SAN DIEGO MORTGAGE AND REAL ESTATE

Beating the 2010 VA Loan Limit Deadline

The 2010 VA loan limit deadline approaches and it looks like we were able to sneak one in before the December 31, 2009 drop dead date.  We went from application to funding in 17 calendar days.  I want to share some thoughts about how to get a VA mortgage approved quickly and help veterans (and their REALTORs) avoid some of the common deal killers:  

1- The VA appraiser can be the largest stumbling block.  VA appraisers have ten BUSINESS days, from the time they receive the assignment, to inspect the property and complete the valuation report.    Most VA appraisers are quite helpful and will try to "push" that time frame but you have to help them.  I recommend that the listing agent have 4-5 pre-arranged inspection times available for the appraiser and that the listing agent meet the appraiser at the property.  

2- The appraisal still has to be underwritten by a VA-approved, LAPP underwriter who issues a Certificate of Reasonable Value (CRV).  That typically takes one to three business days.  Some lenders opt for the VA to underwrite the appraisal; that takes 2-3 business days.

3- The good news is that the rest of the file can be submitted right before the expected appraisal upload.  I recommend that the loan file be fully processed and submitted on the 6th-9th business day after the appraisal assignment.  If the file spends a week in underwriting, the CRV should be issued by then.

4- Common mistakes associated with residual income analysis include:

• improper calculation of the veteran's tax obligation
• failure to account for the monthly utilities expense ($.14/square foot)
• forgetting to account for and secure a monthly child care expense statement
• not documenting the income with a Statement of Service (active service members)

5- Failure to fill out the proper forms and disclosures (VA forms are onerous).

6- Forgetting to pull a Certificate of Eligibility (usually comes with the case number assignment)

7- Forgetting to pull a CAIVRs report.

8- Securing a clear termite report, with Sections 1 AND 2 clearance, signed by both the seller and the buyer.

9- The most common funding mistake is not having a Yeoman/Quartermaster available, for deployed active duty service members, to fill out an "Alive and Well Statement".

10- The BIGGEST mistake made is forgetting to have the VA Amendatory Clause executed by the seller, buyers, and real estate agents, at contract acceptance.

VA loans are often considered to be time consuming propositions.  With proper preparation, and a teamwork approach from the listing agent, selling agent, and lender, a VA loan can go from application to funding in less than three weeks.

Merry Christmas from Brian Brady of MortgageRatesReport.com ! Rates held at 5.0% today and next week promises to be a doozy. Enjoy your holiday weekend

December 24, 2009 mortgage rates should be above 5%. Bond market was stable today but has taken a beating these past two weeks. We saw close to 2% loss in bond prices, which drove retail mortgage rates from 4.5% to over 5% today

January, 2010 Mortgage Rates Should Start Climb To 6%

December, 2009 mortgage rates have been quite volatile.  We started the month out with conventional rates as low as 4.5% (with an origination fee) and today, that same loan is offered at 5.0%  Throughout 2009, I reported that this was a classic overreaction, by the MBS traders and changed my posture to float rather than lock rates in at application.  That worked for 2009 but won't for 2010.

For those of you who have followed me on Twitter or Facebook, you've seen that I have been recommending borrowers to lock-in rates at loan application rather than "playing the market", for the past six weeks.  This rapid rise can be attributed to one thing; it's an answer to a comment investments broker, Jeff Brown made yesterday.  Jeff said:

I don't think it's the beginning of the climb yet. Uncle Ben is still doin' his thing with much vigor.

Jeff, Uncle Ben ain't got no mo' vigor; he's out of Viagra.  I tried to explain this phenomenon over on Active Rain, last night:

Markets are discounting mechanisms meaning that traders anticipate how potent the Fed can be.  The Fed's just about out of bullets and MBS traders know it.  Let me try to give you an example of what the Fed did by recanting the explanation I gave, to a Del Mar REALTOR, on the beach this summer.

I had my daughter (Maggie) get me ten cups of water from the ocean.  Then I drew six lines in the sand, equidistant from each other, and labeled them 6% (on the right) through 4.5% (on the left). I had Maggie stand at 6% and explained that this represented Dec, 2008 mortgage rates.  I announced that my intention was to throw water at her until she moves to the left, away from 6% and towards 4.5%.  I grabbed two cups and threw one at her, then at the line marked 5.5%; Maggie quickly darted to the left. 

Then, I threw a cup at her every time she inched to the right.  I explained that Maggie was acting EXACTLY like the MBS traders, naturally gravitating towards the "natural" market.  Each time I chucked a cup full of"stimulus", Maggie moved back under 5% and closer to 4.5%.  Once, she got real daring (like the MBS market this past summer) and I threw three cups at her.

At the beginning of December, The Fed had two cups of water.  Now, they only have 1.5 cups of stimulus left.

Even if the Fed announces an extension of the MBS purchase program, bond traders might view this an inflationary (printing money to buy money) and reject the Fed's efforts to control mortgage rates.  If bond traders push up yields on US Treasury securities, because they believe the Fed and Congress are borrowing and printing money irresponsibly, no amount of support will work.  The only weapon left in Uncle Ben's arsenal will be a form of wage/price controls; that didn't work 35 years ago and won't work today.

I might be early but I think the risk of a quick jump in rates is MUCH greater than the opportunity of slightly lower ones.  My bias is towards locking all loans at application.  We may see an opportunity to float in the next few months, if markets overreact but I doubt it.

Get a customized mortgage rate quote today.

Mortgage Rates Report: December 23, 2009- I was correct about the direction (up) but perhaps not the severity of the rise. Mortgage rates jumped up to 5% today and will most likely open at 5.125% tomorrow. What is uncertain is whether this is a YE2009 yawn, from bond traders or the inevitable climb to 6% I've been talking about since last month.

Mortgage rates today, Dec 22, 2009, should be higher than a week ago. MBS markets got hit hard yesterday, opned up down today, and traders are in holiday mode. I expect we'll be above 5% before 2009 ends

Home Buyer Tax Credit Q&A: TurboTax VP Bob Meighan, CPA

I participated in a live chat with Turbo Tax VP, and Certified Public Accountant Bob Meighan today.  I had two pointed questions for him:

 BRADY:. What if a buyer's federal tax obligation is less than the tax credit? Does the buyer receive the full amount or just an amount up to his/her federal tax obligation?

MEIGHAN. The homebuyer credit is a "refundable" credit, which means that you get the full credit regardless of your tax liability. In other words, the IRS will send you a check if your credit is more than the tax liability/withholding.

BRADY. If the transaction closes on or after Jan 2, 2010, can the home buyer still claim the tax credit on their 2009 tax return? If the transaction closes after April 15, 2010 (but before June 30, 2010), would they file an amended return for 2009?

MEIGHAN. The beauty of the homebuyer credit is that you can get the credit dollars pretty fast. So, if you purchase in 2010, you have the option to claim the credit on your 2009 return (either the originally filed one or even an amended return). By doing so, you get your credit dollars now (or relatively soon) versus having to wait to claim the credit on your 2010 tax return (which would be filed in 2011).

Other questions asked in the chat about the Homebuyer Tax Credit:

Q. What will be the earliest day I will be able to file online this year?

MEIGHAN. TurboTax Online is up and running now. While not all IRS forms are final yet, most should be final by January 1, 2010. So get ready and get going. By the way, if you'll be claiming one of the homebuyer credits, you may have to wait a few weeks because the credit form for this won't be final from the IRS until sometime in January.

Q. Can you tell folks the top 3 things EVERYONE should know about this credit....at a very high level?

MEIGHAN:  Three things you need to know about the homebuyer credit:

1. The credit is available to first time AND existing homebuyers. The credit amounts are $8000 and $6500 respectively. And pay attention to the rules. For example, a first time buyer simply means you have not owned a principal residence in the last three years.

2. The purchase date has been extended to June 30, 2010, but you have to have a signed contract in place by April 30, 2010.... See More

3. Those claiming a homebuyer credit on their 2009 return will have to paper file the return. The IRS will NOT accept the return electronically because they need a copy of your settlement statement to substantiate your purchase. Having to file a paper copy of your return is big disappointment because it will delay your refund from days to weeks.

Q. Would a current homeowner be eligible for the extended Homebuyer Credit if they purchased a second home in another state this year? They did not sell their current home, but were told by their Realtor that they can claim the credit.

MEIGHAN. As long as you owned and lived in the existing home for at least five consecutive years of the eight years prior to the purchase date of your new home, you may qualify. There are other requirements like income and purchase price, but otherwise you should qualify. By the way, there is no requirement that you sell your existing home.

Q. Can a home buyer file with TurboTax.com with the home buyers credit?

A. You can use any version of TurboTax to claim the first time homebuyer credit. However, you won't be able to file until sometime in January when the IRS releases the final form for claiming this credit. Also, those claiming the credit will have to paper file their return because of the IRS requirement to attach your closing statement. This paper filing requirement is true for ALL filers, regardless of whether you use tax software or go to a pro.

For more information, read the December 17, 2009 TurboTax Blog post about the home buyer tax credit.

To purchase Turbo Tax for 2009, click here

How To Get An Offer Accepted with an FHA or VA Mortgage

Debbie Rumsey, a REALTOR in Encinitas, CA commented that buyers with VA home loans face increased scrutiny from sellers and their agents, on an article I wrote about VA condo complex approvals:

Thanks Brian!  I have bookmarked this for a place to refer back to when using VA loans.  The hardest part so far seems to be able to get sellers to accept them!  Glad to hear it is easy once you have received acceptance!

Debbie, I think we have to get really proactive when you present an offer for a buyer using VA or FHA financing.  There are three reasons sellers discriminate against buyers using government- assisted financing:

• The low down payment requirement means less skin in the game
• The (misguided) perception that the seller must pay for some or all of the buyer's closing costs
• The (false) belief that VA and FHA appraisers are (a) less generous in their valuations and (b) more restrictive in the remarks about property condition.

Debbie, I'll share with you how I've been helping agents debunk those three myths and get offers accepted (and eventually closed).

The low down payment requirement means less skin in the game

We can't debunk this because it's factual.  What we can do is show the seller that the borrower has an automated underwriting approval and furnish income and asset documentation to support that approval.  What this does is assuage  the fears a seller might have about a buyer (and that buyer's lender) performing within a prescribed time period.

The (misguided) perception that the seller must pay for some or all of the buyer's closing costs

The seller is not required to pay ANY costs for the buyer but is permitted to pay up to 6% for FHA loans and up to 4% for VA loans.  There are certain "non-allowable" costs for which the buyer is forbidden to pay.  Either the real estate agents or the lender can pay those costs.  All you (or any other agent) needs to request is a "no junk fee" good-faith-estimate to be furnished to the buyer.  It is further advised that the following language be inserted in to the CAR purchase and sale agreement:

Seller not responsible for any buyer closing costs, regardless of the selected loan program.  All agency-related "non-allowable" costs to be borne by lender.

The (false) belief that VA and FHA appraisers are (a) less generous in their valuations and (b) more restrictive in the remarks about property condition than conventional appraisers.

This is a common misperception.  In the 1990s, it was widely believed that FHA and VA appraisers would intentionally "low ball" appraisals and "condition" for repairs on the property in order to "cover themselves" with the agency.  The agencies did require the appraisers to warrant the condition of the property, much like a property inspector, in the late 1990s.  The agencies relieved the appraisers of the (unfair) responsibility in the early part of this decade.  Still, agents have a bad taste in their mouths from that time period.

Agency-approved appraisers are required to comment on the condition of the property inasmuch as it relates to livability, just like conventional appraisers.    Real estate agents also relied on the "clubby nature" conventional lenders had with their appraisers; those close relationships were removed with the implementation of the Home Valuation Code of Conduct.

In summary Debbie, what we need to do is to be really proactive with the offer.  Lenders (like me) need to give REALTORS (like you) a better pre-approval package so as to relieve the seller of any doubts that the loan can close.  REALTORs need to address seller-paid closing costs in the offer, and we both probably need to attach a copy of this article to better educate listing agents (and their clients) about how HVCC has made all appraisals equal.

2010 VA Home Loan Limits Reduced in San Diego County

The Veterans Administration announced that the zero-down loan limits, for VA-guaranteed mortgages, will be reduced to $437,500, in San Diego County.  The high-balance, VA jumbo mortgage program started in 2008 and allowed for zero down loans up to $697,000.  As priced declined, that number was reduced to $593,750 for 2009.

Median prices across Southern California stabilized in 2009 in response to the high balance loan program, foreclosure stays, and home buyer tax credits.  San Diego County's median price rose from $323,000, in October, 2008 to $325,000, in October, 2009.  It is anticipated that the 2010 VA loan limit should facilitate approximately 75% of the sales prices for 2010.

2010 VA loan limits in Southern California:

San Diego                $437,500

Los Angeles           $593,750

Orange                     $593,750

Riverside                $417,000

San Bernardino     $417,000

Imperial                   $417,000

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