Last year, more than two million people were turned down for homes, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic.  With lenders’ underwriting criteria becoming more rigorous in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection.

Making sense of the story

• Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments.  Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
• Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income.  Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
• Poor credit: Lenders typically reject applicants with FICO scores below 620.
• Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low.  A buyer may think he or she is purchasing a house worth $800,000, but if the appraisal comes in less than that, the lender will not loan the borrower the money.
• Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
• Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

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Without loan giants, 30-year mortgage may fade away

How might home buying change if the federal government shuts down the housing finance giants Fannie Mae and Freddie Mac?

Read the full story… The New York Times

Mortgage practices overhaul proposed

State and federal officials are pushing to more tightly regulate the way banks and other mortgage servicers treat struggling homeowners in a bid to stem foreclosures.

Read the full story… The Wall Street Journal

Foreclosure activity drops sharply nationwide

Big banks put the brakes on foreclosure activity last month as the American foreclosure system faced a major overhaul and homeowners challenged their lenders in court.

Read the full story… Los Angeles Times

FHA powers what’s left of the home market

As one of the few backers of low-down-payment mortgages in time of stringent lender underwriting, the Federal Housing Administration has become a primary means of financing for U.S. home buyers.

Read the full story… The Wall Street Journal

We paid cash for our million-dollar home

Cash buyer are becoming common. The number of homes bought with cash jumped to 32 percent in January compared with 26 percent a year earlier, according to the NATIONAL ASSOCIATION OF REALTORS®

Read the full story… CNN Money

Picky first-time buyers losing out on great housing deals

Are today’s first time home buyers passing up great deals because they insist on flawless “move-in-ready” houses requiring little or no changes – even at the starter-home price levels at which shoppers traditionally have been willing to factor fix-ups and renovations into their offers?

Read the full story… The Washington Post

New rules for first-time home buyers

Without a house to sell, first-time buyers have had a field day in the depressed housing market. Until recently, anyway. A series of new rules, regulations, and policies have changed the landscape, making buying that new home harder and more expensive.

Read the full story… SmartMoney

Underwater mortgages rise as home prices fall

The number of Americans who owe more on their mortgages than their homes are worth rose at the end of last year, preventing many people from selling their homes in an already weak housing market.

Read the full story… San Francisco Chronicle

On Saturday, January 15, 2011 from 11:00 AM to 2:00 PM, you are invited to our Open Office at 2652 East Main Street in Stockton. If you are looking for a Single-family property in this area, don’t miss this opportunity to visit and meet with Dave Thurman, REALTOR®. Appointments are not necessary!

• Pick up a free list of homes!
• Foreclosure auction dates & information.
• Get pre-qualified for a home loan.
• Ask questions about foreclosures and short sales.
• Discuss agency and disclosure requirements.
• First-time buyers and investors are welcome.

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• Up Front MIP will decrease from 2.25% to 1%
• Annual MIP will increase from .50/.55 to .85/.90 for terms greater than 15 yrs

FHA will make the premium fee changes on all new case numbers effective October 4, 2010.

Email bulletin was received from one of my favorite lenders:

Terrie Nevis
Prime Lending
3203 W. March Lane Ste. 120
Stockton, CA 95219
Office: 209-952-6800

I found this on my CAR website…

Testifying before the Housing Financial Services Committee yesterday, Secretary of Housing and Urban Development (HUD) Shaun Donovan announced possible policy changes for Federal Housing Administration’s (FHA) borrowers.

Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.

Proposed changes include:
· Raising the minimum credit scores requirements: Currently borrowers with FICO scores as low as 500 may qualify for an FHA-insured loan. The new minimum credit score has yet to be determined.

· Increasing down payment requirements: FHA borrowers currently can put down as little as 3.5 percent. A proposed change would raise that amount to a minimum of 5 percent.

· Limiting the amount sellers can provide as concessions: The agency is considering lowering the maximum permissible level to 3 percent from its current 6 percent limit.

· Raising up-front insurance premiums: Agency staff is reviewing whether to increase the monthly insurance premiums charged to borrowers, which come on top of insurance paid up front. The current up-front premium is set at 1.75 percent of the value of the loan. The FHA may decide to increase that premium. The amount has yet to be determined.

According to Donovan, the rules will not be finalized until the FHA determines how to craft them in a way that weeds out the most problematic borrowers while ensuring that qualified borrowers will not be inadvertently shut out, thereby derailing the housing market‘s recovery.

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• Toll: The FHA Is a ‘Definite Train Wreck’ (blogs.wsj.com)
• FHA Reserves Almost Gone, And There’s No Going Back (hsh.com)

Image by inman newsvia Flickr

The Stockton, CA real estate market is sooo… crazy. Approximately 50% or more of the home buyers are pre-approved for FHA financing for the very low priced inventory available. They find homes for sale on the Internet, but become frustrated due to the fierce competition from other buyers. Most buyers have made offers 5-10 times before finally getting a chance to close. Many home buyers just give up after a while, but in my opinion, expect the market to stay very active right through the winter holiday season due to the extension of the tax credits from uncle Sam.

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