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From Mortgage News Daily…

“While housing is more affordable than ever for most U.S. families, the lack of financing available to them continues to constrain prospective homebuyers according to the most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released on Thursday. The Index indicates that 75.9 percent of all new and existing homes sold in the fourth quarter were within the financial reach of families earning the national median income of $64,200. This is the highest number for the affordability index in its 20 year history.

HOI measures the percentage of homes sold in a given area that could be purchased by households earning that area’s median income at current mortgage interest rates and assuming a 20 percent down payment.

“While today’s report indicates that homeownership is within reach of more households than it has been for more than two decades, overly restrictive lending conditions confronting home buyers and builders remain significant obstacles to many potential homes sales, even with interest rates at historically low levels,” said Barry Rutenberg, chairman of NAHB.

The metropolitan area encompassing Youngstown Ohio and Boardman, Pennsylvania was the most affordable major housing market in the country with 95.1 percent of all homes sold during the quarter affordable under the NAHB definition. The area’s median income is $54,900. Other major MSAs ranking at the top in affordability are Lakeland-Winter Haven, Florida; Modesto, California; Harrisburg-Carlisle, Pennsylvania; and Toledo, Ohio.

The most affordable small housing market was Kokomo, Indiana where 99.2 percent of homes were affordable to families earning the median income of $59,100. Other smaller housing markets at the top of the index included Fairbanks, Alaska; Cumberland, Maryland; Lima, Ohio; and Rockford, Illinois.

Only 29.0 percent of homes in the New York-White Plain area were affordable to those with the area’s median income of $67,400. This was the 15th consecutive quarter that this MSA ranked last in affordability. Other major metro area at the bottom of the affordability index included Honolulu and three California MSAs, San Francisco-San Mateo-Redwood City; Santa Ana-Anaheim-Irvine; and Los Angeles-Long Beach-Glendale.

The least affordable small market was Ocean City, New Jersey where, with a median income of $70,100 only 47.5 percent of homes were deemed affordable. It was followed by Laredo, Texas, San Luis Obispo-Paso Robles, and Santa Cruz-Watsonville, California; and Brownsville-Harlingen, Texas.”

Original Article
http://www.mortgagenewsdaily.com/02162012_home_prices.asp

What’s the difference between pre-qualification and pre-approval? In the world of real estate the terms “pre-qualification” and “pre-approval” are often used interchangeably. But they have different meanings.
What is a pre-qualification? A pre-qualification is an estimate of how much you can afford in a mortgage payment. It is based upon the information you provide, and is subject to the approval process, including further details such as a credit report, appraisal, and income verification. The information you provide won’t be verified as part of the pre-qualification process.

What is a pre-approval?

A pre-approval is a firmer commitment on behalf of the mortgage company and is a more formal process which includes a credit check and income and asset verification.

During a pre-approval we do all the work of a full approval, except for the appraisal and title search.
A credit report will be obtained by the lender to verify your monthly payments on installment loans and credit cards, and to check whether you have a history of making your payments on time.
You will also need to provide paystubs and W-2 plus statements from savings and investment accounts to verify your assets.

If you’ve been pre-approved for a loan, you can shop for a house with more certainty and less anxiety because you won’t be going through the whole process worrying about your mortgage approval.
Even though you are pre approved remember Lenders still need to look at property appraisals, verify information, and in many cases, re-check credit before agreeing to make a loan.

A CHECKLIST OF DOCUMENTS YOU WILL NEED FOR PRE APPROVAL ARE AS FOLLOWS:

2 Year 1040′s all schedules
2 years w2′s
1 month paystubs
Current YTD P&L
2 months ALL PAGES Bank Statements
copy of current ID

In a buyer’s market, meaning there are more homes for sale than people to buy them, such as we have seen since 2007 it can be very common to have a seller credit up to 3% of the purchase price towards the buyer’s closing costs.

This means if you are buying a house priced at $400,000 the seller can actually pay up to $12,000 towards closing costs in both FHA and VA financing at the closing table. That basically knocks the price of the home down to $388,000!

How to write this into the purchase contract is simple. Ask your real estate agent about the value of the home, time on the market and if offers are coming in before writing your offer. This will give you a good idea as to how motivated the seller might be to give you a credit.

Then your real estate agent will write in the contract that the seller will pay 3% towards non-recurring closing costs.

If you or your agent has questions call me. I have successfully closed numerous transactions utilizing the seller credit, helping first time buyers get into a new home!

In October, the FHA set a minimum FICO score of 500 for borrowers who want an FHA-insured loan — the first time a minimum was set. It also introduced a new minimum down payment of 10 percent for borrowers with FICO scores below 580. (Those above 580 still pay a minimum 3.5 percent.)

In addition, new rules that went into effect this month adjust the two types of mortgage insurance paid by consumers for loans insured by the F.H.A.

One change raises the annual insurance premium, paid monthly, setting it at 0.85 percent to 0.9 percent of the loan balance, depending on the down payment or equity owned. The other change lowers the one-time upfront insurance premium that borrowers must pay to 1 percent of the loan balance.

The upfront premium is paid in a lump sum at closing either from borrower funds, or it can be added to the loan balance. The monthly premium is paid over the life of the loan in addition to the interest and principal.

Here is an example provided by HUD of how the changes would affect your payment:
“A borrower puts 3.5 percent down on a $154,000 house with a 30-year fixed-rate mortgage at 5 percent (such a consumer typically earns a gross annual income of $54,000, according to the agency) and who finances the upfront premium into the loan. You would see monthly mortgage payments, including taxes, interest and the two insurance premiums, rise to $1,238 from $1,205. The example is based on median data, including property taxes put at about 2.5 percent of home value. That increase includes the drop in the upfront mortgage insurance, to $1,486 from $3,344 — but also includes the rise in the monthly insurance premium, to $111 from $68.”

Last August, President Obama signed into law a bill authorizing the FHA to increase premiums to shore up its insurance funds; the agency had been authorized to raise the annual premium to as much as 1.55 percent, however HUD has not yet implemented this maximum.

FHA borrowers can stop paying the monthly mortgage insurance premium either after five years or when their loan-to-value ratio reaches 78 percent.

It’s more important than ever to have a competent lending team on your side FHA or not. If you are looking to purchase in the Bay Area with FHA financing know that the Werdmuller Group has 43 years’ experience and is here to help you navigate through the transaction.

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Fannie Mae is trying to tighten up its initiative to facilitate the sale of REOs to owner-occupants with FIRST LOOK®. For the first 15 days the home is marketed, only offers from owner occupants are considerered or accepted. After those 15 days, if no offer has been accepted, the field is open to corporations and investor-owners as well (those that do not plan to live in the home).

To get the process started to purchase your Fannie Mae owned home is easy. Visit http://www.garrick.biz/forms/purchaseAssistant.html to get the process started!

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