This summer, Fannie Mae instructed lenders that they should adopt a new policy that would include a second review of an applicant’s credit report just prior to closing. Why? The answer is simple: the credit profile of a borrower may have changed between the time of the initial review of the credit report and the time of closing. How will this impact the home loan?

The potential impact to a borrower who has utilized credit to make significant purchases after the initial credit report could include:
• A delay in closing
• Increase of closing costs and/or interest rate
• A decreased loan amount
• Denial of the loan

That’s right, in the worst-case scenario, a change in credit could even result in a loan being denied – even after an original approval had been granted.
What should homebuyers do (or not do)?

In order to eliminate any possibility of potential problems before closing, anyone in the application process should use credit sparingly and make sure they adhere to the tips provided below by credit expert Linda Ferrari of Credit Resource Corp:

• Don’t do anything that causes a red flag to be raised by the scoring system.
• Don’t apply for new credit of any kind.
• Don’t pay off collections or charge offs.
• Don’t max out or over charge on your credit accounts.
• Don’t consolidate debt onto one or two credit cards.

This list is not comprehensive, but it does give you a peek into situations that could create issues and could also be contrary to some ideas you have read previously.

Guest blogger, Michael Poland, is a senior mortgage banker with Baird & Warner Financial Services in Baird & Warner’s Lincoln Park Office. Michael can be reached at 773.770.7524 or by email at michael.poland@bairdwarner.com.Similar Posts:

• How to Raise Your Credit Score in 45 Days!
• Baird & Warner offers 5% down condo mortgages!
• 95% Condo Mortgages Back for People with Good Credit!
• Interest Rates Moving Higher
• Interest Rates Moved Higher

Courtesy of PrankPlace.com

Friends of mine called me to share their latest adventure trying to buy a house in the Washington, DC area. At the inspection of a house they had agreed to pay nearly $1.2M for they discovered that the toilet in the basement wasn’t connected to the plumbing in the house! The toilet turned out to be a chemical toilet that repeatedly flushes until the waste is “no more”. According to my friends, the odor is less than pleasant. Their offer has now been withdrawn due to unacceptable inspection results. Similar Posts:

• Inspecting a Winterized Home for Sale in Aurora
• A Tale of 2 Home Inspections
• How a Plumbing Inspection Paid for Itself Many Times Over
• Why New Homes For Sale Should Have Inspections
• Consult with your Realtor When Negotiating Inspection Issues

Short Sale Buyer

A year ago I started working with a woman, Carolyn, who wanted to buy a house. She was a first time homebuyer and excited to take advantage of the first time homebuyer tax credit.

Carolyn fell in love with a house for sale that was a short sale. We learned that there were already other offers on the home. Carolyn had me submit an offer that was above the list price. We waited knowing that it often takes lenders a couple of months to respond to short sale offers. After 2 months we waited some more. After 3 months we waited some more. After 4 months we learned that the bank had approached the sellers and told them that they wouldn’t foreclose, if the sellers would give them the deed. The sellers agreed. Carolyn didn’t get the house.

Early this year I showed Carolyn a house that was advertised as an approved short sale. The listing agent told me that the offer acceptance wouldn’t take as long as usual since the lender had already agreed to the short sale. Carolyn had me submit an offer on February 1st. We waited. We were told that the lender had misplaced the offer while moving their offices from Florida to New York. We waited. We were told that the lender was swamped with offers on other short sales and would get to Carolyn’s offer as soon as they could. We waited. After the offer finally got in the hands of someone who could make a decision, we were told that the original BPO (broker price opinion) for the property was too old. Another BPO needed to be ordered. We waited. Finally on April 22nd, nearly 3 months later, the bank accepted Carolyn’s offer.

On May 12th, one week before Carolyn’s scheduled closing we learned that another lender had a second mortgage on the property and that they didn’t accept the amount of money they would receive after the first lender was paid. We waited while the seller’s attorney approached the first lender about accepting less money. Yesterday, May 28th, we learned that the first lender won’t accept less money. The only way the sale can close is for Carolyn to pay an additional $9,000.

So Carolyn has a lot of thinking to do this Memorial Day Weekend. If she walks away from the sale, it will be too late for her to qualify for the first time homebuyer tax credit for another house. If she accepts the new terms, she’ll have to pay an additional amount that’s more than the $8,000 tax credit. Unfortunately, Carolyn’s experiences aren’t unusual in the world of buying short sales.

If you’re considering buying a home, schedule a time to talk with me. If you have a question, email me.Similar Posts:

• Foreclosures and short sales are no longer an option for first time buyers
• Why you shouldn’t expect banks to make logical decisions on short sales and foreclosures
• Snails and Short Sales
• Short Sales are Anything But
• Beware of Lenders Offering Better Deals if They Finance Your Purchase of Their Foreclosures

Last Wednesday I sent an email to Go Homing telling them to stop publishing my blog content and remove all of it from their Go Illinois REO site. Go Homing is an online bidding site for REO (real estate owned) also known as bank owned or foreclosed homes. Go Homing is part of Altisource Portfolio Solutions.

I made it clear that they do not have permission to publish my blog content, but since last Wednesday they have continued to publish my new content as shown below.

Gomer Homingway did not write Edgewater’s 60660 median condo price up 1%. I wrote it.

Go Homing has published several of my blog posts in their entirety on their Go Illinois REO site. The only differences are that they remove my name as the author and at the end of the complete post they provide a link “Go to the Original Source of this Post”.

Go Homing has several sites that are publishing other Realtors’ blog content. Such sites include:  Go Arizona REO, Go California REO, Go Colorado REO, Go Florida REO, Go Georgia REO, Go Michigan REO, Go Nevada REO, Go Ohio REO and Go Texas REO.

I certainly have no problem with other sites linking to my blog content or even quoting parts as long as I’m given credit for my work. Since Altisource Portfolio Solutions is a big enough company to be traded on the NASDAQ (ASPS), they surely can afford to hire people to develop content for their web sites instead of harvesting the blog content of individual Realtors who never agreed to blog for them.

I have alerted other Chicago Realtors who’s blog content is being published by Go Homing. I will now start contacting Realtors who’s content appears on the Go Homing REO sites for other states.Similar Posts:

• Why Home Inspections are Even More Critical for Foreclosed Homes
• Snails and Short Sales
• Beware of Lenders Offering Better Deals if They Finance Your Purchase of Their Foreclosures
• Foreclosures and the Lessons of Baywatch
• 3 Hidden Costs of Buying Foreclosures

Advertising for FHA Approved Condos

The purchase of a Rogers Park condo advertised as FHA Approved (not the condos shown left) by my buyer, Art, hit a bit of a snag last week. His mortgage banker, Michael Poland with Baird & Warner Financial Services, discovered that the condo development where Art was buying hadn’t been recertified for FHA approval. Michael immediately offered to help the condo association with the recertification to keep the sale together.

It will probably all work out, but unfortunately there’s been added stress for Art who still doesn’t know for sure that he’ll get financing to purchase his first home. It’s also been a lesson for me not to assume that condos advertised as FHA Approved are indeed currently FHA Approved.

It used to be that once a condo was FHA Approved it remained FHA Approved. That recently changed and now condo associations must be recertified every 2 years.

FHA spot approvals for individual condos have also gone away, but I still see them in condo listings. Some condo owners selling for sale by owner aren’t aware of the FHA rule changes.

For more details on FHA condo approval requirements read the Chicago Tribune’s, “The ABC’s of FHA condo requirements“.Similar Posts:

• In search of FHA approved condos in Andersonville and Rogers Park
• 95% Condo Mortgages Back for People with Good Credit!
• Pick Your Real Estate Professionals Carefully
• A Good Example of Why Bringing a Home Purchase to Closing is a Team Effort
• Baird & Warner offers 5% down condo mortgages!

We’ve been getting a lot of questions regarding FHA financing and our 5% down conventional program. We are one of a very few lenders that can offer 5% down conventional financing. I thought it would be a good idea to provide you with a short list of pros and cons for both loans.

FHA Pros
• Allows for higher debt to income ratios. In some cases up to 55%
• Allows for lower credit scores, down to 620
• Allows a borrower to put 3.5% down
• The entire down payment can be a gift

FHA Cons
• Condo buildings must be HUD approved.
• More documentation required from borrower

5% Conventional Pros
• Condo buildings do NOT have to be HUD approved
• Less documentation required
• No upfront mortgage insurance required

5% Conventional Cons
• Debt to income ratio must not be greater than 41%
• Down payment must come from borrowers own funds
• Must have at least a 680 FICO score

Guest blogger, Michael Poland, is a senior mortgage banker with Baird & Warner Financial Services in Baird & Warner’s Lincoln Park Office. Michael can be reached at 773.770.7524 or by email at michael.poland@bairdwarner.com.Similar Posts:

• 95% Condo Mortgages Back for People with Good Credit!
• Changes in FHA approvals add challenges for Chicago condo buyers
• Credit Reports: One May Not Be Enough
• Financing options for some new Chicago condos improving
• Basic Financial Documents Needed for a Mortgage

NOTE TO SELLERS! Homes that sell in 30 days or less get a significantly higher % of list price!

This week I received a great question. Michael M. asked, “Is it wise to see a home that only recently came on the market (let’s say less than 30 days) and is $25-50K out of your price range? Or should you wait until there is a price reduction that brings it closer to your comfort range?”

A few non-scientific real estate statistics will help me answer this question. The statistics shown in the table are based on condo and townhouse listed sales for all of 2009 in the 4 locations (2 city and 2 suburban). On average homes than sold in 30 days or less sold for 96.7% of list price.

So if your maximum price is $250K, you’re probably wasting your time looking at homes priced $275K to $300K since $250K as a percent of those list prices will well below 96.7%. The chances that sellers would accept an offer of $250K are very low. However, after the home has been on market 30 days, you chances of getting an offer of $250K accepted are much better since the average percent of sale price to list price drops to 92.7%!

If your maximum price is $500K, it isn’t outside of the realm of possibility that a seller with a home priced at $525K might accept an offer of $500K since it would be 95.2% of list price. That’s less than my un-scientific average of 96.7%, but not impossible.

Of course, these are rules-of-thumb. For each home, it depends on how well it is priced, how motivated the seller is, how well your buyer agent can help you negotiate a lower price, and other factors.

Besides list price, the other consideration is your amount of self-control. Finding the right home is often based on a bonding experience that buyers have when they see a home. It often happens within just a few minutes. Some people will fall in love with a home and blow through their maximum price. (Love often knows no bounds!) Others have more self-control and are willing to risk losing a home to another buyer while they wait for the price to fall in their range.

Great question, Michael! Let me know, if I didn’t fully answer it!Similar Posts:

• Lakeview vs. Chicago April 2010 home sales
• Loop condos for sale – March 2010
• Don’t Assume a List Price Represents a Home’s Value
• Why Real Estate Stats Can Be Misleading
• Take advantage of advanced pricing analysis!

Don't let an inept mortgage broker add stress to your home purchase!

A day before my buyer’s mortgage commitment was due the broker informed me that he was going to ask for a 2 day extension which turned into more than a 2 week extension!

While part of the delay was due to the underwriter requesting a review of the appraisal, most of the delay was due to the mortgage broker not having all the paperwork ready. In addition, the broker did a poor job of keeping everyone informed. Repeatedly the buyer’s attorney had to request extensions not knowing what the delay was. My buyer didn’t know if she was going to get the loan or not.

In a typical scenario where there’s only a week or two between the mortgage commitment and the closing, such delays would have pushed back the closing forcing the buyer to put her belongings in temporary storage. The sale could have fallen apart. Fortunately, that didn’t happen.

Home buyers should give as much thought to picking a mortgage broker as they do a Realtor! Contact me for the names of some reputable Chicago mortgage brokers.
Similar Posts:

• The Domino Effect in Real Estate
• How Your Mortgage Company Can Put Your Offer at Risk
• Not Every Sales Contract Makes it to Closing
• Pick Your Real Estate Professionals Carefully
• Pick Your Mortgage Company Carefully

Chicago is a very dog-friendly town!

How dog-friendly is Chicago? Chicago made DogFriendly.com’s 2009 Top 10 U.S. Cities to Visit With Your Dog. What’s even more impressive is that Chicago has made every Top 10 List DogFriendly.com has published with the exception of 2007 when Chicago only made the honorable mention list.

Similar Posts:

• Should you view homes above your price range, if they’re on market 30 days or less?
• West Loop condo & townhouse average list prices
• West Loop’s 565 Quincy Condos
• Don’t Make Any Assumptions about Fencing for Your New House
• TLC’s “Moving Up” Show Seeks Chicago Area Buyers & Sellers!

1st time homebuyers with higher incomes and homeowners who buy another home can now get a tax credit!

FIRST TIME HOMEBUYERS
Even more first time home buyers can now qualify for the $8K credit with the income limit raised from $75K to $125K for individuals and from $150K to $225K for married couples.

CURRENT HOMEOWNERS
A new $6.5K tax credit is now available for current homeowners that sell their current home and purchase another for their primary residence. The homeowners must have resided in their current home for 5 consecutive years out of the past 8 years.

For more details on the tax credits, view the National Association of Realtors’ chart comparing the current tax credit features to the new tax credit features.Similar Posts:

• Senate Advances up to $15,000 Tax Credit for Homebuyers!
• How to Buy a Home and Get Your Down Payment Back
• Economic Stimulus Package Includes $8,000 Tax Credit for Home Buyers
• FHA first time buyers risk missing $8K tax credit deadline!
• IRS First Time Homebuyer Tax Credit Information Center