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It looks like an interest rate for a 30 yr conventional loan is aroung 5.75% right now. What a great rate and a great time to purchase a home. Today was not a good day on the stock market but it is Monday!! I heard lately that when the market settles down inflation will go up and interest rates could increase by 2 percent in the next couple years. We will see!
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County foreclosures set record - again, an article from The Gazette, relays that according to a report by the County Public Trustee's Office, foreclosures totaled 488 in March, the third time since December that monthly foreclosures have set a record. One thing to keep in mind about foreclosures, not every filing results in the loss of a home. Some homeowners are able to come up with money and catch up on their missed payments or they work out a payment plan with a lender, who withdraws the foreclosure action. Also, El Paso County's foreclosures are being spread out over a greater number of households because of the county's growth. Despite the rise in foreclosures, the rate of foreclosure per household is much lower than 20 years ago.
http://www.gazette.com/articles/county_34841___article.html/foreclosures_foreclosure.html
--Roger Collins, First National Bank
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I think interest rates are very good these days! I noticed today that a conventional loan rate is around 5.875 to 6%. FHA interest rate is from 5 to 6% depending where you are shopping and a CHFA interest rate is between 6.25-7%
What a good time to be purchasing a loan!
It should be a great help to buyers who have good credit but don't have a lot of savings that the FHA loan limit has been increased in El Paso county to $325,000.
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Mortgage Pre-Approval versus Mortgage Pre-Qualification
Is there a difference between a Mortgage Pre-Qualification letter and a Mortgage Pre-Approval letter?
The reality is that most all buyers need to obtain a mortgage loan to purchase a home. Since mortgage approval is such an integral aspect of a home purchase, wouldn't it make sense that REALTORS® have a better understanding of the mortgage pre-approval process, since so few buyers are able to buy a home and pay cash.
Speaking as a REALTOR®, the difference is in documentation and verification. In other words, is the buyer providing copies of income paystubs and bank account statements to the Mortgage Lender or is the Mortgage Lender simply relying on verbal information provided by the buyer? More often than not, the difference between the two terms is that one is issued without any verification of information and the other starts with the buyer providing written documentation of all information provided. While neither is a considered to be a mortgage commitment, nor a written mortgage guarantee, obtaining a Mortgage Pre-Approval letter is more preferred than obtaining a Mortgage Pre-Qualification letter.
Based upon my experiences in selling real estate since 1971, and helping buyers obtain mortgage financing, Mortgage Pre-Qualification is generally a process where a buyer contacts a Mortgage Lender/Mortgage Representative, often on the telephone, who then asks the buyer to provide some information. The information requested involves a current address and how long living there, a social security number and permission to order a credit report, annual income and hopefully the amount of down payment.
After the credit check is ordered and received by the Mortgage Lender, the Mortgage Rep then estimates the amount of mortgage the buyer can afford and sends (via fax or email) a letter to the buyer with the title Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ or Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ and a purchase price of $__. This is usually done within a half hour or so of the initial phone call, and at best can be described as an estimate of potential mortgage ability and purchasing power, and not Mortgage Pre-Approval.
The pre-qualification letter always includes varying type disclaimer information, such as: Subject to a formal mortgage application and payment of an application fee, subject to verification of employment, subject to verification of assets, subject to credit review, subject to mortgage underwriting guidelines, interest rate to be the prevailing rate of interest for the mortgage type applied for, among many other "subject to"-like statements. In other words, we will give you a mortgage when we see that the information you provided is correct and meets certain qualifying standards.
What problems could arise when a formal mortgage application is submitted by a buyer after they've obtained a Mortgage Pre-Qualification letter like that? The mortgage application process involves somewhat standard underwriting criteria and guidelines for each particular type mortgage, whether the mortgage is VA, FHA or Conventional. The varying underwriting criteria involves guidelines, whether Fannie Mae, Freddie Mac or the Lenders specific qualifying criteria, for verification of income, income qualifying ratios, verification of down payment, cash reserves after closing, credit check scores and work history, among others.
Yes, it is possible that the buyer provided correct information, and will obtain a mortgage commitment when a mortgage application is submitted. However, there are many circumstances where even though the information verbally provided is accurate, certain other details are not mentioned which may have a negative impact on the mortgage approval process. Details like income being received off the books, down payment being borrowed (not gifted from a family member), and savings for the down payment but no other assets for closing costs or inconsistency in work history, to name just a few situations that can cause problems in obtaining mortgage approval.
While Pre-Qualification letters like the previous example are common, not all Mortgage Lenders provide them in that manner. Many Mortgage Lenders require a more thorough process in providing Mortgage Pre-Approval. In addition to obtaining a credit report, many Lenders require the buyer to provide proof of two years of work history, pay-stubs or income tax forms, copies of bank statements for source of funds verification and copies of charge card statements.
When the documentation is provided, it is then submitted to the Mortgage Underwriter for review and approval. The Mortgage Pre-Approval letter is worded something like this: Congratulations, You Are Pre-Approved for a mortgage loan in the amount of $__ and a purchase price of $__ subject to a Contract of Sale and a satisfactory Bank Appraisal on the home being purchased. While more time consuming than the previous pre-qualification practice discussed above, it is more thorough and more reliable, shortens the formal mortgage application and approval process and provides the ability for a fast closing if one is desired.
Consider the advantages of this type Mortgage Pre-Approval. First of all, the buyer and REALTOR will have confidence in a price range and confidence in obtaining mortgage approval. In submitting offers, sellers will know they have a serious buyer who has taken the time to arrange for mortgage financing first. And just as important, the buyer will be more relaxed in spending money to hire an Attorney for contract review, providing the earnest money deposit, hiring a home inspector to perform the home inspection, termite inspection, radon inspection plus any other required inspections and paying for the mortgage application and appraisal fee. Why? They are concentrating on the home they have purchased, and not worrying about the mortgage approval process.
Needless to say, I can't even count the number of real estate transactions I've noticed fall apart after a buyer has paid all those fees for the home they hoped to purchase; only to find out they were not able to obtain mortgage approval, even with a Pre-Qualification letter. These are the financial ramifications for a buyer, but what about the ramifications for the others involved in a lost real estate transaction, the selling agent, the listing agent and the seller. Consider the time, energy, emotional strains and on and on. Real estate is a people business, a service business. Not much good can occur when a real estate transaction is cancelled for mortgage denial, especially when it occurs a month or so after contract acceptance.
Provide better service to your buyer clients, review their Mortgage Pre-Qualification letter with them, and don't be afraid to ask questions. Provide better service to your seller clients, read the Mortgage Pre-Qualification letter the selling agent is providing at the contract presentation, and don't be afraid to ask questions.
by David Fialk
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You’ve just dropped off a filing cabinet full of papers at the lender’s office, and you get a phone call asking for a few boxfuls more.Welcome to the meticulously detailed world of the loan approval process. You’re starting to feel that the loan officer has a love of paper, which is somewhere between mildly perverse and openly masochistic. Stop! Don’t take anything about this process personally.The plain fact is lenders require large amounts of documentation on a mortgage loan. Your employment history, credit rating, recent financial transactions—all of these must be carefully verified. If last month’s Visa payment was late, they might ask for a letter of explanation. If you have your own business, tax returns for at least the past three years will be requested. And they’ll probably want a year-to-date profit and loss statement, too.It’s not that they lack faith in you, it’s The Process: their regulations demand that they document everything. That loan officer with the thing for paper may know that you’re a safe bet, but the underwriters have to be sure that every loan they make could withstand the scrutiny of federal auditors and bank examiners.
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