6 – Do’s Before You Apply For A Mortgage

 With good preparation, most things are easier. That works in mortgages too! Today, I want to give you some ideas that can make your mortgage experience less painful.

Income Items:

1. Gather your documents. Today, many people will have to produce 2 years’ complete tax returns, including W2′s, 1099′s, K1′s, and all the schedules, as well as a month’s worth of pay stubs.


2. Be prepared to explain them. Deductions in your returns and your pay stubs may impact the income your lender will use to qualify you which, in turn, has a big impact on the loan you will get.


3. Have a breakdown of base pay versus overtime for both your pay stubs and 2 years’ W2′s. Lenders treat overtime (and bonus income) differently than your base pay. Be prepared to explain any changes over the last few years because your loan officer will ask you about it.

Asset Items:

1. Start accumulating your bank statements. Lenders look back 3 months from when you sign your contract of sale.


2. You will have to explain any and all large deposits (which are defined as deposits greater than your regular pay check) because lenders want to make sure you haven’t taken out any new loans that aren’t on your credit report.


3. Avoid any significant cash deposits. However, if you did have a cash deposit, understand that the lender will have you source it (a bill of sale and DMV receipt for that motorcycle, for example).


4. If you will be receiving a gift, consult your loan officer on how to document it (from the donor’s ability to how you deposit it).

Credit Items:

1. Ask your loan officer to run your credit and go over it with them. Believe it or not, most credit reports contain errors. Best to identify them and get working on correcting them as early as possible.


2. Do what you can to pay down your balances to under 30% of available credit to help you get the best score possible.


3. Do NOT close accounts or pay off collection accounts without discussing it with your loan officer. Either one of these logical moves can actually have a negative impact on your score.

When buying a home, remember the Boy Scout motto, “Be prepared”. Following these suggestions will make your loan approval easier and less stressful.

Credits- Dean Hartman- The KCM Crew- Neal Paskvan

If you need some advice about this subject or anything else Real Estate… feel free to contact me.

Neal Paskvan- Baird Warner- Downers Grove- 630-964-1855

   Email  neal.paskvan@bairdwarner.com

Short Sale Success: What is an Acceptable Hardship?

 

A short sale, in most instances, is a complex transaction. However, there are two very simplistic characteristics that every qualified short sale possesses:

1. The house must be valued at less than the homeowner owes on their mortgage debt obligation. In other words, the home must be “underwater”.
2. The homeowner must have a qualified hardship.

It is the second characteristic that we would like to touch upon in this blog post.

One question that we answer frequently is “My house is underwater. Is this an acceptable hardship?” Unfortunately, the answer is always “No.”

The simple fact that a homeowners mortgage obligation is in excess of their house value is not an acceptable hardship. A Short Selling bank will entertain a short sale when and only when there is a hardship that will, now or in the future, affect the borrower’s ability to pay their mortgage.

The following is a list of acceptable hardships that may be used when submitting a short sale package:

• Mortgage Rate Adjustments
• Loss of Employment or Reduction in Wages
• Business Failure
• Medical Hardship
• Death in the Family
• Divorce/Separation
• Military Service
• Overwhelming Debt Obligations
• Job Relocation

As always, should you have questions as to the acceptability of a hardship scenario, you should seek advice from an expert that has been trained in the short sale field. Look for the REALTOR®  Designation.

    Neal Paskvan  a Downers Grove Real Estate Broker holds the SFR Designation and may be able  to help

Reach Neal with Barird Warner at 630-964-1855 or e-mail him at neal.paskvan@bairdwarner.com

Downers Grove Real Estate In Real Estate, Keeping Current Matters!

 

There is too much misinformation being spread about today’s real estate market. Studies are being misinterpreted. Prominent names are being used to foster a point even if their quote is from years ago.

As an example, we want to look at a story published last week by The Fiscal Times titled The New American Dream: Rent, Don’t Buy. In the article, they claim:

“Call it the Big Selloff—America is headed toward a future in which fewer people own the spaces they call home… Those trends are just the beginning.”

We are not arguing that the homeownership rate is under downward pressure in this country. We are disputing some of the ‘evidence’ used in the article. Here are three points we want to refute:

The Homeownership Rate IS NOT in a Freefall

The article quotes a Morgan Stanley study from July 2011 which did make the argument that the homeownership rate was trending downward. Many others made the same point at that time. What the article failed to mention is that the homeownership rate unexpectedly increased in the third quarter of 2011! As DSNews reported in early November:

“After falling to a 13-year low during the second quarter, the homeownership rate posted a highly unexpected rise in the third quarter, according to a Census Bureau report.”

The jury is still out as to whether the homeownership rate will continue to fall or whether it has already bottomed out.

The Founders of Case-Shiller ARE NOT Saying Renting is Better

In the article mentioned above, they claim that the team that founded the prestigious Case-Shiller Pricing Index believes that buying makes little sense. The article explains that back in 2006 Robert Shiller presented a study based on data collected prior to 2005 showing that, over time, it made more sense to rent than buy. They use this information to conclude:

“Another skeptic is Yale economist Robert Shiller, co-creator of the Case-Shiller Home Price Index.”

They claim Shiller is a skeptic today based on what he said six years ago!

The major challenge we have with this is that Karl Case, the other founder of the Case Shiller Index, came out ten days ago saying that now is the time to buy. The New York Times in a story published on 12/30/2011 quotes Professor Case as saying:

“If you’re buying a house or apartment to live in and pay for over time, and can afford the payments, then it’s a terrific time to buy.”

Beracha and Johnson DID NOT Conclude That You Shouldn’t Buy

The Fiscal Times article went on to say:

“And in a paper this June in the journal Real Estate Economics, two researchers calculated that over the past 30 years, most often it would have been better to rent than buy.”

They were referring to the great study done by Beracha and Johnson titled Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise? We are very familiar with this study as we posted on it back in May of last year. The paper does explain that over the last thirty years the financial benefits of buying vs. renting could be debated.

However, the conclusion of the paper left no room for argument. According to professors Beracha and Johnson, NOW IS THE TIME TO BUY!

“(F)undamental drivers now appear to be in place that favor homeownership over renting in the near term future…

“[This] might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting.”

They conclude their research paper with this sentence:

“Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”

Dr. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research, is now a guest blogger on this site and in November shared with us his current presentation on this issue. To download the presentation, go to http://realestate.fiu.edu/buyer-or-renter-nation.html.

Bottom Line

We attempt to keep our readers current on this very rapidly evolving housing market with this blog, our tweets, our facebook posts and our subscription service. The letters K-C-M preface each offering. They actually stand for ‘keeping current matters’. We believe that helping our followers stay on top of the latest information available will help correct the housing market.

 

 

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