Number of contracts to buy homes at highest level since May

By PAUL WISEMAN

WASHINGTON (AP) — More Americans signed contracts to buy homes in March as the spring home buying season got underway.

The National Association of Realtors said Wednesday that its seasonally adjusted pending home sales index rose 1.4 percent to 110.5, the highest level since May 2015.

Pending sales rose 3.2 percent last month in the Northeast and 3 percent in the South. After rising sharply over the past three years, states in the West registered a 1.8 percent decline in pending home sales last month and a 7.9 percent drop over the past year. Contracts were flat in the Midwest, rising just 0.2 percent last month.

Pending sales contracts are a barometer of future purchases. A sale is typically completed a month or two after a contract is signed.

Last month's uptick came despite a limited supply of homes on the market, said Lawrence Yun, chief economist for the Realtors.

The housing market has been helped by low mortgage rates. The 30-year fixed rate mortgage last week stood at 3.59 percent, near its low for the year. The 15-year fixed rate mortgage last week slipped to 2.85 percent, the lowest since May 2013.

The Standard & Poor's/Case-Shiller 20-city home price index rose 5.4 percent in February from a year earlier as buyers competed for scarce homes, according to a report released Tuesday.

The Realtors said last week that sales of existing homes rose 5.1 percent in March to a seasonally adjusted annual rate of 5.33 million, a partial rebound after a sudden drop in February.

But the Commerce Department reported Monday that sales of new homes slipped 1.5 percent in March to a seasonally adjusted annual rate of 511,000. Sales plunged in the pricey West, which is prone to volatile swings in sales.

Mortgage help for credit-less first-time homebuyers

Authored by Tracey Boyd

Homebuyers with derogatory marks on their credit reports can still apply for a new mortgage, but what about those first-time homebuyers who have little or no credit at all? There is help for them, too, according to a March 16 article by Erik Sherman for The Mortgage Reports.

There are three traits that put first-time buyers "off the credit grid," according to Sherman, making it harder for them to obtain a mortgage: They have never had a mortgage, they don't have a car loan and they tend to use their debit cards more than credit cards.  This type of financial behavior makes it difficult for a credit profile to be created.

"Call it the unintended consequence of debt-free living: with no visible evidence that you've managed credit accounts in the past, mortgage lenders become (rightfully) nervous about your ability to repay on a loan," Sherman wrote. "...there's no history for them to go on."

Credit report and scores

Little or no use of credit diminishes a first-time buyers' payment history, which is the largest component of the credit score. Even so, first-timers shouldn't run out and apply for a credit card or car loan because those who do have a credit score will likely see it decrease. According to Sherman, this is because opening new credit lines is a negative in the credit bureaus' credit score algorithms. Also, the positive effect on the borrower's credit score won't help until 12 months of payment history exists for each new account.

For these types of borrowers, an FHA mortgage is a great option. Sponsored by the Federal Housing Administration, an FHA mortgage's guidelines direct lenders to look at all aspects of a mortgage application, not just the credit profile. In addition, it allows for a smaller down payment than the more hefty 20%.

"This is good for first-time home buyers because FHA loans allow for a low down payment of just 3.5%, which can help a household with good income but less-than-optimal savings ">move from renting into homeownership," Sherman wrote.

It's available from nearly every mortgage lender, which is great because there is a large market for this type of loan according to Sherman.

"Some estimates put the number of credit-lacking consumers at more than 5 million nationwide," he wrote.

Home loans and the April 15 tax deadline

Your home purchase or refinance loan and the April 15 tax deadline.

If taxes were not fun enough, your home purchase or refinance loan can be affected by when and how you file your taxes.

For those who did not purchase a home or refinance your home last year, there was a change in the mortgage process that created some difficulties based on taxes. Almost every mortgage loan done today requires taxes to be provided as part of your loan documentation, but along with the paper itself, lenders now have to pull a tax transcript from the IRS to verify the paper you provided matches the record with the IRS.

While this is a great tool to prevent fraud, the IRS does have a lag time from when you file your taxes, to when that transcript is available. Why is this important? It is important because after April 15, you the borrower are required to provide the current year taxes or tax extension as part of your current home loan application and if the lender can not verify your taxes by pulling the transcript through the IRS, it can delay the ability to close your mortgage loan.

Although if you efile your taxes, there are ways to try and expedite this process, there will probably still be some kind of delay, but you may be able to avoid a larger delay.

Hopefully this information has been helpful in the planning of a home purchase or refinance.

Give us a call to discuss your mortgage needs – we are here to help!

Mortgage wait period shortened for credit-challenged borrowers

Authored by Tracey Boyd

There is hope for clients with derogatory trade lines on their credit reports due to bankruptcy or short sale. Fannie Mae has changed it's mandatory waiting period for borrowers who have experienced a short sale, pre-foreclosure or bankruptcy and who would like to get a new mortgage, according to loan officer and mortgage market expert Dan Green on The Mortgage Reports.

Fannie Mae's mandatory wait period has been reduced from four years to two, allowing borrowers who have experienced a significant derogatory event to re-apply for a mortgage sooner. The new wait period is just one year longer than the FHA Back to Work program in which certain mortgage borrowers are eligible to apply for a loan just 12 months after a significant derogatory event such as:

  • pre-foreclosure
  • short sale
  • deed-in-lieu of foreclosure
  • bankruptcy
  • mortgage loan charge-off

The new wait period is a major improvement for conventional mortgage borrowers nationwide, according to Green.

Borrowers can apply for Fannie Mae's extenuating circumstances program loan if they can prove that the hardship occurred just once; was beyond their control; and resulted in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. Examples of extenuating circumstances include divorce, illness, sudden loss of household income or loss of employment.

Mortgage applicants wishing to apply for a loan with extenuating circumstances should be prepared to provide valid documentation in support of the claim, according to Green. These may include a copy of a divorce decree, copies of medical bills and notice of job loss or severance papers.

Green said borrowers should also be prepared to write a brief letter describing the hardship and how it directly led to the bankruptcy, pre-foreclosure, or short sale. The letter should clearly state that the default was the borrower's only reasonable course of action and that the circumstance was a one-time event. It should also clearly state and prove that the borrower has successfully re-established their credit by paying all financial obligations on time in the months since the event.

Is It Time To Lock Your Rate?

Do you know today’s interest rate on a 30 year fixed rate loan?  Chances are that this rate has already changed since the last time you’ve looked!  Mortgage interest rates are adjusted daily to reflect the supply and demand of available funds, and all too often buyers are disappointed to learn that their ideal loan rate is no longer available. 

To avoid surprises at the offering table, many buyers will plan ahead and lock in a favorable rate.  Basically, this is a promise from a lender to hold an interest rate and points at a guaranteed level for a fixed amount of time.  Lenders can do this for qualified buyers even before the house is selected (in some instances)!   Securing a lower interest rate in anticipation of rate hikes can save you thousands of dollars over the course of repayment.  For example, if you planned to borrow $300,000 at 6 percent for 30 years, but didn’t fill-out a loan application before the rate rose a quarter-point to 6.25 percent, you would be facing extra finance costs of more than $17,000! 

Locking in an interest rate ahead of time is an attractive option to many home buyers because it can give you a sense of certainty when budgeting a move and planning the future.   Lenders who lock rates do so at the risk of losing money should rates increase.  If a buyer locks in a favorable rate today, and rates increase, then the lender is at a disadvantage and will have to cover the difference. 

To mitigate risk, lenders charge a small fee for this rate lock in the form of points.  A point is a percent of the loan’s amount, and the amount of points required to lock a rate depend on the duration of the lock (longer rate locks cost more), and the type of mortgage loan you are looking at.   Locking in a rate for a new construction loan works differently than for a pre-existing home, for instance. 

Contact us today to learn more about our rate lock programs and whether they are right for you -- we are here to help!