During this time of great uncertainty, one thing is certain: that every individual, household, business, and organization in the United States are feeling the impact of the global Coronavirus Pandemic. As we work together to reduce the spread of infections by staying home and closing non-essential businesses, an unprecedented number of people are facing layoffs, furloughs, unemployment, reduced hours, and/or reduced wages.
In the face of economic hardship, among the first concerns for many homeowners is, “How will I pay my mortgage?” Government at all levels from Federal to State to municipal, are working to help our national economy as a whole, and individual businesses and households survive the financial effects of the health crisis. Continue reading COVID-19 Relief (CARES Act)→
Finding the home of your dreams is one of the most exciting time periods in a person’s life. However, getting approved for a mortgage can be frustrating and disappointing. There are some things that potential home buyers can do to prepare their financial life for the mortgage application process. One of these is ensuring that all of your assets are accurate and easy to document. Preparing these assets at least three or more months in advance of a mortgage application will greatly increase your odds of being approved.
Mortgage lenders want to ensure that you have the ability to continue paying on the home loan, not just qualify for it. For this reason, they typically ask for at least two months of your checking and savings account statements. Lenders are looking for regular, consistent deposits to these accounts, rather than a large deposit just prior to your loan application. Large deposits can mean that you were given the money from a friend or family member. For this reason, don’t change accounts that you deposit your regular paycheck into just prior to applying for a loan. Similarly, if you need to transfer a large down payment amount from another account, do so three months in advance or be prepared to explain the large deposit.
Your income is considered a type of asset since it is how you will be able to continue paying your loan. For this reason, lenders require income verification from your employer. Thus, mortgage applicants should avoid changing jobs just prior to applying for a mortgage. In fact, if you have worked with an employer for less than one year, lenders will typically ask for your previous employer’s contact information as well.
Those who are self-employed may have a harder time documenting their income, which is where tax returns come in. Be prepared to submit the last two to three years of tax returns showing your income. In addition, some lenders require that you present a letter from a CPA that verifies your income.
There are other assets that can be considered when applying for a mortgage. If you possess any of these, make sure that you have all of the titles or paperwork so that you can prove you own them. If you are using property, you must be the sole owner or be applying for a mortgage with the other owner, such as your spouse. Here are some of the assets that can be included on a mortgage application:
Stocks, bonds and retirement accounts
Life insurance policies
Personal property such as vehicles, boats, antiques or jewelry
Other real estate
While taking care of these financial issues prior to applying for a loan is important, it’s just as important after the application as well. Most lenders will re-evaluate your application just prior to closing. So don’t make any major transfers or change direct deposits until you close on the home and have the keys in your hand. If you need more help getting the right financing in place, contact the professionals at Luxury Mortgage.
Searching for a new home can be exciting. However, finding out that another buyer is interested in it too can cause panic and frustration. While a bidding war isn’t a situation anyone wants to get into, it’s becoming more and more common. Realtors in New Jersey report that inventory shortages in certain price ranges have created more competition for homes than before. This has also been the case in Manhattan, where inventory hit a 12 year low. In Greenwich, Connecticut, one in every eight homes sold in 2013 was involved in a bidding war. That scenario is also playing out all across the country. This means that buyers must prepare in advance for a bidding war by submitting strong offers and understanding the negotiation game.
Make a Strong First Offer
The key to winning a bidding war is to get in the game. Unfortunately, if buyers submit a lowball offer, sellers won’t take them seriously. Buyers who live in a market that is in hot demand should consider making offers of no less than 99 percent of the asking price. With buyer traffic at around forty percent more than this time last year, there is a real chance that a seller will receive more than one full price offer. While you shouldn’t bid more than you can afford, you can’t afford to present rock bottom prices in a hot market. However, even when you offer the absolute highest amount that you can, there are other ways to show a buyer that you are serious. For example, consider increasing the amount of earnest money that you put down. Susan Strawgate Code, an associate broker with Houlihan Lawrence in Westchester, has seen multiple bids from both perspectives-as a seller’s and buyer’s agent. She often suggests her buyers make their offer stand out by writing a letter to the homeowner. It provides a rare opportunity to communicate directly with the sellers allowing them to see the bidders as people, not just offer numbers on a piece of paper.
Most home buyers are eager to close the deal, but some aren’t. So, flexibility can work to a buyer’s advantage during high stakes bidding wars. For example, some sellers may want to close immediately and move on with their lives. Accommodate this request by ensuring that inspections and financing are finalized quickly. On the other hand, some sellers may not have found another home yet, which means they may want a lease back option. In this scenario, they sell you the home but you agree to rent it to them for a short period of time. Including this option can really make your offer stand out above the rest.
Other Negotiating Options
If you’re in a bidding war with multiple buyers, there are other ways to increase your odds of coming out on top. One way is to waive the home inspection contingency. This means that you will still have an inspection but you won’t ask for a price reduction or repair costs. However, you can still walk away from the sale if something major shows up. Another option is to waive the financing contingency. This strategy is risky for buyers with questionable credit or low incomes, but can increase the odds of winning a bidding war by around 23 percent. This is best for buyers who have extra cash on hand to shore up financing or who are sure that the financing will be approved. Finally, consider writing the sellers a personal cover letter, which studies show increase your odds of winning by 18 percent.
While bidding wars often won’t get you a great deal on a home, they still end with you getting the home of your dreams. If you do get into a bidding war; don’t panic. Instead, use the strategic methods outlined above to show the sellers that you are serious. If you need help employing these strategies, contact Luxury Mortgage for help from a qualified mortgage broker.
Anyone seeking to buy or refinance loves low rates. That’s obvious. After all, who wants to pay more? We have seen some small upward movement in mortgage rates over the last weeks, and this is not necessarily a bad thing. The uptick, driven by increasing rates on government debt, is not large, but it highlights strengthening in key drivers of the housing market and the ability of the average consumer to get a loan. In balance, it’s a net positive, and here is why.
First, there has been real and sustained improvement in the job market. This is a fundamental driver of the housing market and mortgage industry. People without jobs cannot get financing. Consumers who are confident, have secure employment, and are seeing wage increases, on the other hand, both want and can qualify for financing.
The US economy added just over 1 million new jobs in the three months of November 2014 through January 2015. Wage and salary growth, while not strong, is better, posting a 2.1% year-over-year gain for the fourth quarter of 2015 as reported by the Department of Labor (Wall Street Journal, Jan 31). This improvement can be the stimulus to get consumers back into the housing market as they feel more comfortable taking on new debt.
As importantly, this brightening employment picture makes consumers on the whole more qualified for mortgage loans. In a market with stringent compliance requirements, including ability to repay (ATR) scrutiny, we may be moving into a healthier environment where consumer demand and credit availability are moving into balance.
Second, as mortgage rates experience a bump up, more investors will be willing to look at the home loan market as a viable and profitable alternative again, and some lending standards could ease a bit. This influx of available capital and credit should make loans more attainable for the average consumer. Again, the balancing of credit supply and demand should help accelerate the market.
Third, the modest rate increase, combined with the other factors mentioned above, could be enough to get some consumers off the sidelines. Whether they are first-time buyers, upgraders, or those seeking vacation and second home properties, some will make the move and the investment to lock in today’s historically low rates, even if they are not at their absolute bottom. Mortgage money is still cheap, and some will decide to take action while that is the case.
Finally, some home sellers could decide to relist as the pool of potential buyers expands and mortgage money is easier to find. Some markets are seeing tight inventory, and more options on the supply side of the equation could inspire shoppers to generate demand.
We are optimistic about the market in 2015, and especially as large parts of the country move out of the rock-solid freeze of winter. The spring and summer seasons should be healthy as incomes, employment, housing stock, credit and supply all align and move toward a healthier and more traditional standing.