Hal's Mortgage Blog

Maybe you’ve thought about moving up to a larger home but are unsure if now is a good time. The catch – you have to sell your current place first. After all, the market is a little soft right now and your chances of getting top dollar are slim.

If it makes sense, now is a great time to make the transition. Look at it this way. True, you’ll make less when you sell, but your new purchase should be a bargain and the difference may more than offset the loss.

Using round numbers, if you sell your current home for $135,000, 10% less than you hoped for ($15,000) and you purchase another home at a bargain for $235,000 at a 10% discount ($25,000), you are $10,000 ahead of the game.

Here’s my advice before you proceed:

1. Talk to a good Realtor and get their idea of what you can expect to sell for in a reasonable time frame.

2. Don’t commit to another home until your current home is sold – unless you can afford two mortgages.

3. Make sure you can afford the payments on your new purchase. Get Pre-Approved by a Mortgage Professional

Oct 28, 2009 – The present plan is set to expire November 30, 2009. The extension breaks down like this:

· First Time Home Buyers will have until the end of April to sign a sales agreement and close by the end of June to get the $8,000 credit.

· Homebuyers who have owned their present home for at least five years will qualify for a $6,500 credit under the same time frame guidelines as stated above.

This is not totally unexpected – we knew something would be passed despite recent discovery of fraudulent claims. OK buyers, it’s time to play beat the clock again.

Rates were on their way up, then a few weeks ago they inched back down. What’s going on?

As of today the overnight average is at 5.00 %. If you are interested in tracking this daily, go to my home page at www.HalTennant.com . The overnight average may include some points – usually about .6%.

The general rule of thumb says when the stocks go up, money flows out of bonds and into the Stock Market. This causes mortgage rates to rise. But the market has been going up for the last several months, why haven’t rates gone up?

The answer is Fed Chairman Ben Bernanke has been pumping $1.25 trillion into mortgage backed securities (bonds) in order to keep mortgage rates low. So, just when you think rates are going to start rising again, the Fed pumps some more money into the bond market.

The Fed was scheduled to wrap up this program by the end of the year but it now looks like the new cutoff date will be March 31, 2010. This means the same amount of money spread over a longer period of time. The result? Rates will creep up a bit.

When this artificial “Stimulus” ceases what will be the result? A quick run up of mortgage rates? Another slowdown in the Real Estate and Mortgage business?

That’s when I need that crystal ball.

The Federal Housing Administration (FHA) program first began in 1934 in an effort to encourage home ownership despite the difficult economic times of the era. The program enables consumers who may not qualify for a standard loan to obtain the financing they need to purchase a home without income limitations.

FHA loans differ from typical loans in that they are insured by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development (HUD). Because this insurance reduces the lender's risk on the loan, lenders have greater flexibility with regard to approving loans. For example, FHA loans are not credit-score driven (note- many lenders may impose their own minimum credit score), so a client may be able to obtain a loan despite having had credit problems or even a bankruptcy in the past. Alternatively, if a consumer does not have a traditional credit history it is still possible to obtain financing by documenting payment histories on items such as rent and utilities.

FHA loans also provide added flexibility when it comes to closing costs and the down payment. Many of the closing costs can be incorporated into the loan. A down payment of 3.5% of the purchase price from the buyer is required. There are numerous sources that are allowable such as a gift from a family member or through a down-payment assistance program. FHA loans are processed just like any other loan, and they provide a wonderful opportunity for consumers who are seeking to achieve home ownership!

If you would like a copy of 18 Sources for Your Down Payment send me an email and I’ll send it right out.

It looks like our servicemen will get a break as the House of Representatives unanimously passed a bill that calls for a one-year extension of the first time homebuyer tax credit for service members serving overseas.

In order to qualify, service men and women, members of the Foreign Service and intelligence community who served on official extended duty service outside the US for at least 90 days in 2009 (and their spouses).

The repayment penalty would be eliminated for first-time homebuyers if the service member sells his or her home within three years of purchase because of deployment. The bill passed the House 416-0, and is now in the Senate for consideration and is expected to pass there as well.

“I am pleased that Congress has decided to move forward to include my legislation in this homeownership assistance package for our service members,” said the bill’s author, Rep. Ron Kind (D-WI). “Service members should have every opportunity to succeed and enhance their life when they return home, and this bill will help them do just that.”

Many in the housing industry are calling for an extension and expansion of the $8,000 tax credit currently set to expire on Nov. 30, The Senate is considering a bill that would extend the credit for another six months.

Good credit is well worth the effort it takes to both achieve and preserve it. If you have good credit, the following tips will help you keep it that way. If you are looking to improve your credit, however, now is the time to get started. If you plan on entering into a loan transaction in the next 6 to 12 months, you simply cannot afford to make the following credit mistakes:

Don't fall behind on existing accounts. This includes your mortgage and car payments. One 30-day late can cost you anywhere from 30-80 points or more depending on the other factors being reported on your credit reports.

Don't pay off old collections or charge-offs during the loan process. Paying collections will decrease your credit score immediately due to the "date of last activity" becoming recent. If you want to pay off old accounts, do it through closing, and make sure that 1) you validate that the debt is yours, and 2) the creditor agrees to give you a letter of deletion.

Don't close credit card accounts. If you close a credit card account, it will appear to FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure that it is an account you’ve opened more recently. Remember, 10% of your credit score is made up of your Mix of Credit, so it is important that you have at least 1-2 major credit cards open and in good standing.

Don't max out or overcharge your credit accounts. This is the fastest way to bring about an immediate drop of 50-100 points in your credit score. Try to keep your credit card balances below 30% of their limit on your monthly statement, and especially during the loan process. If you decide to pay down balances, do it across the board. Make an extra payment on all of your cards at the same time.

Don't consolidate your debt onto 1 or 2 credit cards. It seems like it would be the smart thing to do; however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above. If you want to save money on credit card interest rates, wait until after closing.

Don't do anything that will cause a red flag to be raised by the scoring system. This would include adding new accounts, co-signing on a loan, or changing your name or address with the bureaus. During the loan process, it is better to keep activity at a minimum.

That depends.

If you are purchasing with FHA, VA or Conventional financing, most lenders are still on a 30 day turn time. Check with your lender to see if they can close before the November 30 deadline. Remember to factor in the Thanksgiving Holiday.

If you are purchasing with USDA financing, here’s the fly in the ointment. Your loan must first be approved by your lender, then go to USDA for review and approval before it can close.

Normally this might be three to five days additional. With the pipeline bursting at the seams with last minute submissions, that time has lengthened here in Tennessee to several weeks.

We are recommending that Realtors write Purchase Agreements with a minimum of 45 days to close, perhaps even 60 days to be safe.

If your loan is submitted October 12 you have just over 6 weeks to get it closed. On December 1, 2009, you will no longer be eligible for this rebate program.

Certain mortgage companies will pay top dollar to know exactly who is in the market for new financing. What's more, the major credit agencies not only allow files to be flagged whenever someone applies for a home loan, they actually sell this private information as leads to the highest bidders!

For a price tag of $25 to $100, names, addresses, phone numbers, mortgage histories, and even FICO score ranges are sold by the credit bureaus to mortgage companies, which then blindly solicit business.

Unfortunately, no legislation exists to prevent credit companies from profiting from this practice. As trigger leads, consumers are simply at the mercy of any number of solicitations designed specifically to discredit the mortgage professionals they've come to know and trust.

Remember, a limited number of sources exist for lenders to obtain mortgage money, and it's unlikely that a borrower will find an unbelievably low rate without an unbelievably high cost. That's why, prior to applying for any loan program, consumers should visit www.optoutprescreen.com to opt-out of credit bureau solicitations and avoid the problem altogether.

As consumers embark on what could be the largest financial transaction of their lives, it's important to work with a mortgage professional who clearly explains all available options and provides comprehensive solutions.