DC Market is Getting Hotter: Get Pre-Approved Now
DC Market is Getting Hotter: Get Pre-Approved Now
Gregg Busch • January 17, 2014
Over the last several months, I keep hearing DC realtors saying the same thing, “Buyers are wanting to buy, but there is very little inventory on the market to sell.” In desirable areas, multiple offers seem to be common once again and buyers are getting frustrated loosing out in these competitive situations. According to a report released by the national housing research firm, Metro study Report, the volume of DC metro listings on the market has dropped down to 3.6 months of supply from a peak of 11 months existing supply back in 2008. The limited home inventory in our area is likely to continue through 2012 with strong local job growth, decreasing short sales and foreclosures, and a lack of new buildings coming to market.
The best advice for someone looking to purchase is to get pre-approved. Don’t wait till you find the house of your dreams, as it may be too late. Do it up front – maybe even before finding a realtor . With the implementation this year of the Dodd Frank bill and FHA (Federal Housing Administration) tightening lending guidelines, sellers are sure to scrutinize, more than ever, a buyers’ ability to get to closing. Nobody wants to accept a contract from a wishy washer buyer, even if they may be offering a little more. Getting pre-approved lets the seller know that you are credible, with FICO scores and income that meet the strict criteria of today’s lending climate.
The benefits of getting pre-approved are many, First, it saves you time and heartache by looking in the right price range. Second, as described above, it makes you a stronger candidate when you do make an offer, thereby increasing your negotiating power.
Here are some great tips in starting the pre-approval and buying process:
1) Determine how much you can afford up front, Remember that when you hear the total monthly payment make sure you are looking at the approximate after tax payment. If your lender tells you that you can not qualify for what you want to buy think about a family member co-signing.,
2)Have a lender run your credit report to check your scores, sometimes the credit scores you get on line can vary from the scores lenders get from mortgage credit reporting companies, good credit scores are important if you want a good rate, Sometimes it can take as much as 6 months to improve your scores so act now before you start looking for a house.
3)Make sure you enough for a down payment and closing costs. Have your lender calculate what you need for cash in the bank. A rising numbers of young people struggling to buy their first home are being forced to ask their family for help with down payment and closing costs, Work out an arrangement where one day you will pay them back with interest, With FHA and conventional financing you can put down as little as 3% these days!!!!
4) Hire a real estate agent: As a buyer of a home, especially being a first time buyer, you will want to have an agent represent you on your purchase. A buyers agent that you hire will have your best interest in mind and help you in evaluating the value of the property and negotiating the best possible price and terms in making an offer. Additionally your agent can help you with the many facets of the transaction process, connect you with a reputable lender and inspector and other service people. The buyer agent is paid from the transaction by the seller. One of the best ways to select a Realtor to help you find a home is through a referral from a friend, work colleague or neighbor. Another is by going to open houses and talking to the different agents holding the various homes open.
Finally, since a full mortgage approval is taking somewhat longer these days it is to your advantage when you make an offer to shorten your financing contingency to 21 days or sooner. Being pre-approved can allow the lender to speed up the loan process and get the appraisal ordered immediately once you have a ratified sales contract. If you can accomplish a faster close date your offer will be looked at more seriously by the listing agent and seller if there are multiple offers.
Gregg Busch is a licensed mortgage loan officer and Vice President of First Savings Mortgage. Gregg has over 20 years of mortgage banking experience and can be reached at Gregg@Greggbusch.com.
DC Home Prices Increase, Despite National Trends
Gregg Busch • July 26, 2011
Case Shiller Index reported that of the 20 cities it recorded, home prices are off to a dismal start, with 18 cities down in price. Only 1 city actually had a 3.6% increase in prices. Guess which city that was…?
You got it right, the Washington, DC area. So with all the negative press these days about housing being in the dumps and prices poised to drop further, one needs to recognize that these are national numbers, not local.
Why is the District fairing better than the national average? Low unemployment with a rate of 5.6%, high affordability, above average home price growth, falling foreclosure rate, less houses under distressed sale, cheaper to buy then rent, and an increasing population. All these bode well for the future of housing in the Washington region. This is why we are actually seeing multiple offers this spring with low inventory levels. Realtors’ biggest complaint is that there is not enough inventory to sell, which is starting to drive up prices.
So now you ask yourself why you should pull the trigger today. Here are the best reasons why now is a good time to jump off the sidelines and get into the housing market:
1.) You can still find a good price if you look hard. The MRIS (multiple regional listing service) and Delta Associates are estimating that the increasing number of jobs into the area will continue the price gains long term. Buying now makes sense as clear statistics show prices are on the incline.
2.) Mortgages rates are still low, but not for long as the economy shows continued signs of improvement. Today you can get a loan around 4.75%, where just 2½ years ago rates were at 6.25%. Over a 30-year period, that can save you many thousands of dollars.
3.) You will save on income taxes to be able to afford more per month. You can deduct the mortgage interest and real estate taxes off your net taxable income.
4.) You will be able to hedge against inflation in the long term. You are not guaranteed a quick return in 2 years, but history has shown that owning a home over an extended period of time does beat inflation by a couple of points a year over average.
5.) It’s forced savings. As you continue to make your mortgage payment monthly, more dollars go into principal to pay the loan down which builds up equity. On top of those savings you have the appreciation of the property over the long term. Like the stock market, it is risk capital. As the stock market continues to go up and the economy improves the price will start to appreciate again. Just look at history.
As populations continue to grow in our country and here in the DC area, strain is going to be felt in the price of homes if new housing is not being created. New building permits are only growing at 4%, and while this is sufficient to cover population growth, it won’t be enough to cover those moving to the market or the people coming from being renters to buyers. Act now, and don’t pay attention to the negative headlines about housing.
The Difficulties for the Self-Employed Borrower
Gregg Busch • March 25, 2011
As all of us are aware by now, after the largest housing bust since the great depression, getting a mortgage is far from the pre-bubble days where just filling out an application gave you an over 70% chance of getting a loan if you had good credit. Everything you can think of involving your financial picture now needs to be disclosed and reviewed by a lender. For those of you that are self-employed or own your own business, getting a loan can be even more toilsome.
Pre-housing bubble days allowed the “self-employed” to just state their income and put a decent amount down in cash. We, the lenders, just focused on the borrowers’ credit scores, the value of the property, and in most cases savings in the bank. As the housing market nationally started to crash, so did more of these stated income loans, referred to these days as “liar loans.” Not all self-employed borrowers that used stated income loans were lying about their income, but since the program was abused it went “pop” with the bubble.
Here is what you need to know about getting approved as a self-employed borrower:
1) You must have a 2-year history of being self-employed with reported 1040s to qualify for a mortgage. There are some exceptions, so e-mail me if you have any questions.
2) Lenders are looking for several months of “cash reserves,” which are total mortgage payments in liquid assets. Many mortgage programs, especially if the loans are over the Fannie Mae/Freddie Mac loan limits, are looking for as little as 6 months or up to 12 months of cash reserves, depending on the loan size and down payment.
3) Lenders are now using income reported to the IRS as taxable income to qualify for a loan. If you are writing-off a lot of deductions then you are going to have a harder time qualifying for a loan. You have to be more conservative in your business deductions, which is hard in this economic climate. Bottom line: pay more in taxes to qualify for a larger loan.
4) Declining income is a red flag for an underwriter. If your business is still reeling from the economic tsunami of 2009, getting a loan can be even more difficult. Lenders will only use the lower of the two years of income to qualify you if, for example, 2010’s income is lower than 2009’s. We can make exceptions for declining income for a health issue or call to active duty, for example.
5) The higher your credit scores are, the better chance you have of getting a higher loan and qualifying for more. Reducing credit card debt is one of the easiest ways to improve your credit score, since credit card debt has an immediate impact on your score. Work with a credit repair company to get rid of any inaccurate information and make sure you check your credit scores regularly.
Gregg Busch is Vice President of First Savings Mortgage Corporation. For more information or a free pre-approval contact him at GBusch@FSavings.com or 202-256-7777.