Archive for the ‘Income’ Category

If it’s spring, it must be the housebuying season, right?

I know that the calendar says it is spring.  I also know that Easter and Passover are coming weekend. Though, like many others, I just don’t know where the spring weather is!  For those of us in the residential housing game, which each year feels more and more like a Game of Thrones, the spring weather is very important. For sellers and buyers alike, there is a big psychological boost when warm weather finally arrives.  Like the Israelites roaming the desert, the homebuyers are looking for a sign from above that it is time to enter the Promised Land (of homeownership)!

Photo via mypreferredlender.net

I am hoping that we finally get some warm weather next week.  And, while knowing that “hope” is not an effective business strategy, I am still predicting a very strong housing market.   Though the “so called” experts only expect housing prices to rise about 3% over last year’s prices, I think that the increase will be significantly larger. I am expecting the increase to be more like 5%-8% possibly higher.  As for the number of previously owned home sales which decreased to 4.93M nationwide in 2014 from 5.09M in 2013, I see a reversal of this for 2015.  I believe that nationwide we will be slightly above the 5.09M number.

First of all, interest rates have continued to remain low despite the dire predictions for this year. Since rates have actually decreased, not increased since January 1st, home affordability has improved since 2014. With the higher employment numbers so far this year, more people are in a position to buy a home now than they were last year.

In addition, the banks are finally easing up on their credit requirements. In January, the Federal Housing Administration (i.e. FHA) dropped their mortgage insurance rates from 1.35% to .85%. Here is a link to a 2 minute video about this reduction and it’s effect — Changes to FHA Mortgage Insurance Premiums January 2015.  With FHA loans allowing credit scores down to 580, low downpayments (including gifts and up to a 6% seller’s concession); and debt-to-income ratios as high as 55% of gross income (with income from non-occupying co-borrowers included), these loans will enable a lot of people to buy homes.

Other new first time home buyer programs were implemented by Fannie/Freddie which now allow for a 3% downpayment with credit scores as low as 620.  This will allow home buyers with less than $10k down to buy a $300,000 house or apartment!   For more information and for each of their specific program requirements (since they vary slightly), you can view this short You Tube video. — Fannie Mae and Freddie Mac 3% Downpayment for Conforming Loans.

There is also pent up demand for housing. The leading edge of the Millennials, who are now in their early 30s, are being “forced” by demographics, income and family size to purchase homes.  Though they prefer to stay flexible by renting and live in/near cities, like those of us who came before them, there comes a time when practicality and affordability (i.e. realization that you are no longer so young), trumps desire.  For many of the older Millenials, that time is now!

On the other end of the demographics are the folks who are retired or semi-retired and looking to unload the family home that they no longer need. For these people, who held out for higher prices after the housing collapse, housing prices, though not back to 2006 levels, have returned enough for them to consider selling.  The irony is that it is the clash of these two very similar generations, the formerly largest and most selfish generation of Baby Boomers with the (unbelievably) even larger and more selfish Millennials, will together bring back the housing market beginning this year. Their “partnership” will also allow the improvement to continue for the next several years, and probably accelerate as well.

So, there you have it. IMHO, there will be a very strong purchase market this year. But, if this does not occur, I will be back in the fall to tell you why. Since, like the rest of the “so called” experts, if I am wrong, it won’t be my fault. Rather it will be caused by something happening that was unexpected (at least to me)!

If you “like” these monthly posts, PLEASE “Like” my business Facebook page — New York Real Estate Lawyer or subscribe to my mailing list HERE.  Then, check back there often for several posts a day on articles about residential real estate, mortgages, and interest rates.

Happy Easter and Happy Passover to those who celebrate each.

Dan

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Mortgage Checklist Documents

A lot of people have been asking lately what documents they need to provide in order to get approved for a mortgage to buy a house. With this video, we’ll go over the documents that you need to provide the lender to make the mortgage application easier for you and the lender. They fall within basically three different categories.

Watch this video and learn about the requirements and documentations you need to prepare to get a mortgage for that home purchase.

So You Want to Buy a House in 2015 (or Refinance)?

If you are looking at the mild, dry weather this winter and the low interest rates and thinking “We should look into buying a house this year,” then this is for you. Likewise, if you have an interest rate above 4.25%; want to change from a 30 year fixed to a 15 year; have PMI on your loan but an increased house value; have an FHA loan with PMI of 1.35%; or want to convert an ARM to a fixed, this is for you too.

But, in order to get a new loan, there are a few things that you should know.  Though some of them are “self-evident” and would appear to the untrained eye to be common sense, trust me that they are not. I would say “don’t try these at home” but, if you don’t try these you will likely not be able to buy or to refinance your home!  To get a loan you need 3 basic things: good credit, sufficient income/employment and assets.

Credit Items:  If you have a mortgage on your house, pay it on time EVERY month. Just one late payment in any year can disqualify you from getting a loan for 12 months. Similarly, if you carry credit card balances, at least pay the minimum payment when it is due.  Having a late payment on your credit card can drop your score by 20-50 points in the months following that late payment.  To keep your credit score highest, keep the credit card balances to less than 25% of the credit limits. MP900405592

Do not incur additional debt while you are in the loan process.  That means, no new “toys,” furniture, trips, cars etc.  As one client told me when his initial loan approval was subsequently declined for leasing a new car, “you didn’t tell me NOT to lease a car.” So, though I never told him “TO” lease a car, I am telling you now not to do this (or at least not to do it before you check with your lender first).

The credit reports you get from the consumer credit reports are not the same credit reports that lenders use. As a result, the credit scores are generally overstated (sometimes significantly). Do not rely on these when applying for a loan. Have a credit report run by a professional (i.e. as noted above, do not try this at home).

Finally, one of my favorites, do NOT co-sign a loan for anybody at any time (other than student loans for a child). Co-signing is the same as signing as far as the banks are concerned.  If the loan payments are made late, or worse, not at all, it will destroy your credit for a very long time.  As Nancy Reagan would advise “Just say No.”

If you have credit issues, address them up front so they can be explained and dealt with early on.  If they exist, they will come up.  Not only that, but when the tax liens and collection accounts appear, we are not going to believe that “this is the first you are hearing of this.”

I Quit My Job Income/Employment:  Do not change (or worse) quit your job during the loan process (And Yes this happens. And No, it is not an isolated incident). If possible maintain a stable work history in the same job preferably or at least within the same line of work for the two year’s prior to applying for a mortgage loan. While there, find out if your employer has a procedure in place for verifying employment.  A lot of large companies and government entities have an online procedure that requires a code from the employer.

When you are asked to provide all of the pages of your tax returns, do not just send the first two pages or the random pages you feel like sending. We need to see all schedules to determine if there are other properties owned, unreimbursed business expenses, etc. Yes, we know that the tax returns are long yet we still need ALL pages.

If you are self-employed, find out what your tax returns show.  Do not tell us when we inquire about your income, “I don’t know what he (i.e. accountant) puts down.”  I know a lot of accountants and generally (though I won’t swear for all of them), “he puts down” the income and expenses based on the results of your business and the documentation that you provide to him.

Assets:  Cash may be king in life, but not in mortgage lending. All assets that will be used in the purchase of a house need to be located at a financial institution and “seasoned” in the account for at least 2 months.

Writing a Check

If you are getting a gift for some of the downpayment it needs to be from a blood relative. And, the source of the relative’s assets needs to be provided via a copy of their account statement. We understand that your uncle does not want you to see his bank statement. But, by making a gift, those assets are now part of the loan file and they need to be verified like
any other assets.

As with the tax returns, ALL pages of your bank statements mean “All pages.” We are aware that the last few pages may be blank, or contain printed text or have copies of your checks. But, we need these too. While we are at it, do not move money between your accounts without telling us first and unless absolutely needed for the downpayment or closing costs. Otherwise, we will need many more statements and possibly explanations. This applies especially to any large deposits that are made into your account during the two month’s prior to applying for a mortgage loan.

You are now ready to apply for a loan. If you follow the suggestions above, you will avoid 80-90% of the issues that arise during the loan process. Good luck.

Dan

It is Possible to Buy a Home Now with Less than Perfect Credit and a Small Down Payment!

There’s a general feeling in the market that in order to get a mortgage now, a person has to have a credit score over 700 credit score; a very high income and a large down payment.  This can be difficult since the economy is still recovering so that high paying jobs are hard to come by. Also, due to the high cost of living, it is hard to save a lot of money in order to buy a house. But none of that is necessary.  So long as you have a job and a little money saved or available to use from some source, you can buy a home!

bright picture of man holding paper house

There are loans available through Fannie Mae and Freddie Mac, as well as the FHA which require much less of a down payment.

For example, on a Fannie Mae or a Freddie Mac loan you can put down as little as 5%, and on an FHA loan, you can put down as little as 3.5%. In addition, on an FHA loan, you can even get that 3.5% as a gift from a family member, as an advance from your employer and in various other ways. With respect to credit, you don’t need credit scores over 700 to qualify for a loan either. On a Fannie Mae and a Freddie Mac loan, you want to have at least a 660 credit score. On an FHA loan, you can qualify for standard interest rates with a credit score as low as 640.  You can even get an FHA loan, with slightly higher interest rates with credit scores as low as 580.

As for income, Fannie Mae and Freddie Mac are letting people spend up to 45% of their gross monthly income on their mortgage and debt payments. The mortgage part consists of principal and interest on the mortgage; real estate taxes; mortgage insurance (if applicable) and your home insurance. The other debt payments include car loans, student loans, credit cards, alimony and child support and any other debt that is payable monthly. On an FHA loan, we can lend to people who have debt to income ratios as high as 55%. That means 55% of your total gross income can be spent on your debt.

So, if you have a good job, are able to come up with some money for a down payment, you likely will be able to buy a home. Even if you had a bankruptcy, foreclosure or short sale in the past few years you may be eligible.  If you are dreaming of owning your own home, the best thing to do is to contact a reputable mortgage lender to discuss your financial situation.  They will be able to tell you if you can qualify for a loan now or, if not what you may need to do in the near future to make that happen. And, as you can probably imagine, if you do not know a good mortgage lender, I will be happy to refer you to one of the best! 🙂