Effective June 1, 2008 Fannie Mae has revised down payment requirements for conventional, conforming loans that they will purchase or guarantee. The ratio of home loan to value can be a maximum of 97% for loans written through the automated underwriting system known as Desktop Underwriter. The lower ratio of 95% of loan to value is available for conventional conforming loans written outside of the automated Desktop Underwriting system. This new national policy makes low down payment loans available nationally in areas where home   prices were declining. This means that buyers of owner occupied single-family homes will have a consistent national approach when applying for a conventional conforming mortgage.

Housing sales peaked in 2005 and have been experiencing a pricing decline since. The good news is since the correction, prices are beginning to stabilize and Fannie Mae is seeing lower risk of further significant declines. This new down payment policy that supersedes the former “declining market” provisions means home buyers may not need higher down payments. The new policy also helps assure stability, liquidity and affordability for the housing market which should help those seeking mortgage loans.

Fannie Mae also has streamlined refinancing for borrowers whose mortgage balance exceeds the value of their homes; improved pricing for jumbo-conforming mortgages and undertaken a neighborhood stabilization initiative for targeted areas with high home foreclosures. These policies should help further strengthen the housing market’s long-term prospects.

Applying for a home mortgage is a relatively easy process. However the information needed to obtain home loan approval in a timely manner requires a coordinated effort by the borrower and lender. The mortgage loan application is prepared by lender with the borrowers input and takes about 30 minutes to complete. The lender then gives the application to a loan processor, who organizes the information. The processing of the application may require additional information for verifying employment, bank balances or other information. This information is often obtained at the time of application and can help speed up loan approval.

During loan processing, some of the items requested may include the purchase contract for the home, if the home loan is being obtained to buy a home. Updated bank statements or investments that may have changed in value may also be requested. If a borrower is self employed or is in a specific career (Doctors, Nurses, Police & Fire, Teachers, Military & Veterans, Pharmacists & Dentists), then tax returns and/or Profit and Loss statements for the past 2 years may also be required. Depending on the personal home loan needs of the borrower and down payment amount, evidence of past mortgage or rent payments, divorce settlement papers, and gifts provided by a relative or a non-profit down payment assistance program may also be needed.

Simultaneously, an independent appraisal of the home is ordered. The appraisal is needed by the lender to establish the maximum amount a lender will loan based on the home’s appraised value. The loan processor is assembling and organizing the borrower’s financial information in an organized manner to present to an underwriter. The underwriter will review the information to determine if the borrower meets the guidelines for making the home loan. Once approved, a commitment letter is provided which states that the lender will make the loan based on the specific conditions determined in underwriting.

The whole process generally is completed in 30 days or less. Speeding up the mortgage process is a simple easy three step process.

Applying for a home mortgage is a relatively easy process. However the information needed to obtain home loan approval in a timely manner requires a coordinated effort by the borrower and lender. The mortgage loan application is prepared by lender with the borrowers input and takes about 30 minutes to complete. The lender then gives the application to a loan processor, who organizes the information. The processing of the application may require additional information for verifying employment, bank balances or other information. This information is often obtained at the time of application and can help speed up loan approval. 

 

During loan processing, some of the items requested may include the purchase contract for the home, if the home loan is being obtained to buy a home. Updated bank statements or investments that may have changed in value may also be requested. If a borrower is self employed or is in a specific career (doctors, nurses, police & fire, teachers, military & veterans, pharmacists & dentists), then tax returns and/or Profit and Loss statements for the past 2 years may also be required. Depending on the personal home loan needs of the borrower and down payment amount, evidence of past mortgage or rent payments, divorce settlement papers, and gifts provided by a relative or a non-profit down payment assistance program may also be needed.

 

Simultaneously, an independent appraisal of the home is ordered. The appraisal is needed by the lender to establish the maximum amount a lender will loan based on the home’s appraised value. The loan processor is assembling and organizing the borrower’s financial information in an organized manner to present to an underwriter. The underwriter will review the information to determine if the borrower meets the guidelines for making the home loan. Once approved, a commitment letter is provided which states that the lender will make the loan based on the specific conditions determined in underwriting. 

 

The whole process generally is completed in 30 days or less. Speeding up the mortgage process is a simple easy three step process.

Qualifying for a home loan can be a relatively easy process and should be the starting point for a home buyer. To qualify, a mortgage lender will look at a variety of information in determining if a borrower is credit worthy. The two key factors are your ability to repay a home loan and your past experience in paying off other debts.

Your ability to repay a home loan is measured by your annual income. If you are an employee this is usually reported on your form W-2 from your employer. Length of employment generally should be at least two years with the same employer or at least in the same field of employment for several years. Then your proposed monthly mortgage payments plus any other loan payments you have are divided by your current monthly income to determine your financial ability to repay. This calculation is called your debt to income ratio and is used by all mortgage lenders in determining if you can qualify for the amount of the loan you are seeking. In some cases other loan payments not related to your home loan can be excluded in the analysis of qualification with certain career programs.

Your past credit history will measure your willingness to repay the loan. A mortgage lender will obtain your credit report which will indicate how you have paid previous loans. Timely payment of past loans will help increase your credit score and late payments will lower your credit score.

Home loan qualification varies with each individual and can be tailored to the specific financial circumstances of a borrower. Many applicants that are weak in one financial area can compensate in another area. Some compensating factors could be down payment, long term employment, and professional licenses . NextHome offers career-specific options for Doctors, Nurses, Police & Fire, Teachers, Military & Veterans, Pharmacists & Dentists.

Selling a home has been relatively easy in prior years. The challenge typically was finding a new home to buy. Many sellers refused to sell their existing home until they found a replacement.

Buying first worked well for many sellers in years past as the risk of owning two homes for a long period of time was relatively low.

Now there is substantial evidence suggesting that the real estate market is slowing with supply now exceeding demand. If so, is it still a good idea to buy before selling?

First, consider the alternatives. If you buy first, you will know where you’re moving, what it will cost and when you can move. Families with small children often find it easier to market their old home after they have moved out. Their home can then be prepared for sale and kept that way with little, if any, effort.

The downside to this approach is that it’s expensive. You must come up with cash for a down payment and closing costs before your home is sold. Many homeowners do not have the extra cash in savings to accomplish this. Some homeowners may tap into their home equity before selling by using an equity line of credit.

House Hunting Tip: In a changing market, it’s wise to factor in a longer marketing period for the home you’ll be selling. You could get lucky and sell quickly. However, in a soft market, it usually takes longer for homes to sell. It’s far better to err on the conservative side than to be caught short of cash making mortgage payments on two homes.

The biggest risk you face in buying before selling is that your home doesn’t sell in the desired time frame and the market worsens. In this case, you could be forced to reduce your list price in an attempt to speed up the selling process.

An option may be to rent your old home until the market improves. But, keep in mind that to take advantage of the federal capital gains tax exemption on the sale of a primary residence (a $250,000 exemption for single sellers and $500,000 for married sellers who file jointly), you need to have occupied the property for two of the last five years.

Homeowners who can’t qualify to buy before selling, or who don’t want the anxiety of owning two homes, have other options. The most appealing is to buy the new home contingent on the sale of your home. Unfortunately, sellers of the most desirable homes usually don’t look favorably on contingent sale offers. A local real estate agent will be able to tell you if contingent sale offers are a viable option in your area.

If not, consider selling your home with an option to rent it back from the new owners for a time after closing. This will give you extra time to find a home to buy if you haven’t found one by the time your sale closes.

Typically the seller’s rent covers the buyer’s costs of ownership during the rent back period. This may be more than you paid to own your home, particularly if your home has appreciated substantially and the buyer is taking out a large mortgage.

The Closing: Renting your home back from the buyer after closing is done for convenience sake. If you want to pay cheaper rent, you can always move to a temporary rental until you find your dream home.