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It appears that the current Tax Credit provided for First Time Home Buyer's will likely be extended with revised conditions.

The proposed deal (which is still subject to change) would extend the tax credit until April 30,2010 and also expand it to “move up” borrowers.

Details of the revised homebuyer credit reportedly are as follows:

• Credit is changed to 10% of sales price up to $7290
• For first time homebuyers, the income level to qualify is $ 75,000/150,000.
• For “move up” buyers the income level to qualify is $ 125,000/250,000.
• For “move up” buyers, they must have been residing in their primary residence for 5 years.
• The credit runs from Dec. 1, 2009 to April 30, 2010.
• Sales contracts signed as of April 30, 2010 would have 60 days to close. 

Extension of Temporary Higher Mortgage Limits

It appears that we are also getting closer to extending the current temporary increase in FHA & GSE mortgage limits for another year. Hopefully, this legislation will also be passed in the next week or so.

As I hear many real estate agents (buyer agents & seller agents) discussing how their clients mortgage pre-approval was useless but necessary, I thought I should elaborate on what should be a customary practice for all lenders. 

Unfortunately, this process is not widely regulated among lenders.  In fact many loan officers and mortgage brokers will provide a pre-approval letter to their clients without properly qualifying them.  This can be a recipe for disaster!  There are many factors that are not verified during the application of a borrower.  Yes, many questions are asked during the process, but what a borrower tells the mortgage representative versus the factual information sometimes varies. 

Most lenders will issue the pre-approval after a 1003 (mortgage application) has been recieved, credit pulled and run through an automated underwriting system.  The AUS (automated underwriting system) decision is only as good as the data input on the 1003 by the mortgage rep.  If the mortgage rep doesn't understand how to identify potential red flags in the application, you could end up with several un-happy people involved in the process.

Some of the issues that could be mis-represented are: income, assets, down payment amounts, earnest money, fair market value of appraisals, debt-to-income ratios, closing costs, interest rates, etc.  This doesn't even include errors reported by credit bureaus or errors in the application not picked up by the underwriting system.

It is my practice to take as complete an application as possible and then verify the data by requesting the necessary documentation to process the loan before providing a pre-approval letter.  Though this will never uncover all issues that could show up during the process, it greatly reduces mis-communications and inaccurate information.  A thorough and complete application helps the borrower understand what is necessary to complete the transaction and makes the process much easier to close.

Economic Report Data for Next Week

Tuesday: Consumer Confidence, Durable Orders & Treasury auctions.

Wednesday: New Home Sales & Treasury auctions. 

Thursday: Revised second quarter Gross Domestic Product (GDP) & Treasury auctions. 

Friday: Core PCE inflation data & Personal Income.

As I talk to dozens of people each day, the first question is always the same... "What are rates doing?"

I always find this the best time to educate my borrowers on recent trends and try to provide some insight.  Rates change with the market and several other factors.  They may change daily, several times a day, or not at all.  They typically seem to increase toward the end of the week and close of markets and drop again slightly at the beginning of the next week.  Of course, any market news can instantly cause investors to react and mortgage rates to fluctuate.

The next question is, "When can I lock my rate?" or, "I'm going to wait for rates to come down."  OK, but keep in mind when rates drop, they may not stay at that point very long.  In order for me to lock an interest rate, I need to have an application and a file in underwriting.  I can do this very quickly but it depends on the borrowers availability.  Rates may drop and by the time the application is recieved & submitted that rate could be long gone.

Please call/email me for more information.