I have seen estimates stating that 29% of deals that go to contract and require a mortgage, don’t close. That number boggles my mind. It means that even after a buyer and seller come to terms on a sale (not an easy feat these days), 3 out of 10 transactions fall apart. What are some of the more common reasons?
Appraisal issues – In many markets, we are still seeing declining values. Appraisers are in a difficult position, and with so many transactions (including seller’s concessions to assist buyers with closing costs) values aren’t always coming in at sales prices.
Short Sales not being approved by the current lender – With so many sellers owing more than their home is worth, buyers’ proposals need to be sanctioned by the lender (who will be receiving less than they are owed). Some of the offers are too low, but often, the lender isn’t local and they really don’t know what the property is worth today.
Bad pre-approvals from the loan officer – Today, loan officers who are not reviewing tax returns, analyzing bank statements, and asking for detailed explanations and documentation on credit blemishes, are truly hurting the customers. Issuing pre-approvals based on the representations of the customer is reckless and a cause for dismay later.
A lack of transparency – Whether it’s a seller or agent not disclosing property issues, or a buyer trying to sneak things by an underwriter, too many people think they can cut corners. That is not the world we live in anymore. Everything is uncovered. Being honest in the beginning, gives you the best chance to overcome obstacles.
It is clear by the numbers that closing loans can be more difficult today. However, with proper planning and integrity, many of the challenges can be dealt with early and successfully. Agents documenting values of the homes, loan officers doing complete reviews of the loan profile up-front, and everyone telling the truth helps get deals to a successful conclusion and avoids horror stories.
by Dean Hartman on January 26, 2012
Friday, January 27, 2012
Monday, January 23, 2012
10 Surprising Reasons You Can’t Get a Home
Getting a home signifies financial security and an investment for the future. Owning a home is part of the American Dream. There are some surprising reasons why you can’t get a home.
Down Payment – You may have the required 10%-25% on the asking price of the home you are interested in but how you acquired it and how long you’ve had it could keep you from getting the home. Many times relatives offer young couples the down payment. Lending institutions take this into consideration when looking at the ability of a homeowner to keep up with mortgage payments. Saving the down payment over time lends to the credibility of money management.
Credit– Credit history is an ongoing process. Student loans are one of the first obligations a person may have as an adult. Late payments may have a bearing on your ability to acquire a home later in life. Credit scores are also affected by utility payments. Any recurring bill that is paid late may come back to haunt you even though your financial situation is now more sound. Your debt to income ratio ideally needs to be under 45%. Less than a 3 month asset reserve in a bank account will generally keep you from getting a home. Check your credit score with all 3 agencies and make sure there is nothing being reported incorrectly. You need to aim for a score of 660 or better.
Job Security – Your job history may be why you can’t get a home. Lenders look for stability. If you jump from job to job, regardless of monetary or career improvement, lenders see you as a financial risk. When the economy takes a downward turn, employers tend to retain employees with seniority. Also taken into consideration is the risk of the job.
Parent History – If your parents have a questionable credit history, you may be dealing under their shadow. If parents foreclosed, you may be affected. If they were late with mortgage or credit card payments, you may be looked upon as having the same traits. If you are asked information on parent particulars, you may need to look elsewhere for home financing.
Location – The location of a home may affect whether or not a lender is willing to risk mortgaging it. LNG routes, Super Site areas, fault lines, destructive weather patterns all have bearings on mortgage risks lenders are willing to take on.
Inspection – More and more, home inspections are being required to seal the closing deal. Hopes have been dashed to learn major expenses must be incurred to pass inspection for the approval of the sale.
Condition – Fixer-uppers may offer pricing that appears affordable. If you have no background of construction or home improvement projects completed, lenders are leery to finance such undertakings. They may require a lump sum amount be in an account to cover the improvements necessary to ensure the property does not result in a loss to the lender.
Liens – If you owned property before and were subject to liens for unacceptable reasons such as credit card debt or unpaid taxes, you may not get the home you desire. A current homeowner may also have substantial liens that need to be satisfied at closing either from the sale itself or as additional costs to the buyer.
History – The history of the home may be the deciding factor that keeps a lender from financing in your behalf. A murder, haunting, nearby sinkhole, or other less favorable activity, bear upon the lender’s willingness to finance such a home.
The Bank – Economic conditions and bank lending history may be the reason you can’t get a home. Banks may be leaning toward only very secure clients to up their lending credibility. If a bank turns you down, look to other options before you decide to settle on thinking you can’t get a home. FHA, VHA, or a first time buyer program offer other alternatives for which you may qualify.
If you can’t get a home loan with one lender, chances are good that another institution will also turn you down. You should take some time and work at increasing the good points that will work in your favor. Try again when your situation has improved.
by Ann Douglas
Down Payment – You may have the required 10%-25% on the asking price of the home you are interested in but how you acquired it and how long you’ve had it could keep you from getting the home. Many times relatives offer young couples the down payment. Lending institutions take this into consideration when looking at the ability of a homeowner to keep up with mortgage payments. Saving the down payment over time lends to the credibility of money management.
Credit– Credit history is an ongoing process. Student loans are one of the first obligations a person may have as an adult. Late payments may have a bearing on your ability to acquire a home later in life. Credit scores are also affected by utility payments. Any recurring bill that is paid late may come back to haunt you even though your financial situation is now more sound. Your debt to income ratio ideally needs to be under 45%. Less than a 3 month asset reserve in a bank account will generally keep you from getting a home. Check your credit score with all 3 agencies and make sure there is nothing being reported incorrectly. You need to aim for a score of 660 or better.
Job Security – Your job history may be why you can’t get a home. Lenders look for stability. If you jump from job to job, regardless of monetary or career improvement, lenders see you as a financial risk. When the economy takes a downward turn, employers tend to retain employees with seniority. Also taken into consideration is the risk of the job.
Parent History – If your parents have a questionable credit history, you may be dealing under their shadow. If parents foreclosed, you may be affected. If they were late with mortgage or credit card payments, you may be looked upon as having the same traits. If you are asked information on parent particulars, you may need to look elsewhere for home financing.
Location – The location of a home may affect whether or not a lender is willing to risk mortgaging it. LNG routes, Super Site areas, fault lines, destructive weather patterns all have bearings on mortgage risks lenders are willing to take on.
Inspection – More and more, home inspections are being required to seal the closing deal. Hopes have been dashed to learn major expenses must be incurred to pass inspection for the approval of the sale.
Condition – Fixer-uppers may offer pricing that appears affordable. If you have no background of construction or home improvement projects completed, lenders are leery to finance such undertakings. They may require a lump sum amount be in an account to cover the improvements necessary to ensure the property does not result in a loss to the lender.
Liens – If you owned property before and were subject to liens for unacceptable reasons such as credit card debt or unpaid taxes, you may not get the home you desire. A current homeowner may also have substantial liens that need to be satisfied at closing either from the sale itself or as additional costs to the buyer.
History – The history of the home may be the deciding factor that keeps a lender from financing in your behalf. A murder, haunting, nearby sinkhole, or other less favorable activity, bear upon the lender’s willingness to finance such a home.
The Bank – Economic conditions and bank lending history may be the reason you can’t get a home. Banks may be leaning toward only very secure clients to up their lending credibility. If a bank turns you down, look to other options before you decide to settle on thinking you can’t get a home. FHA, VHA, or a first time buyer program offer other alternatives for which you may qualify.
If you can’t get a home loan with one lender, chances are good that another institution will also turn you down. You should take some time and work at increasing the good points that will work in your favor. Try again when your situation has improved.
by Ann Douglas
Tuesday, January 10, 2012
When the Prophet Says Buy – BUY!
John R. Talbott, previously a Goldman Sachs investment banker, is a bestselling author and economic consultant. When it comes to the housing market he is also a prophet. When housing prices started to skyrocket in 2003, he published The Coming Crash in the Housing Market correctly warning us that a real estate bubble was forming. Then in January 2006, he called the absolute peak of home prices in the US by releasing a new book, Sell Now! The End of the Housing Bubble.
Mr. Talbott, the person who accurately predicted the housing bubble and its bust, now has a new prediction – IT IS THE TIME TO BUY A HOME! In a recent article, Homes – Buy Now!, Talbott simply explains:
“I have been waiting for more than five years to offer this advice. It is now time in most cities across the country to buy a new home or refinance your existing home with thirty-year fixed rate mortgage debt.”
He goes on to explain that his conclusion is based on four different metrics, all of which favor buying today:
Home Prices Relative to Peak Prices During the Bubble
Home Prices Relative to Construction Costs or Replacement Costs
Home Prices Relative to Incomes and Rents
Home Prices in Real Terms, Not US Dollar Terms
Bottom Line -If the person who called the real estate bubble and its bust says now is the time to buy, we believe it is time to buy.
by The KCM Crew
Mr. Talbott, the person who accurately predicted the housing bubble and its bust, now has a new prediction – IT IS THE TIME TO BUY A HOME! In a recent article, Homes – Buy Now!, Talbott simply explains:
“I have been waiting for more than five years to offer this advice. It is now time in most cities across the country to buy a new home or refinance your existing home with thirty-year fixed rate mortgage debt.”
He goes on to explain that his conclusion is based on four different metrics, all of which favor buying today:
Home Prices Relative to Peak Prices During the Bubble
Home Prices Relative to Construction Costs or Replacement Costs
Home Prices Relative to Incomes and Rents
Home Prices in Real Terms, Not US Dollar Terms
Bottom Line -If the person who called the real estate bubble and its bust says now is the time to buy, we believe it is time to buy.
by The KCM Crew
Wednesday, January 4, 2012
5 Real Estate Trends to Look For in 2012
Predicting trends during the most volatile housing market in American real estate history is no easy task. We strongly believe these are the five real estate items we should keep an eye on in 2012:
1. Buyers Will Return
In 2011, a lack of consumer confidence in the overall economy dramatically impacted the housing market. Buyers were afraid to make a purchasing decision on any big ticket item. By the end of 2011, consumer confidence began to return and sales increased. Economic conditions will continue to improve throughout 2012 and consumer sentiment will solidify. Once that happens, home buyers will realize that now is the time to buy.
2. Foreclosures Will Increase
The ‘shadow inventory’ of foreclosures which has been growing since the robo-signing challenges of late 2010 will finally be introduced to the market. Distressed properties sell at discounted prices. They will impact the housing values of the non-distressed homes in the area.
3. Prices Will Soften
As more and more foreclosures come to market, there will be greater downward pressure on the values of houses in the region. Foreclosures impact values of non-distressed properties in two ways:
They will eat up some of the buyer demand in the market.
They will impact the appraisal on ALL transactions in the area.
4. Short Sales Will Increase
As mentioned above, we strongly believe that home prices will soften through at least the first half of 2012. Falling prices will force more homeowners into a position of negative equity. Negative equity is one of the triggers that cause people to strategically default on their mortgage obligations. If this happens, there could be an increase in the number of foreclosures. However, we predict that banks will take preventative measures which will help many of these homes avoid foreclosure by easing the requirements in the short sale process for both homeowners and real estate professionals.
5. Great Agents Will Be VERY Successful
Real Estate professionals who have invested the money, time and energy to truly understand what is happening and why it is happening will separate themselves from their competition and do very well this year.
Those who take that next step of learning how to simply and effectively communicate the market to their clients will be seen as industry leaders. These experts will dominate their markets.
1. Buyers Will Return
In 2011, a lack of consumer confidence in the overall economy dramatically impacted the housing market. Buyers were afraid to make a purchasing decision on any big ticket item. By the end of 2011, consumer confidence began to return and sales increased. Economic conditions will continue to improve throughout 2012 and consumer sentiment will solidify. Once that happens, home buyers will realize that now is the time to buy.
2. Foreclosures Will Increase
The ‘shadow inventory’ of foreclosures which has been growing since the robo-signing challenges of late 2010 will finally be introduced to the market. Distressed properties sell at discounted prices. They will impact the housing values of the non-distressed homes in the area.
3. Prices Will Soften
As more and more foreclosures come to market, there will be greater downward pressure on the values of houses in the region. Foreclosures impact values of non-distressed properties in two ways:
They will eat up some of the buyer demand in the market.
They will impact the appraisal on ALL transactions in the area.
4. Short Sales Will Increase
As mentioned above, we strongly believe that home prices will soften through at least the first half of 2012. Falling prices will force more homeowners into a position of negative equity. Negative equity is one of the triggers that cause people to strategically default on their mortgage obligations. If this happens, there could be an increase in the number of foreclosures. However, we predict that banks will take preventative measures which will help many of these homes avoid foreclosure by easing the requirements in the short sale process for both homeowners and real estate professionals.
5. Great Agents Will Be VERY Successful
Real Estate professionals who have invested the money, time and energy to truly understand what is happening and why it is happening will separate themselves from their competition and do very well this year.
Those who take that next step of learning how to simply and effectively communicate the market to their clients will be seen as industry leaders. These experts will dominate their markets.
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