Aren’t They the Same Thing?
There is often confusion about the difference between getting “prequalified” and “preapproved” for a loan. Don’t they mean the same thing? It’s common to think so, but they’re actually different.
Prequalification
Getting prequalified means that you’ve contacted a loan officer, allowed them to review your credit, and provided them verbal information regarding your assets & monthly income. The loan officer determines an approximate monthly payment for the proposed loan and makes sure that the Debt-to-Income ratio (how much you make vs. how much you pay out in monthly expenses each month) is within tolerance. The process can take as little as 15 minutes over the phone.
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The Lesson
I learned an expensive lesson this week. In general, for Hawaii purchase transactions, escrow fees are split 50/50, owner’s title insurance is split 60/40 and the conveyance tax is paid by the seller. I learned that this is not law, actually just the traditional agreement as outlined in the HAR (Hawaii Association of Realtors) standard purchase contract, Section C-11.
The transaction I was about to close was an REO (bank or lender owned property) owned by Fannie Mae. Fannie supplies their own purchase contract and within it is a section that states that, regardless of local tradition or customary practice, Fannie Mae will not pay any transaction costs nor any transfer (conveyance) taxes. This means that the buyer is responsible for 100% of the escrow/settlement fees and 100% of the owner’s title insurance premium.
…and Even More to Learn
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The $8,000 first-time homebuyer credit just won’t quite go away. As much as we’d love to say this was for everyone, it’s a bit limited in scope, but if you qualify, what fine, fine news! Eligible taxpayers who contracted to buy a home qualifying for the first-time homebuyer credit before the end of April now have until Sept. 30, 2010 to close the deal, according to the Internal Revenue Service.
The Homebuyer Assistance and Improvement Act of 2010, signed by the President earlier this month, extended the closing deadline from June 30 to Sept. 30 for any eligible homebuyer who entered into a binding purchase contract on or before April 30 to close on the purchase of the home on or before June 30, 2010. The new law addresses concerns that many homebuyers might be unable to meet the original June 30 closing deadline.
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This is a valid and quite common question. Technically, on a VA Loan, the only income we can use for qualifying purposes is the Veterans’ and the Veteran’s spouse. No other person can be on the loan – not the parents, brothers, girlfriend’s or fiancee. But there is one exception.
If two Veterans who are eligible for a VA Loan want to purchase a property together, they can by doing a “Split Entitlement” VA Loan. What “Split Entitlement” means is that instead of a Veteran using 100% of his or her entitlement to purchase a home, the entitlement is split 50/50 with another Veteran – which they in-turn share responsibility in making sure the loan is eventually paid in full.
What are the steps for “Split Entitlement”?
The process is quite similar to doing a regular VA Loan. The only difference is that when all Prior-to-Doc conditions are met (right before signing final loan documents), the file must be sent to the local VA office for prior approval. This process may take up to 10 days, but once the final approval is issued by the VA office, the VA Loan Specialist may proceed with ordering the loan documents and closing the loan.
Doing a “Split Entitlement” VA Loan is best for unmarried Veterans looking to share the cost of homeownership.
What Happened?
Greece is in financial trouble and that is affecting economies the world over. The problem is that Greece’s National Debt simply grew too large. Due to government’s spending, the debt expanded 15% annually, but the economy itself was shrinking about 5% each year. As a result, the total government debt grew to 115% of the GDP and it is expected to grow to 150% by 2013. What that means is that the government owes more money than the whole country produces in a year. Believe it or not, the 115% number isn’t that much higher than many other industrialized countries. However, Greece has deep systemic problems. It was forced to cut back it’s spending and because it is a consumer based economy that produces almost no exports, there is little for the economy to do but shrink and make it’s debt burden greater.
Why Now?
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The end of an era is fast approaching. Real Estate professionals and potential homebuyers across the country are scurrying to submit purchase contracts before the swiftly looming April 30th deadline of the $8,000 First Time Homebuyer Tax Credit. This tax credit has been wildly successful; the IRS states that over 1.4 million first time homebuyers took advantage of this program as of September 2009. While those numbers are a bit dated, it does show how successful this piece of legislation was.
So, what does this mean for a good majority of us? Well, it’s just back to business-as-usual. Rates are low, housing prices have settled, and the economy is starting to turn around – even without the credit, it’s still a great time to buy.
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In our last post we defined what a short sale is and what it isn’t. Here we will go through the process in more detail. I’d like to thank Attilio Leonardi of Team Lally & RE/MAX Kapolei for his insights into the process. He and his team have sold over 80 short sale properties and gladly shared their knowledge.
Of course, nothing is too good to be true, so let’s take a quick look at the potential challenges one could face when attempting to purchase a short sale property.
Potential Challenges
Short sales can be challenging for a number of reasons: (more…)
We’ve all heard the sad news that foreclosures are increasing here in the Aloha State. Of course that also correlates to a lot of short sales as well. The reality is that this does present a buying opportunity for people who dreamt of owning a home over the past few years but couldn’t afford it. Not only are values lower than they have been in years, but the large number of foreclosures and short sales have banks ready to sell the properties at less than market value. Is this too good to be true? Let’s take a closer look.
What a Short Sale is…
First of all, what is a Short Sale? Is it different than a foreclosure? Or different than a ‘bank sale’, bank owned property or ‘REO’? They are all related, but there are critical differences between each. A short sale is an event where the owner of a property wants to sell his/her house, but owes more on the house than it is currently worth. So, in order to sell the property, the owner must obtain permission from the bank that services the loan on the property (because the sale amount isn’t enough to pay off the loan). (more…)
Remember a few years back when Google Maps launched their ambitious new satellite tool that allowed you to see what your home looks like from space? If you thought that was impressive, wait until you see what Google just released for the Hawaii market; a tool called Street View. Street View allows you to see what a property looks like at street level, right from your computer screen. In addition, with the click of a few arrows, Street View allows you to move up and down that street as if you were taking a stroll in the neighborhood.
As you can imagine, this new feature, which which has been available in other mainland and foreign markets but only available in Hawaii as of last Monday, has major implications for home buyers scouting out their upcoming home purchase. There are already great web services that provide online MLS listings for Hawaii, but the pictures used in these applications are images provided by the listing agent as well as an aerial view supplied by online map provider such as Google or Microsoft. Now the aerial views are great, but it doesn’t give you the “curb appeal” of a particular property and you can bet the seller’s agent will only show images that display the property in the best possible angles which could be deceiving.
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Hooray! Last week, Congress passed and Obama signed the new Homebuyer Tax Credit into Law. Not only is it an extension of the $8000 first-time homebuyer tax credit, but it also adds a $6500 tax credit for repeat/move-up homebuyers.
This new version of the tax credit is part of The Worker, Homeownership, and Business Assistance Act of 2009, and extends the credits through purchase contracts dated April 30, 2010 or prior; however, the transactions must close by June 30, 2010.
Here’s a quick summary of the new version of the tax credit:
3 Minute Thursdays: What is Prepaid Interest?