Erin Griffin - Green Solutions Consultant

I feel like a broken record, and the market is proving me to be a liar. I keep thinking we cannot go any lower in rates, and bam! here we go again. So how did we arrive at this juncture? Well, the markets are a fickle and sensitive place right now. Some buzz words as of late to create a stir:

• Europe: Greece, Turkey,etc...
• Housing Starts
• Mortgage Applications
• Existing Home Sales
• Foreclosures
• Unemployment

This could almost be just today! Regardless of the reasons why, rates are now floating at 4.625% with nominal fees and 4.375% with 1/2 - 1 point origination.These are the lows of the lows folks! Well, maybe. :)

Although the environment is more difficult to maneuver there are a few pointers to follow to ensure a solid refinance or purchase. When refinancing:

1. Before you turn over any money for an appraisal, check Zillow, ask your Realtor, or even a past appraiser of your property what the current value of your home is. The biggest mistake I see is conjecture and wishes of retention on home value. In the Chicagoland area alone, we are 11.7% down in the last year according to Zillow.com, so properties improving or maintaining the past value is illogical at this point.
2. The key to a successful refinance is knowing the home valuations that can work for you and what the break-even analysis on the refinance actually is. It is integral to consult an experienced Loan Officer rather than light your money on fire to see if the appraisal works out.
3. Employment: if salaried try to avoid using bonus income if not needed, it only complicates the underwriting.
4. If tax returns must be used (self-employed borrowers or commissioned borrowers) the income is based on adjusted gross income (after write offs) no exceptions. A 2 year history is needed, if there is a serious decline in income in the past two years, most likely underwriters will drop the income to current levels, or even deny a loan, so it is worth analyzing beforehand.

Purchases:

1. All of the above absolutely pertain, in addition using a qualified Realtor is so important in this market. The nuances involved to create a successful home purchase process from start to finish are astounding.
2. When viewing prospective homes, keep in mind the condition of the home and how an appraiser will view and take pictures. Underwriters scrutinize appraisals, they quickly become Pandora's Box if allowed. It takes a trained eye in these situations. You can also bounce it off your lender to ensure nothing occurs to sabotage the loan.
3. Borrowers must have a solid understanding of their own financial situation, from credit scores, down payment sources, gifts of equity, etc... Only an experienced lender can explain the proper guidelines associated with current lending practices.
4. Once a borrower is pre-approved, it is essential NOTHING is done on credit period! Reports are now pulled at the beginning and end of every transaction - it could potentially kill any deal on the table the day before closing! It is so essential to know this!

These are just some tips to help take advantage of the record low rates (again), I am still closing loans, both refinances and purchases, we just have to be careful as we navigate through the new regulations.

Housing Starts Highest Since October 2008!

Is this a good sign? Well initially yes, progress is fantastic, however, building permits declined. To read more: Always seems to be a little bad with the good news. So how did this affect our interest rates?

As of this morning, rates remained at all time lows:
30 YR Fixed: 4.875%*
15 YR. Fixed: 4.25%*
5 YR ARM: 3.75%*

*rates subject to change

Beginning June 1st, mortgage lenders are likely to order a second full credit screening immediately before closing. This report will be designed to find out whether the borrower has obtained, or even shopped for, new debt between the date of the loan application and the closing. If they have made applications for credit of any type - for furnishings and appliances for the new house, a car, a home equity line, a new credit card - the closing could be put on hold pending additional research by the lender.

If borrowers have taken out new loans that are big enough to affect the debt-to-income ratio calculations used in the original loan approval, the deal could fall through. The added debt could render the borrower ineligible for the mortgage because they now appear unable to handle the payments without a strain on their household budget.

When pulling the last minute credit report, lenders are also looking for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages, etc., anything that may have changed since the initial application that might impact the borrowers debt-to-income ratio. Fannie Mae instructions say that "lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing" are considered in the final loan analysis.

How should home buyers and refinancers prepare for the credit check procedures? Follow one rule: abstinence. Between the application for a mortgage and the date of closing, resist spending. Don't apply for new credit unless it has been discussed in advance between the borrower and lender and a green light is given.

The housing tax credit is officially over, foreclosures continue to increase, home values remain low, stock market is crashing again; so is there anything positive ahead? I suppose it depends on who you ask!

As far as the real estate market, and in this professional’s opinion, yes there is much to come in recovery and market improvement. To back this opinion with some facts on pending home sales and existing home sales:

Pending Home Sales
Mar. index: 102.9
Monthly: Up 5.3%
Yearly: Up 21.1%

Existing-Home Sales
Mar.: 5.35 million
Monthly: Up 6.8%
Yearly: Up 16.1%
National Association of Realtors' forecast until 2011:

Personally speaking, this has been the busiest spring market influx in two years. My purchases have increased a dramatic 59% in the last few months. Real Estate is exciting again; buyers and homeowners alike are beginning to take advantage of the low interest rates. Even if sales prices are not ideal for sellers, it is still a perfect time to consider upgrading into that larger home and capture the savings that way!

Currently, the FHA approval process for condo buildings offers two dimensions for current homeowners and homeowners associations. Two types of FHA approval exist, DELRAP and HRAP. Questions and confusion abound regarding this issue so here are a few details to begin helping you navigate through the web of FHA chaos.


FHA Approval Types involved:

1. DELRAP: This is an FHA Approval that a lender can approve in conjunction with a loan application. It requires the same paperwork as an full FHA Approval with the addition of a fee. The turn time frame is shortened to approx. 2 – 3 weeks. A few limited investors (lenders) offer this type of approval. The approving lender accepts the risk if the property doesn’t meet the FHA requirements, so the risk exposure is great, hence only a few main investors will do this. The investor reviews the declarations, budget, bylaws, etc. and if they see anything that raises a red flag such as: special assessment, limited reserves, or any other non-favorable issue they will send the file to the local HUD office to review. Now the process turns into a full HRAP Approval, which is the standard FHA Approval, and takes 8 – 12 weeks.

2. HRAP: This is the standard FHA Approval. The association, seller, or whoever can submit this approval to FHA directly (free) or with assistance of a lender or an FHA Approval Company for a fee.

Hopefully this is a start to clarify the FHA approval system. I will continuously update the progress and conclusions of the initial approvals.