The one thing I’ve always loved about VA loans is how every unique guideline is designed to benefit the veteran.  More information regarding these benefits can be found on a related blog post here.  Many of my colleagues who do home loans prefer not to do VA loans due to the complexity of the guidelines.

I’ll be the first to admit that VA loans are different.  They’re designed for a niche market and requires a fair amount of training to be an expert, but it’s nice to see that our government is always looking out for those who look out for us.

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As the First Time Home Buyer tax credit comes to an end, it seems as though home buyers are taking longer to find a home that suits their needs. One may call it an issue of supply and demand, however, most are calling it “My Realtor sucks!”

Just like early 2007, real estate was booming at an astronomical pace. Mortgage and real estate firms were opening their doors faster than they could imagine because there was an oversupply of qualified buyers (via SubPrime) and  an oversupply of sellers cashing out on their home’s appreciation. This “oversupply” basically gave any Realtor enough business to make it a full time career, however, do you remember what happened after the market collapsed? Yup, ghost town baby!

So with the extended tax credit enticing more buyers to buy and more sellers to sell, we are having more Realtors enter the market like before.

What to Look For

If you are in the market to buy a home, or any product for that matter, it is very important to interview who you are hiring to represent your best interests. Here’s a couple of good questions to ask the Realtor you are wanting to help you find your dream home:

• How long have you been a Realtor?
• Are you full time or part-time?
• How is your current work load?
• What are you specialized in? (if they say everything, not a good sign)
• How long are you seeing homes on the market in “x” area?
• What’s your best and worst attribute?

These are just a couple things to ask, but remember, its an interview, so feel free to fire away! It is crucial that you work with someone that is good at what they do. You would think this goes without saying, but so many people work with “Uncle Bobs sister’s uncle’s FedEx guy” just because a family or a friend referred them.

A referral is great because it usually means they have done a great job for someone, but that doesn’t necessarily mean they will do a good job for you and your specific situation. Just like people shop loan officers, you should shop Realtors as well. Would you hire a Foreclosure Expert to find you a luxury home? Most likely not.

An Added Cost You May Not Be Aware Of

Choosing the wrong Realtor can definitely cost your more than you expect if you’re not careful. Finding a home is one thing, but determining your needs and negotiating the terms is where these folks earn their money. Anyone can plug away at a sales price, area, and send you a list of homes (whoop-dee-freakin-doo), however narrowing that search down to what’s specifically in YOUR interests, and getting it to you at the price you want to pay is where a rookie Realtor will fail, and an expert will excel.

Most buyers see the $8,000 Tax Credit at the end of the tunnel, but it blinds them way too soon. They don’t take into consideration what they can LOSE if they are not working with an experienced Real Estate Team (Realtor and loan officer).

You have:

• Earnest Money
• Option Fees
• Appraisals
• Inspections
• Termite Reports

This stuff can add up really quick, and if there’s a glitch in negotiations, time lines, or financing, you might as well put some rosy red lipstick on and kiss that money goodbye!

Remember, there’s no reason to settle for less than the best when you have more than enough selection out there right now!

What a long strange trip it has been, indeed. Not the least of which included the evaporation of mortgage insurance coverage for loans above 80% loan to value (LTV). Further crippling the already dazed market mortgage insurers began eliminating coverage plans for the majority of loans, not only non-coventional (aka sub-prime) , but for stronger borrowers with good credit and employment histories looking to make less than a 20% down payment.

In a sign things may just be looking up, at least sometime in the relatively near future, mortgage insurance companies such as United Guaranty, have begun loosening their very tight restrictions at least on some loan programs.

Included in the betterment are loan up to 97% flex in stable markets to borrowers with a 700 or higher middle credit score. Before the nay saying begins consider the reasons this is good for the housing market and the US economy and, more importantly, why it has been needed for several months. The home seller, for example, who may be transferring to a new market for their career may have sold their existing home with a huge loss of equity or may even have had to dip into their savings to pay the difference between the sales price and their existing home mortgage. Obviously this leaves a very stable and credit worthy home buyer in the shadows if they intend to purchase in their new location.

Buyers who exhibit a long history of good credit decisions and who may have assets but do not want to remove them from higher yield investments are perfect fits for higher LTV loans even in this still uncertain market. Though we are facing yet another round of defaults and foreclosures due to resetting rates on conventional mortgages the insurers have some sense of certainty we are at or near the bottom.

USDA Rural Home Loans are one of the most popular programs available! They are 10%, no money down loans and require no monthly Mortgage Insurance… but there are a couple of “tricks” to obtaining these loans!

You must meet the Maximum Income Requirements for your area.  The MAXIMUM income is determined per county, and is based upon how many family members reside at the residence. In the Raleigh/Cary Area (which includes Garner and Johnston County in North Carolina) the MAXIMUM income for a family with 1-4 members is $88,400 and the MAXIMUM income for a family with 5-8 members is $116,700.  This means that BEFORE TAXES (your “Gross” income) can not be a penny over this amount… even if you are not using the income from a college son who is living in the home… his income is being counted in the mix.  To find out the Maximum Income Limits for your area, click here.

Figuring out the family income, and if you meet the requirements is pretty straightforward - where most people find difficult about USDA homes, is finding a PROPERTY that qualifies for this financing! USDA is a loan designed for RURAL areas.  It doesn’t mean that you have to find a FARM… but it does mean that you will need to located a home that sits in a LESS densly populated area.

That’s where Zillow can help!

Look at the Maps Below… the properties shaded in “Orange” do NOT qualify for USDA Home Loan Financing… however - all of those OTHER areas do!

So once you know, for instance, that one side of Ten-Ten qualifies for this program, it’s pretty easy to go to Zillow, and put in Garner, NC.  All of a sudden, houses pop up, and you can pretty easily see which ones qualify!  Here’s a great house on Grissom Farm Road!  That’s pretty cool hugh??

To find maps of the areas near you that qualify for USDA Home Loans, click here

Have three minutes and 23 seconds? Watch this funny public service ad (PSA) featuring actress Vivica A. Fox as she spoofs the priorities of buying a home and getting a mortgage. Love the line, “Where’s the love, Dan?”

During the process of taking a home loan application from application point to closed and funded is a journey of a thousand tales. Home shoppers, of course, need to know when to start shopping and for how much of a home mortgage they are approved.

Approval is a short matter of accepting an application, examining the home loan applicant’s credit, income and assets, and generally includes submission to an automated underwriting engine such as Fannie Mae’s Desktop Underwriter (DU for lenders) or Desktop Originator (DO for brokers). Being among the first steps in the loan process the automated underwriting system (AUS) gives the earliest indicator of what needs to occur in order to close the loan. Often the next step is securing a property, especially when purchasing one of the many homes for sale featured here on Zillow.com, and providing a fully executed sales agreement to the loan officer (MLO - Mortgage Loan Originator).

During the time between the acceptance of the sales agreement and the closing of the loan many steps need to be taken depending on the type of the loan. The time it takes to accomplish each step is entirely dependent on the speed with which each party acts. Under new federal guidelines in the Real Estate Settlement and Procedures Act (RESPA ammended 2009 effective 1/1/2010) the MLO cannot accept income and asset documents from the home loan applicant until they have completed six trigger events. Those six events are:

1. Borrower(s) full name(s)
2. Borrower(s) Social Security Number(s)
3. Borrower(s) income – can be verbal
4. Property address (“to be determined” is not a trigger)
5. Property value estimation (can be a guess based on sales price)
6. Loan amount

Once an offer has been accepted on a property then the real work begins where the MLO and her processor start working to meet all the required conditions such as getting a clear title on the property, status and amount of property taxes, employment verifications, citizenship validation, verification of tax returns, proof of insurance coverage, acceptable appraisal of value, and others. Additional “stips” may also be issued by the AUS which need to be met before sending to the underwriter as well.

Underwriters have the very critical job of insuring the applicant(s) and property meet all of the guidelines for the specific type of loan being issued. Usually, in direct lenders especially, if the stipulations of the AUS are met by the MLO and processor are met the underwriter will approve the loan and the all important “Clear To Close” is issued.

What happens between application and Clear To Close is a journey of many opportunities. Applicants can help insure a quicker time and smoother experience by providing all the information requested by the MLO as quickly as possible and if all parties do the same it will be a fast closing and smooth sailing. Otherwise it can get bumpy so exercise patience and be ready to help when called upon.

American service members often live a transient lifestyle. From frequent domestic relocation to overseas deployments, moving is an inevitable part of military life.

That can make saving for and securing a home difficult for families. Because of those demands, the VA allows active duty soldiers stationed overseas to obtain VA loans and purchase homes from points across the globe.

Service members have to file legal paperwork giving someone they trust power of attorney. That individual, typically known as the attorney-in-fact, can apply for a Certificate of Eligibility on behalf of the service member and start the entire loan process.

Once the specifics are nailed down (entitlement, property identification, price and terms, etc.) the VA requires the lender to procure the veteran’s written consent regarding the transaction. It is, after all, the service member paying the mortgage. That can be accomplished a couple different ways.

Veterans no longer on active duty but for some reason unable to execute the loan documents can also take advantage of this VA provision.

In both scenarios, the lender has to verify that the service member or veteran is still living and not missing in action.

There are also hardship exemptions available that can relax requirements for service members. Ultimately, it’s up to the VA to make the call.

Image:http://www.flickr.com/photos/soldiersmediacenter/ / CC BY 2.0

Soon it will be a lot easier to tell the difference between web sites that claim to give you free credit reports and the government site that actually does — AnnualCreditReport.com. Offers of “free” credit reports often oblige consumers to spend money on credit monitoring or other products or services. But the only no-strings-attached, completely free credit reports are available at AnnualCreditReport.com or by calling toll -free 877-322-8228.
 
Starting April 1, the new Federal Trade Commission (FTC) “Free Credit Reports Rule” requires all advertisements for “free credit reports” to include new prominent disclosures. The FTC press release elaborates:
 
“For example, any Web site offering free credit reports must include a disclosure, across the top of each page that mentions free credit reports, which states:
                     THIS NOTICE IS REQUIRED BY LAW. Read more at FTC.GOV.
                     You have the right to a free credit report from AnnualCreditReport.com
                     or 877-322-8228, the ONLY authorized source under federal law.
The Web site disclosure must include a clickable button to “Take me to the authorized source” and clickable links to AnnualCreditReport.com and FTC.GOV.”
 
For more information on how to get your free credit score, click here.

Stated income loans were a big part of mortgages through the middle of the previous decade. Originally designed for self-employed borrowers who re-invested much of their capital into promoting their business or took advantage of multiple deductions the stated income soon spread into W2 employees. When you see the stories about a fast food cook buying a $300,000 home this was generally the result of overstated income.

Mortgage insiders recognize this was because the rating companies, those such as Standard & Poor’s and Moody’s, rated mortgage backed securities of pools containing this type of loan with the highest ratings. Resulting was a massive increase in the number of these loans being purchased on the secondary market and in return an increased number of them also being originated by lenders who offered the now formerly hyped “sub-prime loans”. The rest, as they say, is history.

Today when applying for a loan you may be asked for a copy of your last two years of income tax returns. Additionally you may hear the terms, “all schedules, all pages” meaning the underwriter wants to see all of your income sources and deductions.

When the borrower provides these documents as requested that is not the end of the story. Lenders, at least most lenders, are also requesting copies of tax return transcripts from the Internal Revenue Service to verify the tax returns provided by the applicants match the ones on file at the IRS. Generally form 4506T is used to request tax returns for the previous two to three years.

Refusal to sign the document giving the lender permission to request transcripts of the tax returns would generally result in the lender ceasing to continue underwriting the file.

If a borrower has not filed tax returns for the previous years leading up to the mortgage application and the file at or near the time of applying for a mortgage the underwriter may reject the application stating the filing of the tax returns appears to be solely for the purpose of being approved for the loan. Further, if the applicant is filing a late return at the time of mortgage application the transcripts may not be on file quickly enough for the IRS to deliver them to the lender.

When a borrower finds their self in this situation they should consult with their mortgage professional to get an underwriter’s opinion on whether or not they will be able to be approved with the late filing. Even then if the applicant is filing taxes late and at or near the time of the mortgage application they will need to provide, in most cases, a copy of a paid in full receipt and stamped documents directly from the IRS. Either way the applicant should check with their mortgage professional in regards to taxes and verification of income by using tax transcripts.

Bond traders are not idiots.

I’ve blogged about this before.  People that invest in the bond and stock markets tend not to be completely stupid, in my experience.  They do listen to CNBC.  They do read the paper.  They’re not unaware of what’s going on in the markets.

Everyone knows, for instance, that the Fed is going to phase out its purchase of mortgage-backed securities (MBS - it is these securities that lenders use to set their mortgage interest rates).  Everyone knows that this phase-out is set to occur on or about the end of March.  Today, Fed Chairman Ben Bernanke announced that the phase-out would be dependent on “the markets”, by which he presumably meant the homebuying markets as well as the bond and stock markets.  In today’s testimony he gave no indication that there would be a dramatic, one-day-we’re-buying-the-next-we-aren’t cessation, and in fact he reaffirmed that the Fed would still be willing to buy MBS to keep interest rates low.  But he also left intact the plan to stop buying, and sooner rather than later.

So…why aren’t we seeing a dramatic selloff in bonds?  Are traders deaf?  Are they insane?  I mean, if Toyota were to have a huge recall of its cars (I know, like that would ever happen) and suddenly start bleeding money, its stock would fall like a rock.  Oh.  Wait.

Similarly, if one knew ahead of time that a dramatic decrease in the available purchase demand was in the offing, wouldn’t one be selling ahead of a price decline?  Well?

Unless something weird happened in the last five minutes while I’ve been writing this, I think we have three things at work here that are currently more powerful than anything the Fed does, at least as regards the bond market, and, by extension, mortgage interest rates.

1. The homebuyer credits.  Uncle Sam has decided that handing over fistfuls of cash to people in exchange for them buying houses is a good idea.  At least, it’s a good idea for another couple of months (see full details on the homebuyer tax credits here).  That is, no question, stimulating demand for housing and for mortgages.  That is firming home prices, and that firming holds out hope that there won’t be an eventual half of all homes in foreclosure (the best predictor of impending foreclosure is home equity - the more, the better).  As fewer homes are in foreclosure, the mortgages that back those securities have more value, meaning that MBS are worth more.
2. The economy sucks.  Yeah, yeah, GDP is roaring ahead by 6%.  Whatever.  Anyone believe that number?  Anyone?  Bueller?  Look, until people start being hired, and the hemorrhaging in the job market stops, no increase in nominal GDP - even assuming, for a moment, that the government figures didn’t begin with “once upon a time” - there is not going to be enough strength in the “recovery” to have any measurable impact on anything.  Bad economy=bad for stocks=good for bonds.
3. And finally, the big one - we all know that Bernanke isn’t really in control of anything.  What year is this again?  Oh, right, it’s 2010.  Let’s see…even numbered year…ratcheting up of commercials…huge increase in bloviation from Washington…AH!  That’s it!  It’s an election year.  The party in power is reeling from a series of straight jabs to the jaw along the once-reliable East Coast, and that increases the pressure on the DC elites to make sure the economy isn’t getting observably worse coming into November.  Think the Fed will be increasing interest rates in the late summer?  Pardon me, I’m going to have to get some supplementary oxygen from laughing so hard.  Traders know who is really calling the shots in the financial system, and it isn’t Tim Geithner, nor is it Ben Bernanke.  Any serious fiscal responsibility will have to wait at least a year.

Result?  No big selloff in bonds at this point.  No big moves in any direction.  Traders are waiting for #3 to move before they do.  Another stimulus (this time, it’s Stimulus III - The Jobs Bill) is possible, even likely, and that will change things.  There is a gigantic overhaul of the entire financial system stalled in Congress right now, but it could get legs again now that health care appears too politically toxic.  That also would dramatically change things.

Not being a prophet, I can’t tell you what will happen in April.  Perhaps we’re in for a (long-overdue) spike in interest rates.  But me?  I’m not betting that way.  And neither is Wall Street.