Residential Purchase - The Mortgage Porter

Seattle Area Rent vs Buy Ratio

April 22, 2010 by Rhonda Porter Leave a Comment

Chris Lodge, Property Information Manager at The Talon Group double checks some stats that the NY Times have came up with regarding home ownership in the Seattle area which is being picked up by the media. From Chris:

I've long championed the idea that local news and data is more valuable than what the national news gives us. So when a client of mine sent this New York Times article over to me, it definitely piqued my interest. The headline , "In Sour Home Market, Buying Often Beats Renting", is a great attention grabber for sure.

Do they believe that Seattle is a good place to buy?

Chris has done some research on his own which provides different stats, read his article and data on Talon Blog by clicking here.

If you would like a free rate quote, to compare to what you're paying in rent, for a home in Washington, click here.

Filed Under: Residential Purchase, Title Insurance

What Should a Preapproval Letter Contain?

April 21, 2010 by Rhonda Porter Leave a Comment

This isn’t the first time I’ve written about preapproval letters at The Mortgage Porter…however it has been a while and I would say that with all the changes in the mortgage industry, your preapproval letter is more important than ever. Most Seattle area real estate agents will not accept an offer on a home that’s listed for sale without a bona fide preapproval letter.

Preapproval letters may vary in appearance and content from lender to lender. Some mortgage companies may have different protocal for when a preapproval letter may be issued. When I provide a preapproval letter, it means that I have a complete loan application, most likely with exception to the property address since the home buyer has not yet identified a home. It also means that the home buyer (i.e. borrower) has provided me all the necessary documenation that supports or backs up the information that has been provided on the loan application, such as

income documenation (to make sure they qualify for the proposed montly mortgage payment)
assets (at minimum, enough to cover the down payment and closing costs)
credit report…everything seems to be based on your credit score from potential interest rates to what you qualify for. This is something that we need to pull if you are interested in obtaining an actual preapproval.

A good preapproval letter should address all of these items so that the seller and the real estate agents know how qualified the home buyer is. This is done in a manner in which not to violate the buyers privacy. For example, a seller or real estate agents should not see the buyers income, assets and credit scores. If a buyer wants to share that information with someone other than their mortgage professional, it is up to them! Instead, the preapproval letter will address that these items have been reviewed and are acceptable.

For example, I might include something like this in a preapproval letter:

This preapproval is due to your job stability and excellent credit. Funds to close this transaction are from your personal savings and a seller contribution in the amount of $5,000.

You can see that I have addressed income, assets and credit in this paragraph.

My preapproval letter also includes program type, the sales price and loan amount. Every so often I’ll have a real estate agent want me to leave the sales price blank. This is something that we can do IF the borrower has substantial cash reserves. I’ve found that some home buyers would rather not have their preapproval letters written this way…and I’m happy to provide several preapproval letters with staggered sales prices (as long as the borrower has documented the funds for down payment and closing costs).

You may find a total mortgage payment on a preapproval letter. This is because borrowers are qualified by their mortgage payment since loans have a certain allowed debt to income ratio. If a borrower is a little pushed with their ratios and they find a home within the sales price and loan amount they are preapproved for, but the property taxes or home owners insurance are higher than estimated or mortgage rates climb higher than what they were approved at, you no longer have a preapproved buyer. Whether or not your mortgage originator includes what payment you’re preapproved for, it’s important to ask.

Any conditions to the loan approval should be included on the preapproval letter. Standard conditions on our preapproval letter may include:

satisfactory purchase and sales agreement
satisfactory title commitment
subject to appraisal
subject to changes to financial situation as disclosed on the loan application (i.e. changes in your employment, debts or assets may jeopardize your preapproval status).

Preapproval letters may also have an expiration date. Before our current lending environment, preapproval letters would be valid for a longer period of time. Now credit reports and other supporting documentation “expire” earlier. Should your preapproval letter expire, they’re typically easy to update by just supplying your latest supporting documentation (paystub, bank statement, etc).

The letter should have a date and be signed by whomever prepared the letter with their contact information.

When I prepare a preapproval letter for someone who’s buying a home located in Washington, at the very least, they have gone through preliminary underwriting. If a mortgage originator has not obtained your documentation or if you have not completed a loan application, you are probably just prequalified and not preapproved.

With HUD’s new Good Faith Estimate, unless you have a property address, you may not receive a good faith estimate with your preapproval letter. This is a glitch with RESPA that I hope HUD finds a way to correct. Even HUD admits that if a mortgage professional provides a good faith estimate without a property address, they’re doing so at great risk (due to the financial liabilities packed in the new Good Faith Estimate). Your mortgage professional can provide you with a “work sheet” until you have a transaction (property address).

If you are shopping for a home anywhere in Washington state, I’m happy to help you become preapproved.

15 Days Remaining for the Home Buyer Tax Credit

April 15, 2010 by Rhonda Porter Leave a Comment

NOTE: this is a post from 2010 and this tax credit is no longer available.

If you are planning on taking advantage of the home buyer tax credit, either as a first time home buyer or a "repeat" home buyer (aka "long time resident"), you have fifteen days to be in a binding sales contract with mutual acceptance. This means that both you and the seller have ironed out the negotiations which can sometimes take a few days to agree on…so in reality, you probably have less than 15 days unless you submit the "perfect" offer to the seller and they decide to accept it with no counter offers.

If you are hoping to claim the home buyer tax credit, you should check in with your mortgage professional to make sure that your preapproval is still valid. In the Seattle-Bellevue area, listing agents and sellers expect a preapproval letter to accompany the purchase and sale agreement before they will consider the offer.

Preapproval letters may expire if your paystubs, bank statements or credit report are outdated. The terms stated on the preapproval letter should match with the terms of the offer being presented to the seller. Mortgage rates have been volatile and if your debt to income ratios were "pushed" to the limit, you may or may not be qualifed for what you once were.

If your offer is countered past April 30, 2010 because you didn't have all your ducks in a row with your lender, you may not qualify for the home buyer tax credit.

And before you try to get into a mutual contract before the deadline–it's a good idea to make sure that you actually qualify for the tax credit.

You may be disqualified from the home buyer tax credit if:

the government has deemed you make too much money–modified adjusted gross incomes up to $125,000 for a single taxpayer, or $225,000 joint, qualify for the full credit. Those with MAGI up to $145,000 for a single taxpayer and $245,000 joint qualify for reduced credit.
if the purchase price is over $800,000 (better write that offer for $799,950 if your income qualifies).
if the home being purchased is not going to be your primary residence.
family members are not eligible (you cannot buy the home ancestors or dependents)
if the contract is accepted after April 30, 2010
if the transaction is closing after June 30, 2010

Remember, I'm your mortgage expert for homes located in Washington. I am not a tax expert–please consult your CPA or tax advisor for more information.

Filed Under: Current Affairs, First Time Home Buyer, Legislation, Residential Purchase

Why It Pays to Get Preapproved Early: You May Think You Know Your Credit Score

April 7, 2010 by Rhonda Porter Leave a Comment

I recently met with a couple who had relocated to the Seattle area and were ready to make an offer on a home. They’re very qualified with their income stability and enough savings to put a twenty percent down payment on their next home. What surprised them was the credit report. [Read more…]

Filed Under: Credit Scores and Reporting, Refinance, Residential Purchase Tagged With: credit scores, preapproval

Claiming Your Home Buyer Tax Credit

January 28, 2010 by Rhonda Porter Leave a Comment

April 15th will be here before we know it and many are preparing for filing their income tax returns. If you are planning on claiming the home buyer tax credit (up to $8,000 for a first time home buyer or $6,500 for a repeat/long-time resident home buyer) there are some things you need to know as far as what the IRS will require.

First of all, you will not be able to e-file if you're claiming the home buyer tax credit. This is because the IRS is requiring supporting documentation due to all the fraud that transpired previously with the first time home buyer tax credit. So along with Form 5405, you may also need to send the following when you submit your return to the IRS:

a copy of your HUD-1 Settlement Statement with signatures of both parties (your autographs and the Seller's). In Washington State, this is something you receive from your escrow company.

If you're claiming the tax credit as a "long time resident" home buyer (meaning you've owned and occupied your previous residence for any 5 consecutive year period during the 8 year period ending on the purchase date of your new home), in addition the the Settlement Statement, you will also need to provide the IRS one of the following:

Form 1098 or Mortgage Interest Statement
Property Tax Records
Home owner insurance records

The IRS is requiring this documentation to prove you owned and occupied your home for a minimum of five out of eight years. And per their instructions:

"These records should be for 5 consecutive years of the 8 year period ending on the purchase date of the new home."

Be sure to review the IRS Instructions for Form 5405 for more information and please consult with your tax professional to make sure you qualify. My specialty is helping Washington State residents with their residential mortgage needs…not income taxes!

If you are considering buying a home and taking advantage of the first time or repeat (long time resident) home buyer tax, you only have about three months left. You must have a binding contract (signed purchase and sales agreement) by April 30, 2010 which must close by June 30, 2010.

Filed Under: First Time Home Buyer, Residential Purchase