LOAN PRE-APPROVAL WILL HELP BUYERS MEET FEDERAL TAX-CREDIT DEADLINES

First-time home buyers have until April 30 to enter into a contract to purchase and close by June 30 to qualify for the $8,000.00 federal tax credit. The April 30 deadline applies equally to existing home buyers who seek to qualify for the $6,500.00 federal tax-credit. One way to help meet the April 30 and the June 30 deadlines is for the buyer to be pre-approved for mortgage loan he requires. When the home-buyer has a preapproval letter from the lender , it means the borrower is able to enjoy a faster closing date, because there is no window period while your loan application is being processed. This can result in shortening the closing time from 30 to 60 days to two or three weeks, which can be very important if the buyer needs to move quickly to meet the above deadlines. As stated below often times there is confusion between a buyer being pre-approved and being pre-qualified. Home loan pre-approval and pre-qualification are different and distinct processes.*

NEW JOBLESS CLAIMS FALL SHARPLY AS RETAIL SALES ARE UP

Initial filings for unemployment benefits fell by 6,000 to a seasonally adjusted 462,000. That nearly matches Wall Street analysts’ estimates and is the second straight drop. These figures follow positive news on employment provided by the Labor Department. For the month of January. Job openings rose to their highest level in almost a year and the unemployment rate remained unchanged which was better than analysts had predicted. According to the Commerce Department retail sales climbed 0.3% vs. January, the most in three months and 4.4% above last year. Wall Street had anticipated 0.2% drop. Analysts said rising stock prices, stabilization in home prices, government stimulus and slowing job losses have helped to support consumer outlays, which account for 70% of economic activity.

HOME-MORTGAGE RATES DECLINE TO LOWEST IN FORTY YEARS

Home-mortgage rates continue to remain low. The average rate on a 30-year fixed-rate continued to hover below 5% , averaging between 4.8 and 4.9%. Fifteen-year fixed-rate mortgage averaged 4.33% this week, down from last week’s 4.40% average. The mortgage average 5.81% a year ago..Many experts agree that the rates will not remain too low for long and will rise once the Fed’s program ends, hurting the recovery in housing and the overall economy. However, there is still time to take advantage of the historically low interest rates.

EXISTING HOME SALES UP IN THIRD QUARTER/ INVENTORY DOWN

The New Jersey chapter of the NAR announce that existing home sales in New Jersey rose 8.5% in the third quarter of 2009 as compared with the same period last year and attributes the spike in…activity in New Jersey to the rush of first-time homebuyers aiming to take advantage of the $8,000 Federal tax credit. President Obama signed legislation extending and expanding the tax credit (see below). At the same time ,there is a declining housing inventory –which fell to its lowest level in twenty seven years which according to leading economists signals a stabilizing Market.

CONGRESS AND PRESIDENT EXTEND AND EXPAND TAX CREDIT

The President has signed legislation that extends the present $8,000 tax credit for first-time homebuyers through April 30^th2010. Additionally, current homebuyers who have lived in the home they are selling for five of the last eight years are eligible to receive a $6,500 tax credit. In a further effort to make this legislation available to more homebuyers the income limits for eligible homebuyers has been raised. NAR economists estimate that the current tax credit has contributed approximately $22 billion to the general economy, and approximately two million people will take advantage of the tax credit this year.

Finally, as the unemployment figures hover around 10%, the President signed legislation that extends unemployment benefits up to 20 additional weeks for unemployed workers in states including New Jersey.

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PRE--QUALIFIED V. PRE—APPROVED*

Often times there is confusion between a buyer being pre-qualified and being pre-approved. Home loan pre-qualification and pre-approval are different and distinct processes, so it is important to understand the difference. Pre-qualification is a preliminary process which requires the buyer to complete a mortgage application and allows loan officer or loan processor or mortgage broker to check the buyers credit determine how much may be borrowed on a mortgage loan prior to the buyer making a formal application. This is a good first step which enables the buyer to approximate the price range for the home purchase. But only a mortgage underwriter can pre-approve a buyer for a loan. To be pre-approved the buyer must provide the underwriter with verification of income and asset documentation ( W2’s,bank statements).The underwriter will then approve the buyer for a specific loan amount and property value. Once the buyer is pre-approved the seller should have comfort that the mortgage contingency clause in the contract of sale will not be a problem and the transaction will close in a timely manner.

FIRST-TIME HOME BUYER CREDIT

As part of the Presidents’ stimulus package first-time homebuyers are eligible to receive a tax credit equal to ten percent of the purchase price of their home, up to a maximum of $8,000, if they purchase after January 1,2009, but before December 1,2009. Unlike last year’s Congressional $7,500 tax credit, there is no payback provision. The tax credit will phase out for those individuals with incomes over $75,000 or married couples with incomes over $150,000 who files their taxes jointly. First- time buyer was defined in last year’s law as those individuals who have not owned their home for three years. There is a forfeit provision if the homebuyer sells the home within three years. According to the National Association of Realtors, first-time homebuyers account for approximately 41 percent of total home sales.

NEW FICO CREDIT SCORE DEBUTS

Fair Isaac Corp. has announced its new-improved-FICO score. The new score is touted to be more accurate in predicting borrower defaults and more forgiving of one-time slipups ,but will take a harder line on repeat offenders. The score will still range from 300 to 850 and is programmed to do a deeper analysis of subprime borrowers or those with “thin” or young credit histories . According to FICO more customers with accounts in good standing should see a slight increase in their credit scores in addition to improving the accuracy of lending decisions by as much as 15%. Fico will also factor in credit-card accounts for authorized users, such as children and spouses. FICO has joined with Trans Union LLC and Equifax Inc. two of the three major credit bureaus . The Experian Group Ltd. has declined to participate.

FREE CREDIT SCORES MAY BE OFFERED

Consumers may soon be able to get “free credit scores” through their bank or credit unions.

Fair Isaac Corp., maker of the FICO credit score, has announced an agreement to approximately 200,000 members of the Pennsylvania State Employees Credit Union. Fair Isaac said that this is an expansion of an existing program presently being offered to credit-card members at Washington Mutual, which is being acquired by J.P. Morgan Chase. Fair Isaac stated that they are in ongoing discussions with many of their customers to expand the program. In addition to getting their credit scores, consumers will also be advised as to the reasons for their score and the actions they can take to improve their scores.