Planning To Use The $8,000 Tax Credit? It’s Time For A Re-Pre-Approval
Mortgage Market Update
From the desk of Joe Bailey
Keeping You Informed…
Planning To Use The $8,000 Tax Credit? It’s Time For A Re-Pre-Approval
As the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in California and elsewhere working hard to get under contract.
What’s A Re-Pre-Approval?
If you’re among them, a piece of advice: If your pre-qualification and/or pre-approval letter is more than 8 weeks old, get yourself “re-pre-approved”. Mortgage guidelines have been in flux and your original lender letter may now be invalid.
As examples, over the past half-dozen months, the majority of lenders have reduced risk tolerance with respect to:
- Maximum debt-to-income ratios : Now capped at 45%
- Minimum allowable credit scores : Heavy penalties starting below 740
- Calculation of “assets in reserve” : Only 60% of some assets can “qualify”
For buyers of condominiums and certain townhomes, even the subject property itself comes under tougher scrutiny.
You Only Get One Chance To Claim The $8,000 Tax Credit
Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers would be prudent to revisit their qualifications.
What passed underwriting in January may not pass in May.
Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, addressing and correcting it up-front will be simpler than trying to clean it up once a home’s already under contract. If things fall apart after the April 30 deadline and you lose your claim on $8,000 — tough noogies.
With More Homes Going Under Contract, Home Prices Certain To Rise This Spring
As expected, the Pending Home Sales shot higher in February, boosted by the federal home buyer tax credit’s April 30 deadline.
Pending Home Sales Spike
Versus the month prior, February’s index rose 8 percent but remains well off the highs set last October.
For today’s home buyers and seller, the Pending Home Sales Index is an important measurement. This is because a “pending home” is a property that is under contract to sell, but not yet closed.
According to the National Association of Realtors®, 80% of homes under contract close within 60 days, historically. Therefore, a higher Pending Sales figure in February projects that April’s Existing Home Sales will be higher, too.
More Pending Home Sales Means Higher Home Prices
If you’re a California home buyer today, no doubt you’ve noticed the extra market activity.
On right-priced homes, multiple offer situations are more common; sales prices are settling closer to listing price; Days on market is falling. These are the signs of a buyer-heavy market. It drives home supplies down and home prices up.
It’s a good time to be a seller, in other words. Especially as buyer activity looks poised to peak.
Get Ahead Of The Surge To Get The Best “Deals”
When the home buyer credit faced its last expiration in November 2009, we saw a pattern of buyers rushing to beat the deadline. There’s no reason to expect that won’t happen again. And as it does, Pending Home Sales should continue to climb. Average home sale prices should rise.
Home buyers may find it smart to go under contract sooner rather than later. Pending Home Sales is a warning shot. Higher home sales figures are ahead.
“Play like a champion today!”
Joe Bailey - Loan Officer
O. (831) 689-8500
C. (831) 251-5167
Tags: First Time Homebuyers, Foreclosure, Pre-Approval, Re-Pre-Approval, Tax Credit
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