Mortgage rates have stabilized from last week and seem to be holding steady, but there are quite a few events this week that could cause the mortgage market to move.

More Govt Debt Hits the Mortgage Market

More Government debt hits the market this week as the US Treasury unloads $126B in securities.  Monday $8B in TIPS (Treasury Inflation Protected Securities) hit the market, Tuesday $44B in 2-Year Notes, Wednesday $42B in 5-Year Notes and $32B in 7 Years on Thursday.  The last round of auctions did not perform very well and caused the mortgage bond market lower which means higher interest rates.  This is one item I will be watching closely this week.

Bernanke Testifying to the House and Senate

On Wednesday and Thursday, Federal Reserve Chairman Ben Bernanke will be testifying on monetary policy before the House of Representatives Financial Services Committee and the US Senate Banking Committee.  His comments can be a potential market mover as big news will trump any technical signals we currently have.

Not Quite Ready to Lock? Proceed with Caution

The trend beginning this week is market stabilization, however we recommend to our clients that are floating their interest rates to proceed with caution and be ready to lock if investors start to shift their money out of the bond market.

Related posts:

1. San Mateo Mortgage Rate Update
2. Mortgage Interest Rates Predicted to Rise in 2010
3. How to Sell Your San Mateo Home Fast in a Buyers Market
4. Monthly Mortgage Payment Estimator
5. If My Financials Aren’t Perfect, I Won’t Get a Loan in Today’s Market

Big Banks May Be Nixing the Pre-Approval Process

As lenders begin to work through the lending guideline changes from January 2010, some bigger banks have discussed eliminating pre-approvals.  Instead, they are opting to wait until a potential borrower is under contract before the bank starts looking at and verifying your income, assets and credit score.  Having a different loan process is not such a huge deal unless the bank you’re working with has decided to cut out the most important part of the process, the pre-approval.

Why Will Big Banks Eliminate Pre-Approvals Upfront?

The main reason big banks want to stop issuing pre-approvals is because of all the added paperwork and disclosures required.  Some bigger banks don’t want to ‘clog up their system with pre-approvals that may not turn into real deals’…which means you as their customer are not important to them until you have entered into a legally binding contract with a seller to purchase a home.  Only then are they willing to spend time pre-approving you for a loan.  Biggest problem with waiting until you are under contract?  You could lose a lot of money!

Why Waiting for a Pre-Approval is a Bad Idea!

The whole point of a pre-approval is to make sure you are a ready and capable borrower that can confidently move forward on a purchase contract to a seller.  What some of the big banks are issuing are glorified pre-qualifications (or estimates) at best as to what you can afford.

You Could Lose a Lot of Money and the House You Want to Buy!

Typically you have 30 days from the time the seller accepts your offer to close your transaction.  Why would anybody want to enter into a legally binding contract, put down up to 3% of the purchase price as a deposit, pay for inspections and appraisals (upwards of a $1000 or more), and to go through the emotional roller coaster of a purchase transaction only to find out at the end that you don’t qualify for financing?

If you would have received your pre-approval at the very beginning, you would you have taken out the unknown factor of “Will I be approved for this loan”?  A genuine pre-approval will save you money, time and the anxiety of not knowing if you are credit worthy.

Smart Sellers and Listing Agents Won’t Accept Your Offer

The fact of the matter is smart sellers and listing agents will not even accept your offer without a genuine pre-approval letter.  Listing agents who are representing their clients best interests will call the lender who issued the pre-approval and ask the Mortgage Advisor just how credit worthy is this buyer. They will also ask if the lender has verified the borrowers income, assets and credit score and has been fully approved for the loan.  If the lender answers no, most listing agents are going to advise their clients not to accept the purchase contract and find another buyer who is genuinely pre-approved.

Your Pre-Approval Letter May Not Be Worth the Paper It’s Written On

If you’re reading this and are relieved because you’ve already received a pre-approval letter from a big bank, the first question you should ask yourself is, “did my lender ask for and review my documentation?”

If you did not supply documentation to a lender and they gave you a pre-approval letter, all they gave you have is a glorified pre-qualification letter.  This means your approval is not worth the paper it’s written on.  So remember….pre-approval letter means verification of income, assets and credit.

When Should I Get Pre-Approved?

You should be fully pre-approved, we call this a “genuine pre-appoval” by a reputable lender BEFORE you start to even look for a house.  You need to know how much you can afford, if there are any mistakes in your credit report that need clearing up and if there is anything you need to work on to get pre-approved for financing before you start looking for a home.

Not Quite Ready to Get Pre-Approved but Want to Learn your Options?

If you’re not quite ready to go through the pre-approval process but want some information about what types of programs may fit your financial needs, we can schedule a time to sit down and talk about your options.  Of course, there is no obligation or charge for this meeting.  Call me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com to schedule a time to sit down and talk.

Received Something from a Bank and Want to Make Sure It’s a Genuine Pre-Approval?

If you are beginning the loan process or already in the process and want to make sure you have a genuine pre-approval letter, give me a call at (650) 520-0915 or send me an email at info@SanMateoMortgageBlog.com.  I still fully pre-approve all my clients at the very beginning, well before they start looking for a home.  It is the most important piece in the home buying process and will ensure a smoother and successful closing.

Related posts:

1. Biggest Problem with New GFE and How to Avoid It
2. What is a Genuine Pre-Approval and How Long is It Good For?
3. Why It is Imperative to Get a Pre-Approval Before Submitting an Offer
4. What Is and What Is NOT a Pre-Approval
5. New Good Faith Estimate Misses the Mark

Lender Not Required to Provide GFE until Borrower Under Contract

The new regulations do not require the lender to generate a GFE or hold the lender to their fees until the borrower is under contract with a property.  This means that you can’t realistically shop between lenders until you are under the time constraints of a purchase contract. Waiting until you are under contract to stop start shopping for your loan and then beginning the loan approval process is going to make it very difficult to close your transaction in a timely manner.

What Happens if I Don’t Have Loan Approval?

Worst case if you don’t have loan approval before your financing contingency is up (typically 14 to 17 days after you go into contract) you could very well lose the home of your dreams and could also lose your earnest money in the process.

How Can You Avoid Problems with Financing?

To avoid all of this hassle, my advice is to work with somebody you can trust, have confidence in and is there to be a true advocate to you.  Even before the new regulations were in place, I have always provided my clients with an accurate estimate of closing costs and the funds needed to close their transactions at the very beginning of the loan process.  I do not wait until you are under contract, as I think you need to have a clear understanding of how much it is going to take to close the transaction before you start submitting offers.  If it is important to understand how much it is going to cost you to buy a home, ask your Mortgage Advisor to provide you with the breakdown of the costs before you start looking for a San Mateo home.

Want a Second Opinion?

I’d be happy to take a second look at your loan or Good Faith Estimate issued by another lender, free of charge.  I can help you determine whether this is the best loan program for you and if you are getting the best mortgage interest rate.

If you’re in good hands…we’ll tell you!  If there’s something you should be concerned about, we’ll tell you that too!  Then, you decide what the best course of action is.  Call me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com to schedule a no obligation consultation.

Will Big Banks Stop Issuing Pre-Approvals?

The new regulations have definitely turned the loan process upside down for most lenders.  So much so that I’ve heard some big time lenders may to stop issuing genuine pre-approvals to borrowers before they look for a home!  Tune in next time to learn the importance of getting a pre-approval before you start shopping for a home and why some lenders may stop issuing this service.

Related posts:

1. Big Banks May Stop Issuing Pre-Approvals
2. New Good Faith Estimate Misses the Mark
3. 12 Biggest Mistakes Consumers Make When Refinancing
4. Mortgage Disclosure Information Act: Will it Affect You?
5. How to Read the New Good Faith Estimate

At the beginning of 2010 new lending guidelines went into effect regarding how loan originators handle the loan process and how closing costs must be disclosed to the buyer.  One of the new rules included a nationwide standard Good Faith Estimate (GFE).  The purpose of the new Good Faith Estimate is to hold lenders to the fees they quote the buyer and make it easier to compare loan programs and fees between lenders.

New GFE’s Goal: Allow Buyers to Compare Loans

HUDs goal is to make sure that all lenders quote realistic fees and try to avoid any last minute closing cost surprises.  This is definitely a plus for the buyer but besides HUDs goal of quoting realistic fees, the new regulations were put into affect to help home buyers make an apples to apples comparison between loan products and fees from different lenders.

Does the New GFE Solve the Problem and Help Home Buyers Shop?

I’d say no.  The problem with the new GFE is that lenders are not required to provide a Good Faith Estimate or commit to any fees quoted until a home buyer has an accepted contract to purchase a certain property.  This means if you want to compare loan products from different lenders, you really can’t make an apples to apples comparison until you have an accepted contract, which, in my opinion, is too late.

Can’t I Start Shopping for a Loan After I Get an Accepted Contract?

Remember, when you are under contract, you are also under the time constraints of the contingencies in that contract.  (A contingency is a legal right to get out of the contract.)  In San Mateo County, you typically have 14-17 days to get final loan approval under the financing contingency.  Once the clock starts ticking on the contingencies, it is nearly impossible to start shopping for a mortgage loan and close your transaction on time.

Final Verdict? The New GFE Misses the Mark!

Although HUD had good intentions in standardizing the GFE so buyers can accurately compare loan products, the fact that they cannot start to compare loans until they have an accepted contract makes it impossible to gather the information and close the loan while staying within the time frames laid out in the contract.

In my next few posts I will explain how the fees are disclosed, how the loan process has been altered for the buyer and how lenders may start handling the pre-approval process.

Have Questions About the New GFE?

If you have any questions about the new Good Faith Estimate, or would like to schedule a time to sit down and go over the new rules and what you can do as a home buyer to make sure you have a successful transaction, give me a call at (650) 520-0915 or send me an email at info@SanMateoMortgageBlog.com.

Related posts:

1. How to Read the New Good Faith Estimate
2. Biggest Problem with New GFE and How to Avoid It
3. HUD’s Time-line for Buying a Home in San Mateo and Why It’s Wrong
4. Big Banks May Stop Issuing Pre-Approvals
5. Shop for a San Mateo Mortgage Advisor First to Get the Best Interest Rate

Now that you’ve received all of your W-2s and 1099’s, home buyers who purchased a San Mateo home in 2009 are starting to think about their taxes so they can (hopefully) get some money back from the IRS with the home buyer tax credit. Several clients have asked how to claim the home buyer tax credit. Here are some tips.

No e-File Allowed

Because of all of the fraud surrounding the credit, the IRS is not allowing tax payers claiming the home buyer tax credit to e-file because of the additional documentation required.

Additional Documentation Required

Along with your regular tax forms, you must attach Form 5405 with a copy of the HUD-1 Settlement Statement. (You received this from the Title Company when you signed the loan documents at closing.)

Trade Up Home Buyer? More Documentation Required

Remember, to claim the $6,500 trade up home buyer tax credit, home owners must have lived in their primary residences for at least 5 consecutive of the past 8 years and be purchasing a new primary residence.

To prove you’ve been in your home for 5 consecutive years, you will need to provide one of the following covering 5 consecutive years in the last 8 years in addition to Form 5405 and your HUD-1 Settlement Statement:

• Form 1098, Mortgage Interest Statement or substitute
• Property tax records
• Homeowner’s insurance records

Need More Information About Filing the Tax Credit?

Remember, I am a San Mateo Mortgage Advisor helping San Mateo home buyers with their mortgage needs, NOT an income tax specialist. So, for more questions contact your Tax Advisor or visit the IRS webpage.

If you need a recommendation for a tax advisor, send me an email at info@SanMateoMortgageBlog.com and I can recommend someone to you.

Related posts:

1. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part 1
2. California’s New Home Buyer Tax Credit
3. Federal Home Buyer Tax Credit Not Just for San Mateo First Time Home Buyers Anymore
4. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part II
5. Slide Show – Guide to the Extended and Expanded Home Buyer Tax Credit

Date/Time: Tues Feb 16, 2010 at 7pm

San Mateo First Time Home Buyer Class

Lately there has been a lot of buzz surrounding pre-foreclosures and foreclosures in San Mateo. Can a San Mateo home buyer really get a good deal on a distressed property or is all the hype just for headlines?

What Will You Learn?

We’ll spell all of it out for you from…

• What is the difference between a foreclosure, short sale and REO?
  
• How do you go about buying a foreclosure property? 
  
• How do you finance a property in foreclosure?
  
• What are the risks associated with buying a distressed property?
  
• How you can get $35,000 upfront to fix any cosmetic repairs – cause you can!
  

Bonus for First Time Home Buyers

You’ll also get a detailed, step by step action plan to show you how to get the best deal possible on a San Mateo home. As a bonus for first time home buyers, learn about how to use your $8,000 federal income tax credit before it expires in June 2010!

Invest 90 Minutes Now to Save Thousands

Foreclosures and short sales are a growing percentage of properties on the market today. By taking the steps now to position yourself to get the best deal possible may mean thousands more dollars in equity a few years from now. Isn’t it worth 90 minutes of your time to invest in your future?

The program is free to attend and will be held at 1700 El Camino Real in San Mateo. All we ask is you register via the form below or by calling (650) 520-0915.

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Other Posts You May Enjoy

• Can I Use My Tax Credit as a Down Payment?
  
• What Should I Bring to My First Appointment with a Mortgage Advisor? 
  
• No Money to Put Into Home Repairs? No Problem!
  
• Learn the 10 Steps to Profitable Home Buying in San Mateo
  
• What Does the New Economic Stimulus Bill Mean to First Time Home Buyers?
  

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. First Time Home Buyer Class
2. First Time Home Buyer Loan Program for Financing Foreclosures
3. July 11th: First Time Home Buyer Class
4. Class – Guide to Buying Condos with New Financing Rules
5. New Fannie Mae Loan Program for Foreclosures