Landon Harper's Blog

By: Alby Gallun May 14, 2012

With good preparation, most things are easier. That works in mortgages too! Today, I want to give you some ideas that can make your mortgage experience less painful.

Income Items:

1.  Gather your documents. Today, many people will have to produce 2 years’ complete tax returns, including W2′s, 1099′s, K1′s, and all the schedules, as well as a month’s worth of pay stubs.
2. Be prepared to explain them. Deductions in your returns and your pay stubs may impact the income your lender will use to qualify you which, in turn, has a big impact on the loan you will get.
3. Have a breakdown of base pay versus overtime for both your pay stubs and 2 years’ W2′s. Lenders treat overtime (and bonus income) differently than your base pay. Be prepared to explain any changes over the last few years because your loan officer will ask you about it.

Asset Items:

1. Start accumulating your bank statements. Lenders look back 3 months from when you sign your contract of sale.
2. You will have to explain any and all large deposits (which are defined as deposits greater than your regular pay check) because lenders want to make sure you haven’t taken out any new loans that aren’t on your credit report.
3. Avoid any significant cash deposits. However, if you did have a cash deposit, understand that the lender will have you source it (a bill of sale and DMV receipt for that motorcycle, for example).
4. If you will be receiving a gift, consult your loan officer on how to document it (from the donor’s ability to how you deposit it).

Credit Items:

1.  Ask your loan officer to run your credit and go over it with them. Believe it or not, most credit reports contain errors. Best to identify them and get working on correcting them as early as possible.
2. Do what you can to pay down your balances to under 30% of available credit to help you get the best score possible.
3. Do NOT close accounts or pay off collection accounts without discussing it with your loan officer. Either one of these logical moves can actually have a negative impact on your score.

When buying a home, remember the Boy Scout motto, “Be prepared”. Following these suggestions will make your loan approval easier and less stressful.

We report on Fannie Mae’s Quarterly National Housing Surveyevery ninetydays. Fannie Mae also does a monthly survey covering different aspects of the housing market.

Here are some record numbers we found interesting in Fannie Mae’s March report (emphasis added).

• Thirty-three percent of respondents expect home prices to increase over the next 12 months, the highest level over the past 12 months.
• The percentage of respondents who say it is a good time to buy rose to 73 percent, the highest level in over a year.
• Forty-eight percent of respondents think that home rental prices will go up, the highest number recorded to date.
• On average, respondents expect home rental prices to increase by 4.1 percent over the next 12 months, the highest number recorded to date.

Doug Duncan, chief economist of Fannie Mae, capped the report off by stating:

“Conditions are coming together to encourage people to want to buy homes. Americans’ rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that homeownership is a more compelling housing choice.”

Here comes Spring, historically the time of year when buyers awake from the winter slumber of the holidays and snowfall, and go on their pilgrimage to look for new housing. Houses look better in Spring with green grass, blooming trees, and flowers.

Plus, buyers who find a home in the next 60 days can close after the school year ends and enjoy the summer months in their new backyards. It’s almost a rite of passage; baseball teams go to spring training, buyers go look at homes, and the birds fly back north.

But this Spring is different than those of recent memory…

• Because of the warm weather we experienced here in the Northeast for most of this past winter buyers have been out for months – making offers and buying homes.
• Many sellers have finally come to understand that they need to have a compelling price on their home to attract buyers. The days of listing your home and negotiating down are over because there are homes on the market already priced correctly, and those are the homes that buyers are going to. The overpriced inventory doesn’t even get their chance to negotiate down.
• Rates have ticked up as economic news (like unemployment numbers) has improved. That, coupled with rising mortgage insurance premiums and guarantee fees, seems to have given some sense of urgency to buyers.
• The looming shadow inventory, which most certainly will keep downward pressure on home prices (when added to easier short sale approvals), has tended to encourage home sellers to be more realistic in their expectations.
• The abundance of information available to consumers has further increased their need for sound advice from top-notch real estate and mortgage professionals. The cream is certainly rising to the top in those professions.

Low interest rates, a tremendous selection to choose from, and the seasonality of it all makes for an exciting next 60-90 days. My advice to anyone looking to buy or sell is that waiting to be aggressive could be a fatal mistake if you hope to find the best deal. From my experience, the best deals come when more people are competing for them…and that time is NOW!