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That housing market is heating up, all over the nation, and Chico, Paradise, and the surrounding area are no exception! On April 4th, CoreLogic reported that home prices rose by 10.2% annually in the month ended in February. The largest annual gain since March of 2006, and was the 12th consecutive monthly increase in home prices, nationally. Housing Starts were up an amazing 47% in the year ended in March of 2013 to 1.036 million units and up 72% from March of 2011. The 47% increase was the biggest year-over-year increase since 1992. Even though Existing Housing Sales for March were reportedly down 0.6% to 4.92 Million Units, since February was revised to 4.95 Million Units, that’s really only 0.3%, and while not at expectations, it’s still a hot number.
When you have a hot market, and inventory is low, it can create quite the competitive market. In order to be a top consideration for sellers, make sure you plan ahead, and are prepared to move forward with all of your ducks in a row. It could be the difference between getting your offer accepted, or rejected. Some important things to think about are credit scores, income-to-debt ratios, source of down payment and percentage down, structuring your offer with your Realtor, and length in time to close.
Credit Scores are key! Any score, lower than 740, has an add-on to the cost of the loan, due to the delivery fee, to Fannie Mae or Freddie Mac. These delivery fees increase with their level of risk…so the lower the score, the higher the risk, the higher the delivery fee (and therefore, cost of the loan). Often times, when given a chance by visiting a lender, early in the process, there is time to observe the credit score and credit report. Some clients have something as simple as a gas card that may have $290 on it, yet a high credit limit of $300. By paying down this revolving account to less than 30% of the high credit limit, credit risk scores can soar…sometimes saving client tens of thousands of dollars, over the course of their loan. By offering a “rapid rescore” from the credit bureau subsidiaries, scores can increase in a matter of days, as opposed to waiting 60 days for the bureaus to report the adjustments, appropriately.
Debt-to-Income Ratios are also key to getting your loan approved. There is the front-end ratio and the back end ratio. Fannie Mae and Freddie Mac like to keep the back-end ratio at 45% of a borrower’s gross monthly income (before taxes). FHA will still go to 55%, however, they prefer to insure loans with a 50% back end ratio. So, pulling your credit early can assist in knowing these ratios, and give you an opportunity to pay down any debt, they may be preventing you from qualifying for the home you desire.
Funds to Close:
The source of your down payment is critically particular. A 5-10% down loan has different requirements, as from where the down payment may come from, then 3.5% FHA loans, or 20% down loans. Getting to a lender early enough to understand the varying requirements could save you a lot of heartache. Cash, for example, is a no-no, regarding using it to close a real estate transaction. Also, non-documented sources may not be used. Gift funds, from family, need to be sourced and documented with signed forms and copies of transfers and deposits. FHA and 20% down loan allow 100% gift funds for down payment and closing costs, while less than 20% down, conventional loans require that the buyer have 5% of his or her own funds, then, the rest may be gifted.
Writing the Offer:
The offer you make, to the seller, with your Real Estate Agent, could also be key, in getting the key, so to speak, for the home you’re interested in. Asking for too many fixes, too many contingencies, or too long of a period for escrow, could all be damaging to your chances. Working with an Agent that understands these intricacies of the loan process, can help you. For example, knowing that a buyer needs help with closing costs, and knowing that lender is going to credit 2% of the buyer’s loan amount, to help with closing costs, strengthens the deal by letting the seller know that they may only have to pay for about 1% of the sales price, towards the buyer’s closing costs. If the Agent and lender don’t discuss this, prior to writing an offer you’re walking into the negotiations somewhat blindly.
Closing on Time:
Approval letters, from lenders, showing that buyers are approved, can truly strengthen your offer. Access Real Estate Lending’s “Keys On Time,” Guarantee, printed on our approval letters is a 21-Day Guarantee, or a close on, or before, the scheduled closing date, or we’ll pay for the client’s Administrative Fee. Some of the nation’s largest lenders are having trouble closing escrows in 60 days…let alone twenty-one. The average “Keys On Time” Close is 16.87 Days…now, THAT should get some offers accepted. Rules and restrictions apply. Call us, for more details, on how this program works. TOLL FREE: 877.89.ACCESS
Article Featured in Chico Enterprise Record
- Listen to Danny explain why the current market is heating up as well as explain “Keys on Time”Disclaimer: * The “Keys on Time” program is a limited guarantee that Access Real Estate Lending will provide a credit to the borrower of $795 after the close of escrow if, due to some fault on the part of AREL, its originators or other AREL staff, a purchase transaction does not close until a date after the originally stated close of escrow date. The “Keys on Time” limited guarantee does not apply if the purchase transaction fails to close on or before the anticipated close of escrow date due to events/circumstances beyond AREL’s control, including but not limited to, delays caused by: an unacceptable or unexpectedly low appraisal value on the subject property, acts or omissions by the escrow or title company, second lien holder approvals, short sale approval, or loan conditions imposed by the lender that, despite reasonable diligence by AREL, are not met by any party in a timely manner. The “Keys on Time” limited guarantee trigger begins when the initial loan package is received by AREL’s Fulfillment center. The complete loan package must be received in the AREL Fulfillment center a minimum of 18 days prior to the COE date. Exclusions: The limited guarantee does not apply to the HARP program, reverse mortgages, FHA 203k, non-delegated jumbo products or any loans that require prior approval from an investor. The limited guarantee applies to purchase transactions only. All programs are subject to borrower and property qualifications. Rates, terms, and conditions are subject to change without notice.
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