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 30th2010.
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.
.
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.