagged With: , , ,
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