Tuesday, August 26, 2008

Pre-Qual vs. Pre-Approval; What’s the Difference?

I would bet that if I asked 100 different buyers what the difference was between a pre-qualification and a pre-approval, I would get close to 100 different answers. So what really is the difference? Which one is better? Who does it come from? What’s the importance of having one vs. the other…let me try to answer your questions?

Pre-Qualification

Let’s start with a pre-qualification (more commonly know as a pre-qual) since majority of loan officers will refer to this. A pre-qual is typically given by a loan officer to a client as the personal qualification for financing. This does not mean that you have been approved for financing or even that you will get financing.

This is actually a common mistake when shopping for a loan. Many loan officers will offer pre-quals, in some cases just to get your business. But you have to be cautions that you do not interpret this as your approval. It is simply a loan officer’s educated guess.

Pre-Approval

A pre-approval is simply a full approval with conditions attached. This means that your file has been either submitted to an underwriter or run through an automated underwriting system. After doing this you would receive your “pre-approval” with a list of conditions that would need to be met in order to close the loan.

With a pre-approval, there is no more “educated guessing” involved. You now know that your loan has been approved and as long as you can satisfy the conditions listed, you will typically close the file. Just remember that you should ALWAYS request a pre-approval before committing to a loan officer or even a loan for that matter. Otherwise you may get started in the process only to find out that you do not qualify for financing.

Conclusion

So hopefully this simplifies the differences a little for you and now that you know what to look for, you will be more educated about the process. Each loan officer has different levels of experience to navigate through the mine fields of the financing process, so it’s critical to work with a loan officer that knows what they are doing. If you have any questions feel free to give me a call, I am more than happy to help.

Friday, August 15, 2008

Mortgage Industry Tightening Up?

I saw an article the other day in the Seattle Times, maybe you even saw it yourself. The article was talking about how the mortgage industry continues to tighten up; it went into detail on all the changes in the market today.

I would bet that you may even know of someone who has been impacted by all the changes in the mortgage industry, maybe even you have been affected at one time or another.

Well, I guess the main reason I mention this is because I still work with clients who are amazed that our company is able to help them get into a home. They always say how they thought there was no hope for their situation. Usually it’s as a result of low credit scores or a past bankruptcy, etc, but they fully believe in their mind that they will have to continue renting for a long time.

This is just not necessary. I have helped countless clients get into a home through our rent to own program (If you would like more information on this program click here (www.empireoptions.com) but even more amazing is how many clients I have helped out with standard financing. There are so many mortgage brokers that will turn down potential homeowners without even giving them a fair chance, all due to credit issues and past blemishes.

My advice is don’t let the fear of what the media says about the mortgage industry stop you from reaching your goals of homeownership. If you desire a home of your own, feel free to give me a call and we can look into your options, I promise to explore every possibly scenario for you.

Monday, August 4, 2008

New Tax Credits for 1st Time Homebuyers!

Hi! I have a big announcement that I wanted to share with you. Have you heard about the new tax credits for 1st time homebuyers? If you haven’t, you could be missing out on up to $7,500.00 in tax credits for your 2008 or 2009 tax returns!

The first thing you may be asking is how can you tell if you are considered a 1st time homebuyer? Well, that’s easy, if you have NOT owned a home in the last 3 years, then you are a 1st time homebuyer. So if that’s your case…listen up!

A new home-purchase housing bill approved by Congress and signed by President Bush will allow for major tax credits for 1st time homebuyers purchasing a home between April 9, 2008 and June 30, 2009. What this means is that if you have not owned a home in the last 3 years or are thinking of purchasing your very 1st home AND can close before the end of June, 2009, you may be eligible for up to a $7,500.00 credits on your federal taxes for 2008 or 2009 ($3,750.00 if you file as a single person)!

Example: You owe $2,500.00 for your 2008 taxes, but you also purchased a home with you spouse. With the maximum tax credit of $7,500.00, you would now be receiving a $5,000.00 credit back from the IRS! (Since the tax credit is considered “refundable” if you owe the IRS less than what your credit would be, you would receive the difference back from the government in the form of a refund.)

How does it work?

So you may be curious how it all works and what the guidelines look like, or maybe like me you are a little skeptical…well here’s a quick overview of the final form of the bill.

- Any home restrictions? No, you can choose any house type, amount, size…anything. There is no regulation on the type or price of the home you would be purchasing. As long as the home is purchase by a 1st time homebuyer between the designated time period, you will receive the tax credit.
- Who is eligibly? – Any first time homebuyer purchasing a home between April 9, 2008 and June 30, 2009.
- Are there income limitations? Yes, if you make over $150,000 per couple or $75,000 per single the tax credit maximum of $7,500.00 will begin to phase down in increments.
- Any other restrictions? Yes, you are not eligible if you are an illegal immigrant or have financed the property using a state or local housing agency tax-exempt bond mortgage or do not plan to use the house as your principal residence.

Do you have to payback the credit?

Unlike some other credits that are available this one will be required to be paid back, however it will be over an extended period of time. Starting in the second tax year after your purchase and continuing for up to 15 years, taxpayers are expected to make pro-rated repayments to the government on their federal filings. Over a 15-year payback period for the full $7,500.00 credit, the cost would only be $500 a year.

Ultimately, the new tax credit is very much like an interest-free loan for up to $7,500. You pay the principal back in increments over time, but there's no interest charge to you.

How can you claim the credit?

Well, that’s the easy part. After you have purchased the home and met the guidelines as an eligible borrower, you would just request the credit on your 2008 or 2009 tax returns. It’s that simple.

If you would like more information about this great program for 1st time homebuyers you can also go to http://www.federalhousingtaxcredit.com/ or give me a call and we can discuss your options.