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7 Don'ts During the Mortgage Process: How to keep your approval

7 DON'TS During the Mortgage Process:

 How to Keep Your Approval 

APPROVED!

By Sam B. Brock NMLS #884442, CCAR REALTOR®/Lender Committee

Congratulations! Your newest clients used your preferred lender, and were quickly approved for the home of their dreams. So quickly, in fact, that it is going to take a couple of weeks before the current owners move out, so we've got some down time. The last couple of weeks before closing can be the most pivotal in the process, so keep these thoughts in mind (and your clients' minds) leading up to signing day.

1. DON'T apply for any new credit.
Yes, homebuyers need to have furniture and appliances in their new home. But, they don't need it right this second on credit because they were offered 20% off at FurniturePalooza Warehouse. They also don't "need" to get in on the "Sign and Drive" promotion at the dealership to put another car in that new, larger garage. Credit will be re-verified at some point before closing, sometimes as late as the morning of the signing. New debt that comes up will, at best, delay your closing. At worst, it will result in denial of the loan application.

2. DON'T make unexplainable deposits into accounts used for qualifying.
All funds for qualifying and closing must be sourced and seasoned for (generally) at least the last 60 days. Large deposits that the borrower "just had lying around" are a definite red flag. While many programs allow gift funds, there are limitations on each program and required documentation. Have your clients consult their loan officer before depositing any non-payroll funds. Along these same lines, remind your clients that large cash withdrawals can be viewed the same way. Details regarding reserve requirements follow in item #5 below.

3. DON'T change jobs.
This includes position changes, industry changes, compensation model changes (i.e., salary to commission), and retirement. Employment is confirmed during underwriting and reconfirmed within 48 hours of closing. If your client is up for a promotion or is changing jobs within his/her company--even if it means a better income--recommend requesting a delay in the official title change with Human Resources, or have him/her consult his/her lender. Most employers want their employees to relish success and enjoy the benefits of their hard work, and will be more than accommodating.

4. DON'T consolidate debt or close credit accounts.
Your buyer, with a 661 that barely qualifies for his/her program, wants to change their way of doing things and clean-up some old accounts that they didn't know were still open. Have him/her take care of this after closing. www.MyFICO.com shows the formula used to calculate credit scores as 15% based on age of credit, including oldest, newest, and average age of credit accounts. For some homebuyers, closing a few accounts that they don't use or that they have transferred balances away from could change their score enough to disqualify them before closing. By closing these accounts--even with low limits or secured accounts--Mr. 661 became Mr. 652 the morning of closing, and was either disqualified or had to be restructured, including another ride through underwriting and an extension on your purchase agreement.

5. DON'T pay-off collections/charge-offs.
Just like the effects that closing accounts in good standing can have on credit, paying collection accounts or charge-offs that appear on the credit report can actually decrease a score upon verification. The best general advice is to leave these alone until after closing. If the underwriter is okay with them, your client should be as well, until after the loan has closed. Further, many programs carry "reserve requirements" (additional funds that have proven the borrower's ability to save). If the borrower dips into these funds to pay a collection--even though he/she still has plenty of cash to meet the down payment or closing requirements--it can result in the same delays and turmoil as other credit issues. Always have your buyer consult his/her loan officer before making any such payments.

6. DON'T "skip" or "push the date" on other current monthly payments.
There is a theory amongst the public, some REALTORS®, and some loan officers, that in order to have extra cash available at closing, you can push the date on some of your monthly obligations, or even skip payments, since it won't be reflected on the credit report (in theory) for at least 30 days. This is generally poor advice. Remember that the underwriter has viewed and scrutinized monthly checking and savings account statements, and from the credit report, knows the amounts and due dates of the client's other obligations. It is not unheard of for an underwriter to account for all other monthly obligations when calculating the minimum amount of funds required to be shown in the account at closing.

7. DON'T make loans to others/co-sign on student loans, car loans, credit cards, etc.
While everyone wants to see their children or other loved ones succeed and have opportunities to better themselves, there is a time and place for everything. Even if your buyer is 100% sure he/she won't ever have to make a payment for the loved one for whom he/she is co-signing, upon verification, that obligation will be included in the debt-to-income ratio, and can have the same detrimental effect on the loan approval. Again, have your client consult his/her lender or advise them to wait until after closing.

The best advice when asked by your client whether or not he/she can or cannot, should or should not, might or might not, or ought or ought not do anything with his/her funds, credit, or other assets and liabilities during the mortgage process is to have them consult their loan officer or lender representative. Because of privacy laws, we (members of the lending community) are not always able to share with you, the agent, all of the particulars about the borrower's situation. Credit scores, income, debt ratios, and asset account information are privileged information that the borrower can decide to share with you or not. Modifications to this information can make or break your deal, so always err on the side of caution by following the recommendations above and consulting the lender with any questions.

DFW #2 Moving Destinations

Just the Facts

Dallas-Fort Worth Ranks as No. 2 Moving Destinations

Dallas-Fort Worth has been named as the second most popular moving destination in the nation, according to an annual study by moving company Penske Truck rental.   The data is based on the moving firm’s online consumer truck reservations.  Last year, Dallas-Fort Worth ranked as the No. 4 moving destination.  Atlanta continued to rank at the top spot.   The third top moving area was Phoenix.

-          Dallas Business Journal, January 14, 2013

You Are A Listing King With 2 Listings

That is what I am telling agents these days.  Every new listing is valuable, it is almost money in the bank if it is in good condition and priced right.   Case in point is Flower Mound.  Today it has 178 active listings; three years ago 550 active listings; ten years ago 750 active listings.  Yet ten years ago it took 140 days on market.  Today it is 60 days, and in the mid-range market approaching 30 days.  What a market!  And it was announced today that the number of home sales in January are equal to our great market in 2004 – just so few listings, and so few days on market.

-          Mark Wolfe, January 22, 2013 (with inventory input from Jeff Brand)

As Prices Rise, Rental Home Investors Seek New Markets

Rapid price increases are forcing real estate investors to shift their focus, and money, to new markets as they scramble to buy more homes to rent.   The California, Arizona and Nevada markets have skyrocketing home prices, even though they have not fully recovered from the 60 percent plus drop in home values over the past several years.  But the price trend is moving investors to Texas, Georgia and Florida.   Investment firms command $10 billion war chest to buy homes to rent.  Blackstone Group owns 16,000 homes, and is buying 2,500 homes monthly.  Colony Capital expects to invest $150 million monthly in home purchases in 2013.  It bought 5,000 homes in 2012.  Waypoint Homes, another California investor, currently owns 3,300 homes, but expects to own 10,000 by year-end.

-          USA Today, January 19, 20013 

Fix This, Not That: 6 Tasks to Do (or Not to Do) Before You Sell

Posted under: Home Selling, Remodel & Renovate  |  May 15, 2013 10:55 AM  |  103,287 views  |  74 comments

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Online, you can find dozens and dozens of return-on-investment (ROI) calculators which aim to do the math on whether a given home improvement project is worth the money (or not). They tend to focus on how much of the remodeling spend will come back to you in the form of added value when the home is sold.  I submit that this is only one part of the equation, as the primary measurement for many home improvement projects should be tallied up in terms of lifestyle improvement over the years you plan to benefit from the increased comfort, joy or efficiency of your newly-improved home.

Surprisingly, this calculus of what home upgrades are (and aren’t) worth doing gets slightly more complicated in the context of preparing a home for sale.  It seems like it should be even more simple - dollars in vs. dollars out.  But most agents or stagers will tell you that preparing a property for listing is more art than science, in that there are many human factors that must be weighed and balanced against the costs involved. 

For instance, whether a given project is worth doing sometimes depends on the current state of the property vis-a-vis local buyers’ expectations at that price range.  It can also depend on the relative aesthetic and perceptual boost that a particular project promises, and on any negatives that the property needs to compensate for.  The seller’s budget and even local municipal codes all must be factored in.

Accordingly, there’s no single set of black-and-white rules that apply to every property and every seller.  But here are some rules of thumb and food for thought that you should walk through with your agent or stager if you’re in the process of trying to figure out which tasks to do - and which to leave for your home’s next owner - before you put your place on the market.

FIX:  Paint. There is simply no accounting for the massive upgrade a fresh coat of paint can bring to the look and feel of your home, inside and out - especially given the relatively low cost and high do-it-yourself-ability of painting.  A home that is freshly painted inside and out reads as fresh, clean and ready for new life, from a buyer’s perspective.  A taupe wall with white trims and moldings has essentially become the new white wall of this generation - the aim is to go neutral, not boring.

If you can’t afford the time or cost to paint everything, take a hard look at your walls and rooms and see which hallway or room(s) need it the most.  Also, painting your trims, doors and moldings can go a long way toward de-shabbifying a place.  Similarly, on the exterior of your home, I cannot overstate the polish potential of painting the trims a bright or deep, color. Changing the color and refreshing the paint on your exterior shutters, doors and eaves gives a powerful update and burst of color to the place. 

Check in with your stager and agent about your color palette for any pre-listing paint projects before you have the hardware folks mix up a vat of chartreuse semi-gloss for the kitchen walls.

DON’T FIX:  That uber-luxe kitchen remodel you always wanted. Do gorgeous kitchens sell homes? Yes. But they also easily run into the tens of thousands of dollars. Unless your home’s existing kitchen is truly cringe-worthy, a high-end overhaul just before listing is not likely to even recoup what you spend on it. I advise sellers who are hemming and hawing about a kitchen remodel to do it while they and their families can still enjoy it.  If you’ve already decided to move on from the home and the kitchen is so bad as to render the place un-sellable, your agent and stager can help you come up with a moderate plan for whipping it into shape without breaking the bank.  Repainting or refacing cabinets (instead of replacing them), installing butcher block counters (vs. marble or stone) and replacing your avocado green appliances with nice GE or Kenmore versions (vs. Wolf and Miele) might be the route to go. 

Caveat: if your home is competing with luxury properties and you insist on listing it at top dollar, you might actually have to go with a higher-end kitchen upgrade plan before you list it. Think long and hard about whether this make more sense than simply discounting the property or offering a kitchen upgrade credit to the buyer.

FIX:   Plumbing problems.  Plumbing leaks make noise, cause damage to the wood structure and areas around them and are often believed by buyers to cost more to fix than they actually do. In some parts of the home, plumbing leaks are prone to being called out as conditions conducive to long-term structural problems by pest and structural inspectors. If you can have a handyman or plumber come in and eliminate drips and leaks, you will simultaneously eliminate some buyers’ objections or concerns about your home. 

And this goes for sewer line issues, too.  An increasing number of areas are now requiring that the sewer line from home to the sewer main in the street be inspected before or during a home’s sale - and be repaired or replaced if it is cracked or broken.  If you’ve had chronic backups or your home’s sewer line is simply due for an inspection, work with your agent to get the appropriate inspector out there now to get an understanding of what sewer line work will need to be done to comply with any local point-of-sale ordinances.

A new sewer line is a great draw for a buyer, as is one with a clean bill of health. If your line does need work, you and your agent might decide not to repair or replace it, based on your budget, how much of a seller’s market your area is currently experiencing, legal requirements and standard practices in your area. But you should have the state of the sewer line in mind, for better or for worse, before you set the list price for your home and begin preparing your disclosures for prospective buyers.

DON’T FIX:  Malfunctioning, costly appliances.  Consider offering a credit for the buyer to use to replace appliances that don’t work - or don’t work well. Buyers appreciate the ability to select their own new appliances on your dime. That said, it can be difficult for some buyers to get past the collective aura of bad repair that arises when a home has a whole host of really old or beat up appliances.  In some cases, it might even make sense to simply remove an appliance entirely, without replacing it at all.  In others, a replacement or a credit might make more sense - this is a topic for discussion with your listing agent, who should have a good understanding of what’s normal in your area and important to local buyers.

If you do decide to replace an appliance, consider resources like Craigslist, where you might be able to find used items in good repair at a fraction of the new cost.

Caveat: if you are in a price point or area where the average buyer uses an FHA loan to finance their home, there are certain appliances which must be in the home at closing, like a functional stove.  Discuss with your agent before you start ditching the old appliances.

FIX:  Old and outdated hardware, fixtures and finishes.  Hardware can refer to the little metalworks that make things work (or not) throughout your home, like hinges that make a door hard to close, cabinet and drawer handles and pulls or your closet door and drawer slides.  These are all the sorts of things buyers test out while they’re viewing a home. However, it also includes things that might work fine, but look outdated, like light switches, door knockers and kick plates.  Hardware, as a general rule, is inexpensive as home fixes go - if it will make your home function more smoothly and look like it’s been well cared-for, the low investment is well worth an upgrade.

Scuffed and scratched wood floors; 80’s era carpet, gold-plate lighting and faucet fixtures and even more recent upgrades that have seen better days (e.g. bowing and warped laminate floor sections) should all go on the list of finishes and fixtures to fix or replace before you list.  All cracks, chips, scuffs and nicks should go on the list, for that matter.

The rationale is the same: they are a highly cost-efficient fix vis-a-vis the big bang they make on your home’s appearance to buyers.

DON’T FIX:  Replacing old windows.  This is a project that many crave to do, especially if the windows are single-pane, aluminum framed, or involve rotten wood casings.  But it’s also a project that can easily become extremely expensive, and one that often snowballs into costly, time-consuming framing repairs.  Aluminum frames around windows can sometimes be spruced or painted to make them look at bit better, if absolutely necessary. And even old wood windows that have issues often create a generally charming feeling that helps a buyer see the home’s potential they can restore, better than if you replace it with inexpensive fiberglass windows before listing the place for sale. 

This advice is primarily for those tempted to replace a whole house worth of windows - if you have one window that is particularly offensive or allows water in, or even have multiple window panes that are cracked or broken, these are things you might want to repair or replace.  Your agent can help you make a suitable action plan on this score.

By contrast, if you have old, dinged, ugly or broken doors, toilets and sinks anywhere in your house, these are things you may want to rip out and replace before listing your home.  You might be amazed at how fast and inexpensively these fixes can be done, and how much of a stylistic upgrade and update you can get out of them.  

DFW Home Prices Rising Rapidly

The median single-family home sales prices sold through MLS hit a record high of $176,000 last month.  Home sales prices in North Texas are now about 10 percent higher than they were at the peak of the market in 2006-2007 before the Great Recession.  In 2009 at the peak of the recession, home prices had dropped to a median of approximately $130,000.  And housing economists predict that we are not yet in the peak price time of the year, which is May, June and July.   

-          Dallas Morning News, May 9, 2013

DFW Housing Market Accelerates

North Texas’ housing market took off like a rocket in April with a 30-percent jump in sales.  The year-over-year growth in pre-owned single family home purchases is the second largest the area has seen since 1998.  And the 14 percent rise in home prices from April 2012 is the biggest percentage gain in residential value on record for the area.  (RMDFW was up 49 percent in April over one year ago.)

-          Dallas Morning News, May 9, 2013

Cash Sales Now 28% of RMDFW Closings

Cash sales are accelerating in this historically tight market.  With little inventory, buyers are trying to put their best foot forward, and consequently more buyers are presenting cash offers.   We are now at 28% of all closings are cash sales at RE/MAX DFW Associates, up from the norm of 5%.  

Ross Perot, Jr. – “It’s Time to Buy a Home”

“The big picture: this economy is coming back,” Ross Perot, Jr. said during a interview in California, where he was breaking ground on a condo project backed by his Dallas-based company. “The American people are very shrewd and they realize it’s a great time to borrow to buy a home because pricing is very cheap.”    And that is changing as prices increase.   Further, foreclosures are drying up.   The monthly supply of foreclosures is now back to the 2007 level, before the Great Recession.   The decline in new problem loans shows that the recovering U.S. economy, falling unemployment and rising home prices, combined with more than four years of banks’ tightening lending standards, are propelling the worst real estate crash since the Great Depression into the rearview mirror.

-          Bloomberg News, May 6, 2013

5 Tasks to sell your home quick

Step 1: Assess The Value Of Your Property

Pricing your home right is the key factor in selling it in a reasonable amount of time. Setting a price too high will make your home undesirable to buyers. Pricing it too low may, in fact, deter buyers who wonder what's wrong with it - or simply not get you a fair price for your property. Now is the time to do your research.

How much should your house sell for? In other words, what's the 'right' price? It's the price at which homes similar to yours in the same neighborhood have sold recently. You can use the free online home valuation service to find out exactly what your home is worth if you plan to sell your house yourself. Alternatively if you plan to sell your house with an agent, a good Realtor can quickly give you a reasonable approximate price based on recent sales in your neighborhood, coupled with the condition and specifics of your house. A Realtor can also make specific suggestions for things you can do to prepare your home to sell for a good price.

Step 2: Figure Out How Much It Will Cost You To Sell

If you've never sold a house before, you may not be aware of all the associated costs. You'll need to know about these costs in order to help you adjust the asking price on your house, as well as to help you estimate the profit that you'll realize on the house. If you're counting on the sale of your house to finance the purchase of another, this is especially important. These out-of-pocket costs may include:

    Advertising your home, if you're selling it yourself. This could easily run into hundreds of dollars, depending on the methods you choose.
    Realtor commissions - typically 6% of the selling price.
    Closing costs, including attorney and other professional fees
    Excise taxes on the sale
    Property taxes and any homeowner association fees


Step 3: Take Care Of Any Needed Repairs

If you've been putting off getting the driveway fixed, repairing the roof or any other needed repairs, the time to do it is now, before you put your house on the market. Some repairs, left undone, will prevent your home from selling at all and others will bring your asking price down. Replacing broken roofing tiles, loose gutter shoring and other minor but unsightly problems will make your house that much more saleable.

Step 4: Get Your House Looking Its Best

Selling for the price you want depends on how appealing your house is. Take a good, hard look at your house, inside and out. Trim bushes, mow lawns, plant a flower bed. Something as simple as giving your siding and windows a good scrub down can freshen its look immensely.

Here are some other things that increase the chances of your house selling quickly:

    A fresh coat of paint, or just touching up the trim
    Freshly painted interior walls
    New carpet or flooring in common rooms like the kitchen or bathroom


Step 5: Have A Garage Sale

Get rid of all the accumulated clutter and pocket a little profit at the same time. That collection of kids' bikes in the garage may be a storehouse of memories to you, but to a prospective buyer they're just clutter - and they will make your garage look smaller. Clear away as much clutter as you possibly can. When you're ready to show your house, it should be as close to move-in condition as possible. The more easily a buyer can picture their own family in the house, the more likely they will be to buy.