First-Timer's Guide To Mortgage Shopping

First-Timer's Guide To Mortgage Shopping

by Broderick Perkins

It's not everyday you go looking for a mortgage.

It's not a trip to the mall.

It's a methodical, step-by-step process requiring planning, time, effort and attention to details.

Here are some guidelines for beginners, especially first-time home buyers -- assuming you've already laid the groundwork by inspecting your credit report.

• Inspecting your credit report and getting it in the best shape possible is your first step to the best mortgage. In today's tight money world it behooves you to take the time necessary to carefully scrutinize your credit report and credit score to be prepared to explain to creditors any dings you can't fix.

• Shop around for a mortgage from a variety of sources to determine what's available. Shop mortgage brokers, mortgage lenders, banks and credit unions. Don't forget to examine your local and state mortgage programs as well as community service and housing agency mortgages and mortgage assistance programs.

• Obtain all loan cost information, not just the monthly mortgage payment and annual percentage rate (APR). Check the cost of points (in dollar amounts, not just number of points), broker fees, origination fees, underwriting fees, administrative costs, mortgage insurance, yield spread premiums, commissions, escrow and closing costs -- each and every cost associated with your mortgage. You need these numbers to make a fair comparison.

• Get an explanation for every fee you don't understand. Use the Federal Deposit Insurance Corporation's (FDIC) "Mortgage Shopping Worksheet" to help keep your costs in check.

• Check the loan terms for a variety of loans. Know what down payment you'll need, the term of the loan, whether the loan is a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM) and the specific terms of each. For ARMs, ask for the beginning rate, when and how often adjustments occur, how much adjustments could cost, and the ARM's ceiling rate.

• Be aggressive. Prepare to negotiate with the information you've gathered on the mortgage worksheet. The more information you have about each loan the move negotiating leverage you'll have. A pristine credit record can also give you an edge. Look particularly to quibble over points, yield spread premiums and other broker's fees or commissions. Don't be afraid to ask the lender or broker to waive or reduce one or more of its fees or to agree to a lower rate or fewer points. Make sure the lender or broker isn't just lowering one fee to raise another or lowering the rate to raise points. There's also no harm in asking lenders or brokers if they can give better terms than the original ones they quoted to you, especially if you've found better terms elsewhere.

• Once you are satisfied with the terms you have negotiated, consider a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, the number of points to be paid and a lock on as many other costs and terms as possible.

• Also seek a written loan commitment that guarantees you the terms and costs you've locked. A loan commitment puts you ahead of the pack in the eyes of the home seller who wants to sell quickly.

Published: March 25, 2010

Short-Sale Incentives Start April 5th

Short-Sale Incentives Start April 5th
Potential buyers of short-sale homes might consider waiting until April 5th before making a formal offer.

That’s the date the federal government will begin offering lenders financial incentives to hasten the process. Under the new rules, banks will seek a BPO before the property is listed for sale and let the sellers know a minimum number they are willing to accept. If the sellers bring a buyer with a good offer, the lender must accept it within 10 days.

Not all sellers are eligible for the program, dubbed the Home Affordable Foreclosure Alternatives (HAFA), but enough are that it is probably worth waiting.

Source: The Wall Street Journal, June Fletcher (03/19/2010)

Mortgage industry pros adjust to new 'final rule'

Friday, March 12, 2010

Mortgage industry pros adjust to new 'final rule'

Denver Business Journal - by Paula Moore

A new federal regulation designed to make the homebuying process easier and more transparent for purchasers has caused delays and other problems for some real estate professionals since it went into effect Jan. 1.

But residential real estate brokers and mortgage professionals who deal with the new rule say they're getting used to its forms, procedures, buyer education and other components.
Mortgage professionals - lenders and brokers - face a financial hit if they don't correctly handle the new regulation.

"The final rule involves a lot of change ... a business framework change, and everybody is working through the change right now," said Joel Horn, president and CEO of Denver-based Mortgage Spirit LLC, a provider of loan research and technology to the mortgage brokerage industry. "It's going to take a bit to get through the change curve, but over the next three to six months, the issue will die down."

The "final rule" is part of the Real Estate Settlement Procedures Act (RESPA), which was enacted in 1974 to help homebuyers find the lowest-cost mortgages and refinancings. The rule relates to good-faith estimates for mortgage loans, and it was adopted in November 2008. The regulation went into effect Jan. 1, after about a year's grace period.

Penalties associated with violations of the new rule kick in May 1.

The U.S. Department of Housing and Urban Development controls and enforces RESPA.
Under the final rule, mortgage providers must give homebuyers a good-faith estimate of a mortgage loan's major terms as well as closing costs. The estimate should include whether a loan has a fixed or variable interest rate, if the borrower will incur a pre-payment penalty for refinancing the loan and if the loan includes a balloon payment.

As part of the new rule, the good-faith estimate document has been shortened to three pages from four, and consumers can compare estimated closing costs with actual costs included in their HUD-1 settlement statement. The settlement statement is a comparison of estimated closing costs with the actual costs, and real estate agents provide it at the closing of a home sale.
The rule has caused delays in closing home sales, but only by one to three weeks, according to agents. Some real estate pros were worried delays would be more than double the standard 30- to 35-day closing period.

"It's not delaying closings as much as we originally thought it would," Gary Bauer, an independent residential real estate broker in Littleton, said of the final rule. "We've had delays of about a week because of the educational process with buyers, but I think that will change as people get used to the change."

Some real estate agents have been careful not to schedule closings too close together, to give themselves time to deal with changes in the closing process. "We're going back to the old days, where the transaction is a little more comfortable," said Jolon Ruch, a broker at Keller Williams Realty Inc. in Westminster and a vice president of the Colorado Association of Realtors.

Charles Roberts, a broker owner at Your Castle Real Estate LLC in Littleton and board member of the Denver Board of Realtors, has noticed no problems among his agents because of the new rule. But because Roberts is both a loan officer and a real estate agent, he has observed that "this thing is more difficult for the loan officer."

"The good-faith estimate is supposed to be a good shopping tool for homebuyers. ... It's costly [to the mortgage lender] if you make a mistake, but it's made lenders not make mistakes, which is better for every consumer," said Pete Lansing, president and CEO of Universal Lending Corp. of Denver, one of the metro area's major mortgage lenders.

With the good-faith estimate, mortgage lenders and brokers have more incentive to do their jobs correctly because of penalties related to "tolerances" in the rule.

The rule has zero tolerance for increases in how much mortgage professionals charge for their services, including origination fees and transfer taxes. Once those charges are set, they can't be increased, and if mortgage professionals underestimate fees, they have to absorb that cost.
The rule gives a little leeway - 10 percent - on changes in estimated closing costs on a home purchase, such as title insurance and government recording charges. If actual closing costs vary more than 10 percent from the estimate, the mortgage lender refunds the difference to the buyer.

"People in our industry are focused on getting it right. ... They want to make sure loans are done correctly," said Bob Montoya, executive director of the Colorado Mortgage Lenders Association.

Denver area bucks slide in pending home sales

Denver area bucks slide in pending home sales
By Courtney Schlisserman
Bloomberg News
Posted: 03/05/2010 01:00:00 AM MST
Updated: 03/05/2010 01:17:17 AM MST

(Special to The Denver Post)

WASHINGTON — The number of contracts to buy previously owned U.S. homes unexpectedly declined in January, showing that the extension of a tax credit is sparking little interest.

The index of purchase agreements, or pending home sales, fell 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors announced in Washington. In November, the measure slumped a record 13.7 percent.

However, pending home sales in the Denver area were up 21.9 percent to 3,690 in January, compared with 3,028 during the prior month, according to previously released data.

Nationally, snowstorms in February probably limited contract signings and sales that month as well, the group said.

The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping to boost sales last year. A lack of jobs and mounting foreclosures have depressed confidence, indicating that housing will take time to rebound.

The original deadline for the credit "clearly pulled demand forward, and there has been a substantial payback," said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, N.C. "The housing recovery is going to be very, very slow."

Economists forecast the gauge would increase 1 percent in January after a previously reported 1 percent gain in December, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from a drop of 4.2 percent to an increase of 4 percent.

Denver Post staff writer Margaret Jackson contributed to this report.

Read more: http://www.denverpost.com/business/ci_14515956#ixzz0haufDMTd

Denver housing data focus of economic report

By John Rebchook on March 2, 2010 · Comment · Email This · ShareThis

The Denver-area economy shows signs of improvement so-far this month, with much of the strength lying in the housing market, according to a Metro Denver Economic Development Corp. report released today.

Nine indicators – including the indicator for foreclosures – moved positively for the month, compared to seven indicators in the prior report. Six indicators moved in a positive annual direction, compared to one indicator in the prior month’s report.

Recent residential real estate data suggest housing markets are shifting due to a variety of influences. The extension of the homebuyers’ tax credits in late 2009 removed a sense of urgency for buyers, therefore, existing home sales nationwide and in Metro Denver have slowed.

Tax credits still key

“Many buyers still hoping to receive the credits are now returning to the market, though, and brokers say the pace of home sales should accelerate in the coming months,” said Patty Silverstein, chief economist for the Metro Denver EDC and president of Development Research Partners.

Increased sales volume should help home prices, which are stabilizing – and even rising – in some markets. The Denver-Aurora-Broomfield metropolitan statistical area, for example, was one of 24 metro areas to report an increase in median home price between 2008 and 2009.

Mortgage delinquency rate to fall

As home prices continue to stabilize, mortgage delinquency rates should gradually subside. Data from the Mortgage Bankers Association show the nationwide delinquency rate declined in the fourth quarter of 2009, and Colorado’s rate ranked ninth-lowest in the nation. Significant delinquency challenges remain, though, as roughly one in 17 Colorado home loans was at least 90 days past due or in foreclosure in the fourth quarter.

Foreclosures are an even greater concern in California, Nevada, Arizona, Illinois, Michigan, and Texas – all key economic development competitors with Colorado.

“These six states alone represented 60 percent of U.S. properties with foreclosure filings in January,” said Silverstein.

Housing prices stable

The nationwide median home cost for 2009 ($173,200) was down nearly 12 percent over-the-year, while the median in the Boulder MSA ($346,000) fell by just 3.8 percent. Price trends were stronger in the Denver-Aurora-Broomfield MSA, where the 2009 median price of $219,900 represented a slight, 0.3 percent increase from the 2008 median. The Denver-Aurora MSA was one of 24 metropolitan areas to report an increase in median home price between 2008 and 2009, and the region’s median price ranked 26th-highest in the nation. The Boulder MSA’s 2009 median home price ranked 11th-highest overall.

Data from the Mortgage Bankers Association’s National Delinquency Survey for the fourth quarter of 2009 show Colorado’s rate of mortgage delinquency – 6.91 percent – ranked ninth-lowest in the nation.

Unemployment a concern

Clearly, residential markets are facing a combination of early momentum and continued challenges, the report notes. High unemployment and policy changes in the months ahead – including an end of the Federal Reserve’s financial support for mortgage-backed securities and the expiration of the homebuyers’ tax credits – will bring additional hurdles. Ideally, residential markets will build momentum in the coming months that can sustain a recovery as the policy environment changes.

Committee agrees: HOAs need reining in But ombudsman for homeowners bill put on hold Debi Brazzale, Colorado News Agency Thursday, February 25, 2010

A legislative committee agreed yesterday that homeowners associations need reining in, but the lawmakers wouldn’t OK a plan to create a state ombudsman’s office for homeowners until revisions are made to the proposal. That was after the panel heard from homeowners complaining about overreaching associations in what one witness called the “wild, wild, west of HOA land.”

“Nobody disputes that there are issues with HOAs,” said Rep. Joe Rice, D-Littleton, who heads the Business Affairs and Labor Committee that heard the measure, House Bill 1278.

Rice, along with both Republican and Democratic committee members, liked the concept of homeowners being afforded the services that an ombudsman could provide, but they said they could not support the bill in its current form because of issues raised by state regulators, who would oversee ombudsman, and others who came to speak to the panel.

Division of Real Estate chief Erin Toll said the bill as is won’t work because there is not written into law a standard of conduct for homeowners’ associations that would guide and direct the ombudsman.

“I already know what the complaints are, we hear them everyday,” said Toll. “There needs to be clear standards of conduct about what HOAs can and can’t do along with clear sanctions if they don’t follow those standards of conduct.”

Yet, some were skeptical that an ombudsman is even the right approach to the concerns of homeowners, questioning the creation of another layer of bureaucracy in what some homeowners say is already a labyrinth of bureaucratic red-tape when HOAs and their attorneys are at odds with individual homeowners. Rep. Amy Stephens, R-Monument was among the skeptics.

“I’m not sure this is the right vehicle to get to where we want to be,” said Stephens.

Another concern raised and echoed in testimony was that the bill’s provision for two full-time employees to manage the office isn’t nearly enough.

“We want to be realistic about the expectations about this office of ombudsman,” said Amy Redfern, speaking for the Community Association Institute, which provides educational services to HOAs. Redfern said that they would like to see the bill revisited after more discussions with groups like theirs.

The bill is sponsored by two Democratic lawmakers from Aurora, Rep. Sue Ryden in the House and Sen. Morgan Carroll in the Senate. Carroll has been at the forefront of HOA legislation in previous years, and she and Ryden will sit down with the stakeholders to fine-tune the bill before bringing it back to committee. The next hearing on the bill has been scheduled for March 2.

Taxpayers Seeking Homebuyer Tax Credits, Refunds Must File Paper

Taxpayers Seeking Homebuyer Tax Credits, Refunds Must File Paper

by Broderick Perkins

Homeowners filing for the home buyer tax credit are not allowed to use electronic filing and must file hard copies due to special documentation requirements.

Earlier this year, the Internal Revenue Service (IRS) deployed new home buyer tax credit forms and instructions requiring forms that will force taxpayers to file on paper, rather than electronically.

The new home buyer tax credit filing rules are to ward off a repeat of 90,000 taxpayers who fraudulently claimed the credit, according to the U.S. Treasury.

Under the new and expanded home buyer tax credit rule , the credit is worth up to $8,000 for first-time home buyers and up to $6,500 for qualifying existing home buyers, in both cases, who buy a primary residence or have one built.

The tax credit is refundable. A credit that is larger than the taxes owed is returned to the taxpayer in the form of a refund.

The home can cost no more than $800,000 and qualifying income is limited to a maximum of $125,000 for single taxpayers and $225,000 for joint taxpayers.

Get the full scoop online from the IRS' "First-Time Homebuyer Credit" page online.

All taxpayers (first time and move up buyers) seeking a credit or refund, must use the new IRS Form 5405 "First-Time Homebuyer Credit and Repayment of the Credit" (Taxpayers must pay back the credit if they sell the home within three years). The instructions, which teach taxpayers what documents are required, are available on IRS FORM i5405.

In addition to Form 5405, also include at least one of the following documents:

• A copy of the HUD-1, Settlement Statement, showing all parties' names and signatures, property address, sales price, and date of purchase.

• For mobile home buyers who don't get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.

• For new home buyers who don't get a settlement statement, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

Existing home owners applying for the $6,500 maximum tax credit must additionally prove they lived in their old home for the required period.

To do so, options are:

• File IRS Form 1098, "Mortgage Interest Statement." IRS Form i1098 offers the instructions.

• Also, supply mortgage interest statements or property tax records or homeowner's insurance records.

Again, because some of the documents required are not standard tax forms, taxpayers seeking the credit cannot file electronically.

They can, however, use off-the-shelf tax software or the IRS Free File online software to prepare returns, but they must still print out the return and mail it in with the required documents.

In addition to accuracy and compliance, the only other way to speed up any refund is to request, with the return, that the home buyer tax credit refund be deposited directly into a bank account.

Published: February 25, 2010