Today’s volatile housing market demands that home buyers take an exacting, almost surgical approach to completing a mortgage application in order to speed the paperwork through the narrowed arteries of the home loan pipeline.
Profusely sweating the details of a mortgage application gives lenders fewer reasons to reject your quest for the American Dream. And the need for speed is crucial if you want to beat today’s realty market clock which frequently resets itself.
The real estate market’s mortgage credit squeeze tightens one day then eases the next. So there’s no room for vagueness or foot dragging when completing a mortgage application.
Here are your marching orders.
Tighter underwriting regulations, fewer mortgage options, appraisers trying to keep tabs on value changes, and several recent federal interventions to help cure the housing hangover this year alone, are all conditions that reflect the unsettled nature of a housing market in the throes of correction.
It’s like marching into hostile territory. Actually, it is marching into hostile territory.
Market conditions insist on laser-focused offensive of market monitoring and, when the time is right, fast-as-a-speeding-bullet action. Hesitate at the wrong moment and your mortgage action — along with your dreams — could go up is smoke.
Case in point: mortgage rates plunged recently just days after the most far-reaching federal effort yet was launched to stem the credit chaos spawned by the housing hangover. That’s doesn’t mean rates will remain reduced.
Control of Freddie Mac and Fannie Mae recently went to the new Federal Housing Finance Agency (FHFA), spawned by the “Housing and Economic Recovery Act of 2008′s” statutory merger of the Federal Housing Finance Board (FHFB) and the Office of Federal Housing Enterprise Oversight.
“The full weight of the federal government backing Fannie and Freddie is huge! For the short term, rates have improved to their best levels since 2005. The spread between the larger conforming loans and the loans of $417,000 and less has almost been eliminated,” said Quincy Virgilio, president elect of the Santa Clara County Association of Realtors.
Virgilio, added “My thoughts are, if you were thinking about buying, it’s time to act. I believe we have a short window of opportunity to take advantage of the current lending environment.”
Virgilio concedes, once the elation about government intervention subsides in the fickle investment markets and the new regulator gets to work, rates could just as quickly shift the other way.
Other experts agree.
“While the short-term impact of the Treasury’s actions served to calm the markets and restore confidence, in the longer term, these entities need to be able to fulfill their historic mission,” said California Association of Realtors’ Executive Vice President Joel Singer.
“A privatized Fannie and Freddie will short-circuit the countercyclical role the GSEs (government sponsored enterprises) have played during precarious times in real estate markets,” Singer added. “Without an institutionalized mortgage-backed securities market, mortgage capital will be less predictable and more expensive, and adjustable-rate mortgages could become the standard loan for home buyers, as could higher down payment requirements.”
Says Virgilio, plain and simple, “For the next few months, it’s time to act.”
In “How Can You Speed Up the Approval of the Loan?” the Federal Reserve suggests:
Determine what documentation you’ll need to back up any claims you make on your application. Whenever possible have the original copies of the evidence in hand when you complete you application. Don’t wait for the lender to ask.
In the past, there’s been plenty of time to look for a home or mortgage and its been recommended to shop for a mortgage first and then shop for a home. However, recent evidence suggests, whenever possible, bring a purchase contract for a house when you sit down to complete an application. You may no longer have the luxury of securing purchase money and then looking for a home. Mortgage underwriting terms and the lenders whim could change after you secure credit, while you hunt for a home. Bring a property for sale to the table.
Secure a rate lock. Once you are approved for a mortgage, secure a written guarantee for an interest rate, points and other terms. The lock can give you an edge by locking in terms, but not necessarily the loan. Speed still remains essential.
Also bring to the mortgage application, your bank account numbers, the address of your bank branch and your latest bank statement, plus pay stubs, W-2 forms, or other proof of employment and salary, to help the lender quickly check your finances. Likewise have information about debts, including loan and credit card account numbers and the names and addresses of your creditors. Secure evidence of your mortgage or rental payments, such as cancelled checks.
If you are self-employed, have a home-based business or work as a contractor, secure balance sheets, tax returns for two-three previous years, and other information about your business.
Remain available. Don’t go on vacation. Respond promptly to your lender’s requests for information while your loan is being processed. It is also a good idea to call the lender and real estate agent from time to time to check on the status of your application, and offer to help, contact others such as employers who may need to provide documents and other information for your loan. Keep a log of notes about your contacts with t he lender and others so that you will have a record of your conversations.
Know your credit report and credit scores. You should have copies of your credit report and credit scores — one from each of the three credit reporting agencies — before you apply for a home loan. You should have been monitoring them for the past few months, if not longer, for errors, anomalies and other factors that could affect your application.The only federally-regulated provision for your free credit report is available from AnnualCreditReport.com. You are entitled to one free credit report each year from each of the three major credit reporting agencies, which means you can get three different credit reports each year at no cost. Under most circumstances, credit scores come with additional, but nominal cost.
Written by Broderick Perkins
More home buyers have a better chance now than at any other time in nearly a half decade to negotiate a home-buying deal that costs less and comes with some concessions thrown in.
