DEAN GRAZIOSI: DEAN GRAZIOSI REAL ESTATE

You searched for months for that perfect first home to buy.  You and your realtor looked at everything from foreclosures to new construction.  Finally you found the one that made you say “I could live here the rest of my life.”  You put in your offer and it was accepted.   After the initial joy wears off you realize you need to get your ducks in a row so you can close.  Below are 5 tips that if followed will help you on the road to a smooth and on-time closing.

Get All Back-up Ready for your Mortgage Company.

While you were searching for your home your mortgage company most likely provided you with a list of items you will need to give them before you can close.  Grab that list and start gathering everything you need.  That list will include things like recent tax returns, pay check stubs, identification and recent bank statements.   As you gather them get them to the mortgage provider so they can look them over and make sure they are what they need. 

Get Your Inspection Done

Most offers can be rescinded in the first few days if something is found to be fundamentally wrong with your future home.   A good realtor will have someone they recommend you don’t have to use that inspector, but often times it is good to use someone your realtor is familiar with because they know they can trust them.

No big purchases

Most mortgage companies will require you to have enough money in your bank accounts to cover the down payment as well as a month or two of mortgage payments.  Even after you have shown them your recent bank statements it is a good idea not to spend much money because they may ask to look again the day of closing.  If you need to purchase something for the new home wait until after closing. 

Don’t Use Credit Cards

Don’t use your credit cards for anything until after you are completely closed.  Using your credit cards can affect your overall credit score which could lead to your mortgage provider raising tour interest rate or worse.  Most mortgage companies will run your credit report the day of the closing to make sure you are still within the window of acceptance.  Anything you need should wait until after the closing.

Don’t Take Any New Lines of Credit or Open New Loans

It may be tempting to take a new line of credit to purchase the new floors you need for your new home, but wait until after the closing has been completed.  Opening a new line of credit or getting a new installment loan can lower your credit score and also increase your liabilities.  Both of which can cause your mortgage company to cancel the loan or raise your interest rates.  Anything you need for the new home should wait until you have completed closing. 

Bookmark With

The end of the homebuyer tax credit incentive program contributed to an unexpectedly deep decline in May home sales.  The Commerce Department’s May home sales report showed that only 300,000 homes were sold in the month.  It was the first monthly decline in three months. 

Additionally, April sales were revised to 446,000 units and March sales were trimmed to 389,000 units.  To qualify for the Federal tax credit, first time homebuyers and qualified existing homebuyers had to enter into a purchase contract prior to April 30, 2010. 

Analysts had expected May sales to be in the 400,000 range.  When the Commerce Department’s report was released on June 23^rd, U.S. equity markets fell sharply.  The S&P homebuilders ETF fell 1.6 percent. The news preceded the Federal Reserve’s announcement that lending rates would remain near zero through 2011.

The median selling price of a home in May fell one percent below April selling prices.  Prices have fallen 9.6 percent in the 12 months prior to May.

The absence of the tax credit will cause many first-time buyers to be creative.  However, buyers that have saved and are able to generate the required cash for down payments are in a position to be aggressive and make great acquisitions.

The impact on the low-end housing market may be the most severe, but qualified buyers are in position to realize significant savings in the middle to high-end purchases.

The Mortgage Bankers Association (MBA) announced that its seasonally adjusted index of mortgage applications decreased 5.9 percent. The index includes both purchase and refinance applications.

The MBA’s purchase index fell for the sixth time in seven weeks.  The 1.2 percent drop left the index near the 13-year low.  The foreclosure rate continues to stay at unprecedented levels.  With 9.7 percent unemployment, the housing market will remain a buyer’s market for years to come. 

In addition to the slumping new mortgage application rate, the MBA reported that applications for refinancing had fallen 7.3 percent.  A new trend to simply walk away from the mortgage obligation is leaving lenders with large inventories of REO’s.  Buyers who are positioned properly stand to make significant profits in the REO marketplace. 

Bookmark With

In New York State, homebuyers and realtors are applauding Governor Patterson’s approval of the State of New York Mortgage Agency (SONYMA) plan to facilitate the use of the homebuyer tax credit as a down payment for the purchase of new and existing housing.  New legislation has expanded the tax credit to buyers who once owned a home as well as to first time homebuyers.  New York is already experiencing an upturn in housing sales.

Under the SONYMA Tax Credit Advance Loans (TCAL), funds are provided to eligible homebuyers and can be used towards either the purchase price or toward the home’s closing costs.  SONYMA structures the advance as a second mortgage.  Funds will be available as of January 1, 2010.

The maximum advance is equal to 10% of the purchase price but not to exceed $8,000 for first time homebuyers or $6,500 for non-first time homebuyers and eligible military veterans.  Recipients must be purchasing in state approved SONYMA Targeted Areas.

Interest on the advances is deferred until July 1, 2011 at which point SONYMA will charge interest at a rate of 1% interest above the current mortgage rate.  If the loan is not paid in full, payments will commence on August 1, 2011.

To qualify, contracts must be entered into prior to May 1, 2010 and the transactions must close prior to Jun 30, 2010.  SONYMA hopes the program will fire up sales in distressed housing markets.

This program is an expanded version of SONYMA’s Down Payment Assistance Loan (DPAL).  The new bill includes previously omitted previous homeowners and military personnel.  Again, purchases must be in the agency’s Target Areas.  The minimum TCAL amount is $1,000. 

Eligible purchases must be the owner’s primary residence.  If the advance is not repaid, the loan becomes a second mortgage payable over ten years.

Bookmark With

Unemployment and the abnormally high foreclosure rate continue to weigh heavily on a full-scale housing recovery, but there are signs of hope.  According to Lawrence Yun, chief economist of the National Association of Realtors, pending sales increased for the ninth consecutive month ion November.

Yun credits more determined short sale lenders, low interest rates and the extension of the 2009 Homebuyer Tax Credit with contributing factors.  The expansion of the tax credit bill to existing homeowners should spark even more sales.  Existing homeowners are still reluctant to carry two mortgages, but existing homeowners are helping to clear some of the abundant upscale housing inventory.

Yun also points to the availability of more qualified renters who are anxious to turn rent into equity and tax deductions.  Yun asserts that these buyers have been on the sidelines, waiting to find the bottom of the market.  The reality that they can now acquire more space than in the past ten years is certainly motivating a new wave of prospective purchasers.  With 15-year interest rates at the lowest rate since 1970, buyers are gaining confidence that the time is right.

Meanwhile, newly constructed home sales jumped by 6.2 % in November.  For existing sales, the northeast still remains the most stable area.  November existing sales increase by 20% in year over year comparisons.  The Midwest rose by 12 % and the south surprised with a 6% increase.  Only the west showed a November decline of 5%.

To add hope to a muddled picture, November layoffs decreased to 50,000 compared to 182,000 in November 2008.  With the Obama Administration aggressively tackling unemployment and willing to pump billions into employment initiatives, housing may begin to emerge in the spring of 2010.  That makes this a great time for investors to buy low with the idea of selling high in a relatively short time.      

Bookmark With

Much of the current good news about the real estate marketplace stems from the terrific benefits provided by the 2009 First Time Homebuyers Tax Credit and revisions that have enabled the tax credit to be used towards the down payment requirement.  There has been speculation that a 2010 tax credit is under consideration but as of this date, there does not seem enough support or funding for the initiative.

Unlike the 2008 real estate tax credit program, the 2009 first time homebuyer program does not require repayment.  The program only applies to properties purchased as of November 30^th, 2009.  So, the rush is on.  First time homebuyers know a good deal when they see one and this is it.  Many of today’s upward sales trends are based on first time homebuyers rushing to capitalize on the government’s unique incentive programs.

On May 29, 2009, the U.S. Department of Housing and Urban Development (HUD) announced revisions to the tax credit that allowed borrowers to use the first time homebuyers tax credit for a down payment.  This reversed the agency’s previous stance and helped to trigger an immediate upswing in real estate sales.

Currently there are 11 state housing finance agencies (HFA’s) that provide products permitting buyers to monetize the tax credit for down payment purposes.  Generally, thee programs offer tax credit advances with second liens on the home being purchased until the credit is processed.  In some states, the second lien does not require monthly installments.

The eleven states currently offering these HFA programs are:

·                     Colorado

·                     Delaware

·                     Idaho

·                     Illinois

·                     Kentucky

·                     Missouri

·                     New Jersey

·                     New Mexico

·                     Ohio

·                     Pennsylvania

·                     Tennessee

·                     Virginia

Several other states are considering the initiative and buyers should check with their agents for availability.  There are many expanded proposals before Congress for a 2010 homebuyer tax credit that will not be limited to first time homebuyers, but as of this writing, no details have been released.

Currently the FHA requires a minimum down payment of 3.5%.  Of course, there are additional closing costs and the $8,000 tax credit goes a long way toward easing the up front cash requirement.

Bookmark With