Make It All About You

Each day is full of noise about real estate and our economy. Trying to purchase a home has become a competitive sport. Some buyers will fall out of the market when the weather warms and their frustration from multiple out bit offers has worn them out… they will devote their few remaining weekends to summer living versus house hunting.
If this fall is like the past 3 or 4, prices will gently fall, bidding wars will wain with 2 or 3 competitors and sometimes just one bid… versus the double-digit competition in the early spring market. Inventory will continue to be the huge issue.
However, it is important to keep in mind the economic conditions are constantly changing and in our increasingly global economy events near and far can impact interest rates and financial markets for better or worse.
Perhaps the Millennials have it right, with all the hand wringing about “when will this generation start buying real estate?” They are taking their time and waiting until it is right for them. This is wise.
We should be making our major life moves when the time is right for us. Not because our family members, friends and the media are touting it’s now or never, this is the time, rates are low, do it now no matter what, get in at any price.
Buying a piece of real estate is a big and life changing commitment, you cannot move on a whim at the next romance or job offer, you may have to maintain, repair, pay up for improvements with your extra funds. When the time is right for you, go for it. When the time is right for you, the opportunity will be there. If rates are higher, it is likely that values will stabilize or slightly decline, if rates rise keep in mind that rates will likely fall again. Innovative but not risky programs will be developed to support first time buyers in a rising rate environment. There will be a way to make a home purchase happen when the time if right for you!
Home ownership creates stability and wealth, it makes sense. It makes sense when the time is right and the buyers are ready to take on the responsibility.
Don’t fall into the frenzied ‘get it at all cost’ attitude that is starting to rule the current environment. Make the decision that the time is right for you because you are ready to take it on, not because social pressures are mounting for you to make a huge lifestyle change.

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The New Trend in Credit Reporting

While “transactors” and “revolvers” may sound like the newest Sci-Fi movie, they are actually two new categories now measured by a new credit reporting approach called trending credit. This new approach goes back two years and looks not only at payment timeliness but also at credit trends. A “transactor” pays their credit on time and often in full or significantly over the minimum required payment. A “revolver” is more likely to pay the minimum required, move balances around, and shop for better credit card deals. Revolvers are considered riskier especially those who carry large unpaid balances.

Until recently credit reports told us if the applicant was late on a payment or had defaulted on a loan but they didn’t tell us how the consumer manages their debt.
Fannie Mae will begin evaluating how all applicants manage their credit with a two-year look back to determine payment and spending patterns. This is called ‘trended credit data’ and we have yet to learn how this new approach will impact consumers. However, the common belief is that utilizing this approach will help millions of consumers who have little to no credit history or do not generate a credit score, to build their credit profile. This may allow them to qualify for a mortgage today that they did not qualify for in the past.

This new trending data approach will not alter a consumers FICO credit score, but will change the way the consumer’s use of credit is evaluated. It will take some time to determine how this approach is working for the mortgage industry. Credit industry experts say this move by Fannie Mae is a huge step towards fairer credit.
Freddie Mac has not made a decision to adopt this approach as of this time.
There has been no national discussion addressing any potential negative impact this will have on lending qualification. We will have to wait and see but for now it is important to understand that consumers’ credit is now being evaluated at a deeper level.

For more information on this subject read this great article by national real estate reporter, Ken Harney


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Causing delays in the mortgage approval process.

Ahhh… Spring, the flowers are blooming and the kids are running in the yard and this year’s taxes are filed and behind us. This is a great feeling, but one that soon can go away when it comes to securing a home loan.
From first time buyers to seasoned borrowers, it is no secret that your lender will require you to provide income documentation in order to obtain a home loan approval, including W2 paystub’s, tax returns and the like. What you don’t know is that tax transcripts are required on most mortgage loans originated across the country. Tax transcripts are a validation that comes directly from the IRS to prove that the income used to qualify the borrower is actual income of the borrower and that the lender didn’t miss something or that the borrower is not potentially committing fraud.
Normally, getting copies of tax transcripts isn’t a big deal, but for borrowers who filed their 2015 returns late, or who mailed in their tax return versus filing electronically, tax transcripts may not be available or be delayed. Depending on the source of the borrower’s income, the overall strength of the loan file, and the loan program, the lender may be able to make an exception and close on a loan with missing transcripts, but not always.
Be aware that if asked for an extension on a closing or a commitment date due to an inability to obtain transcripts, don’t blame your lender. This situation is temporary and generally by the end of June transcripts are on track and on time. It’s always better to take the time to do it right. As I have always said, careful and steady always wins out over quick and sloppy.

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