Scott Shapiro

The new age of home loan approvals has certainly made its presence felt in the world of real estate in 2009. Over the last few months, a file of mine, illustrated one of the roadblocks that have become customary in today’s mortgage world. A customer I began working with about four months ago, finally closed on his first home in rural Ohio. Despite the patience of the customer, the hard work and due diligence of the realtor, and the persistence of the entire mortgage company, this file’s struggles were just an example of what the industry’s new regulations have created for all involved. The good news is that despite the changes that some loan officers, realtors, and appraisers have come across these days, quality mortgage companies are still closing loans in a timely fashion.

While there were numerous complexities involved with this loan, the issue that became most problematic was the appraisal. While the new laws regarding appraisals have brought about much debate, it is time to try to understand the hesitance of mortgage investors and be prepared for roadblocks that will occur, instead of complaining. It is the current administration’s goal to remove fraud from the home purchasing and loan process and they are taking measures that in some cases greatly hamper the efficiency of the lender. One area they really have focused on is inflated or problematic appraisals. This was the biggest issue with this gentleman’s attempt to purchase his first home.

While it is no doubt frustrating for all involved when an appraisal comes back incomplete or insufficient, this is an issue all have to get used to. The Ohio loan mentioned above ran into multiple appraisal issues. The first issue was a lack of comparable homes sold recently in the area. This has become quite common these days because home sales are down in many areas, especially rural ones. The end result when sales are down in a given area is that the appraiser is forced to use homes that were sold too long ago to reflect the current trends in the real estate market. This in turn results in a less than satisfactory appraisal of the property and the appraiser is forced to do more research, which adds more time to the loan process. Unfortunately, not only did this happen in regards to this single family home, but further issues arose when the investor discovered this home was purchased less than 180 days ago and thus required a second appraisal. This once again slowed the process and closing down which frustrated all involved.

Despite the appraisal issues involved with this loan, the loan closed last week and all involved were happy. All in all, the appraisal requirements from investors nationwide have hampered and even halted the ability of many to purchase a new home in a timely fashion. As evidenced by my Ohio file, the issues that can come about in regards to an appraisal can be frustrating to all involved in a transaction, but the bottom line is that strong companies will tackle the new issues and get the loans closed. The lesson I learned in my three plus months work on this file is instead of questioning all of the new regulations just deal with them and do what the investor requests. It is not difficult to understand why these investors have changed many of their guidelines. Wouldn’t you have changed your lending guidelines, if your loans had seen such a high delinquency rate?

How often in life is something given away for free. Yes, many advertisements offer items for free, but when one reads the fine print or does further investigation, they quickly realize that nothing is truly being given away. Instead, the word free is just being used to offer incentives to the potential customer. The exception to this rule is the first time homebuyer tax credits being given away to those qualify for one of the federal government’s attempts to stimulate the housing market. While it is debatable whether the tax credit has been successful in its goals, there is little debate whether this program offers potential homebuyers an additional reason to purchase now.

I am here to tell you that time is running out on the FREE, yes the FREE money the United States government is allocating to those who qualify under the first time home buyer $8000 tax credit. While the deadline to close on a home in order to receive the $8000 tax credit is November 30, 2009, the time for those “sitting on the fence” to start the process is now. The average time for closings varies by lender but generally can be anywhere from 30-60 days, so that does not leave much time to get preapproved with a lender and get taken to see potential homes by a realtor. So if you have never owned a home or if you have not had ownership interest in a property in the last three years the time to ACT IS NOW!!! Why not let the government reimburse you next April for part of your down payment or closing costs? If you are someone that wants to purchase, but needs a co-signer to qualify for a mortgage, do not worry. As long as the home is your primary residence, you can still qualify for the tax credit. So my message to those who are still unsure; get out there and take advantage of both the falling home prices and the $8000 tax credit!

Until next time….

As we sit here in mid- July, most if not all Americans are still waiting for the federal government's stimulus package to actually help achieve the goals it set forward at the beginning of the calendar year. There are multiple reasons why many Americans are still unable to benefit from the program, but many of them are closely related to the lower values given to most homes. While it is clear that many homes were overvalued in previous years, many in the real estate business have pointed to the HVCC (the new Home Valuation Code of Conduct) as a major roadblock. So what does the HVCC do? To make a long story short, the HVCC restricts who can perform the appraisal on a given property, and puts it in the hands of a national company. This sounds like a great way to prevent appraisers from giving inflated values in order to continue to earn business from real estate and mortgage companies. The problem with this is that often an appraiser is assigned to a locality they have zero knowledge in. Many involved in real estate believe this had lead to improper home values. Prior to the HVCC, lenders used local appraisers who had the local knowledge necessary to give the home its full value.

Why was the HVCC created? It was put into action in order to improve the home valuation process, but unfortunately it is had more negative effects. These negative effects have clearly hindered, not aided the stimulus package designed by the government to help those who could not afford their homes. Not only has the HVCC halted relationships between companies that have done business with each other for years, but it has also taken away any motivation for appraisers to perform the detailed work necessary to offer the proper evaluation of a given property. Their accountability now has been seriously diminished and therefore the quality of their work has suffered as well according to many real estate agents and loan officers.

While the HVCC had good intentions in its goal of keeping appraisers from overvaluing homes and bringing stability to what was otherwise a chaotic residential real estate market; one must wonder if now this was the best time to make this change. In the midst of the worst housing crisis in American history common sense would point to trying to get more refinances and purchases done. If those in power truly wanted to help those in financial trouble, they could have first tackled the millions of Americans who are about to lose their homes to foreclosure or short sale and then concerned themselves with regulating the industry. Has it not been enough to completely change the entire mortgage approval process? One must seriously wonder if anyone in power has any idea of what is really going on.

Many potential first time home buyers find themselves in similar situations as we enter July 2009. They want to take advantage of the $8000 tax credit for first-time home buyers, purchase while the prices are declining, and know they can afford the payment of the new home. Only one thing stands in their way; cash. While their current rent payment may be just slightly lower than what their housing payment would be, the funds needed for down payment and closing costs are just not available to many people right now. So, how can you purchase a home if you have limited cash available?

1. Down payment Funds- Ideally a customer should have the minimum down payment for an FHA loan of 3.5% before they consider buying a home, but there is one great option if this is not possible. A gift from a family member is that other possibility. FHA allows an outright gift of the down payment investment to come from someone with a clearly defined and documented interest in the borrower. This gives the potential borrower a second option for the down payment. Do not be afraid to talk with your family members and make them aware of all of the advantages of buying now, including that juicy $8000 credit. Perhaps they can assist you in getting in the housing market while the getting is good.

2. Closing costs- When you purchase a home, there are a number of costs other than the down payment associated with the lender and the Title Company, as well as reserves that need to be paid upfront. Not only can you use your own funds or gift funds as mentioned above, but you can also have the seller to pay for up to 6% of these costs in an FHA loan. For example, if there were $10,000 in costs associated with a $190,000 sales price, perhaps you can agree to pay $200,000 for the home and have the seller cover the closing costs. This in effect rolls the costs into your loan and the seller is still paid what they are looking for in the transaction. Even better yet, maybe you are in a position where you can just negotiate part or all of the costs with the seller without raising the sales price. Either way, this is a great option offered by FHA to assist potential home buyers.

The bottom line here is yes there are definitely costs associated with taking advantage of the $8000 tax credit and the declining housing market, BUT there are ways to work things so that you have as little as possible coming out of your own pocket in these trying economic times.

Many Americans find themselves in a similar position today. They have a mortgage payment that is either too high because of a loss in gross income or because their mortgage adjusted and thus their rate has increased. While some of these people have been able to refinance or purchase because they have maintained their credit, many others have seen their bills overwhelm them and thus have lowered their credit scores below the acceptable mark. What can one do to make things better for themselves financially?

1. The first thing to do is seek help from a credit specialist. I work directly with a company whom I connect applicants with poor credit to through a conference call. While credit specialists charge a small fee for their services, these fees are warranted by the results they achieve for their customers. If you refuse to try to fix your credit, then you have no one to blame but yourself. Credit specialists will work directly with the credit bureaus and will remove any erroneous credit issues or potentially some blemishes that are legitimate. They are experts in the field and can work much more efficiently towards improved scores than you and I can.

2. While your credit repair specialist is working on your credit report, you should be also looking to add positive lines of credit to your profile. This can be done by obtaining credit cards, possibly secured cards that are paid for upfront and are given to those with any credit score.

3. Making sure all your bills are paid on time. If you cannot pay a bill, do not simply ignore it. It will not go away. Call the company that you owe and try to work something out with them. Many others are in the same shoes and many companies are willing to work with you before they hit your report with blemishes. Simply put, people that ignore bills cannot expect to get mortgage approvals. Would you lend a large sum of money to someone that shows a history of not paying other bills?

4. Develop a relationship with an honest mortgage consultant that will answer your calls, return your calls in a timely fashion, and will have you ready to go once the credit specialist gets your scores up. Do not settle for a bank that does not return your calls and is of little help other than trying to earn your business once scores are up.

5. Get approved and close on your loan.

It may be intimidating or frustrating at first to tackle these issues, but trust me getting that credit fixed is the only option you have if you ever want a home loan. The qualification standards have been raised and there will never be loans given to those with poor credit again.

Contact me if I can be of assistance to you in anything mentioned above.