Tax Credit Deadline for First Time Home Buyers

Not managing expectations of the first time home buyer regarding the urgency to close before Dec 1st in order to realize the tax credit is like “flirtn’ with disaster!” As of today, there are only 26 business days left until Dec 1st - Veteran’s Day, three days during Thanksgiving, and not counting the last day of the month reduce the actual number of business days from 31 to 26. And, and November only has 30 days in the month! The lending industry is requiring perfection on properly documenting every loan file before the closing package can be released to attorney’s office (see my most recent blog post "Is the Loan Clear to Close?"). It takes longer to clear conditions on each loan. Appraisers must spend more time documenting their appraisals by supplying additional comps or commentary to justify or defend their value. Over half the sellers are banks. Banks will move at their own pace! Do not expect banks to respond quicker to offers, counters, etc. as the deadline nears expiration. Rates are low, home prices are deeply discounted, and the eight thousand dollar federal tax credit is in play. There has never been more incentive or opportunity for a first time home buyer. Activity has picked up as motivated buyers move with urgency to write a contract and close by 11/30. This is a great opportunity to enjoy a run in business that we all welcome, to help buyers realize the American Dream of home ownership, and to help buyers improve themselves financially with instant equity and tax benefits. However, absent of setting expectations to the buyer on time frames and responsibilities, this is a recipe for disaster that can crush clients’ hopes and destroy our professional reputations. We must plan and anticipate if we are to best serve our clients! To learn more about setting expectations for the buyer, to view tips, a proactive timeline, pertinent questions and answers and important information on FHA financing and the FHA flip rule, please read this entire article posted on my website under "News Alerts." Let’s get our buyers motivated and EDUCATED. Let’s get our sellers motivated and EDUCATED. Collectively let’s pull together (realtors, lenders, attorneys, appraisers) to ensure our first time home buyers capitalize on this tremendous opportunity! At the end of the day we will have guided our buyers through a labor intensive, time sensitive process. There is an awesome opportunity for us to showcase our expertise and value and ensure we earn future referrals from those we serve…..and avoid “flirtn’ with disaster” caused by missed expectations and opportunities. Please call me if you have any questions, if there is anything I need to clarify, or if I can help you with a buyer or particular scenario. I am eager to assist!

Is the loan clear to close?

There is an old saying I heard while playing high school football, “Shoot for perfection and you will catch excellence.” In today’s mortgage lending environment, excellence is not good enough when documenting each and every loan file. Lenders are requiring perfection on every loan file. Why? I attended two industry seminars in the last two weeks. In each seminar I heard that each loan file must “achieve perfection.” Simply put if loans are not perfect they will not be purchased on the secondary market by Fannie Mae, Freddie Mac, VA or HUD. Lenders have no choice but to underwrite, review and audit the file to perfection BEFORE closing. Until this recent change (I saw it start this August) lenders would allow documents to be collected at closing or even after closing. NO MORE…not in today’s mentality that if a loan is not perfect prior to closing that is a risk a lender cannot take. Contracts must be fully executed with all addendums, and every initial must be on it. Cash to close must be verified to the extreme. Gone are the days of “lets close it and we can get outstanding information post closing.” Now keep in mind that requirements have not changed but the attitude toward getting every piece of information in advance has. Simply put lenders must have loans ready to be purchased to earn money. Loans not being purchased cost lenders financial loss that they cannot tolerate or absorb. In an attempt to mix humor with reality, I kid with clients and agents telling them we will ask for everything but a blood sample, or your first born….but it may feel like we are asking for that at some point. So getting loan is still the same- we must verify income, assets, cash to close, and credit. What is required to do that has changed…more is required and just as importantly all information is required before loan package can go to closing. Previously the big question was “Is the loan approved?” Now the BIG question is, “Is the loan clear to close?” We must all work together to supply documentation. Patience, cooperation, and communication are the key getting the loan “clear to close” and achieving perfection.