Why should I get Pre-qualified?

Before you get serious about making an offer on a new home, obtain from your mortgage lender a prequalification letter at minimum, or better yet, a preapproval letter. A preapproval letter from a lender is much more significant than a prequalification letter. Prequalification often takes just a few minutes, and many lenders provide this service at no cost to you. However, a prequalification letter is a nonbinding offer by the lender to provide you a loan for a certain amount of money. The problem with a prequalification letter is that the lender hasn’t verified your financial information. Rather, they’re indicating that if everything you stated can be verified and your credit rating is solid, they will provide you with this loan.

Preapproval, on the other hand, involves your lender actually verifying the financial information you provide. The lender will contact anyone they need to receive verification of your income, assets, debts, and credit history. After it verifies this information, it issues a letter stating that you are approved for a certain amount of mortgage for a certain period of time. Some lenders charge a small fee to provide a preapproval letter; however, this fee is generally refunded to you at closing.

You have several very good reasons for obtaining a preapproval letter prior to entering into any negotiations regarding the house purchase, including the following:

• Your mortgage company has done a thorough review of your financial information and has provided you with the letter stating that they will give you a loan for a certain amount of money. It’s obligating itself to provide you with this loan. A potential buyer who already has a preapproval letter from a lender stands a much better chance of having his purchase offer accepted than someone who is making their offer contingent upon obtaining financing.
• The preapproval letter provides you with confirmation of how much money (loan plus your down payment) you have available to spend on your new home.

Preapproved borrowers are attractive to potential sellers. Sellers don’t need to worry that if they accept your offer, you could be turned down for a loan. Also, you may be able to close more quickly than another competing buyer, because you have already completed the time-consuming process of being approved for your mortgage.

If your financial circumstances change significantly from preapproval to closing, your preapproval letter may no longer be valid. Contact your lender immediately if your circumstances change.

To obtain a prequalification letter, preapproval letter, and eventually a mortgage, you need to pull together the following information and documents:

• Employment and income: Be able to answer these questions about your employment: Where do you work? How long have you worked there? How long have you worked in the industry? What is your annual income? How is your compensation derived? How stable is your income?
• Liabilities: What current debts do you have? What is your minimum monthly payment required to satisfy these debts? What is the actual monthly payment that you’ve been applying toward these debts? Of your total debts, how much is directly applicable to credit cards and auto loans?
• Assets: What is your current bank balance? Where will the money come from to make your down payment and pay any closing costs and discount points, if applicable?
• Credit: The lender won’t typically ask you any questions about your credit history and instead pulls a copy of your credit report.

Review your credit report personally to make certain that you have done everything possible to improve its accuracy prior to making loan application.

Documents that you need to provide to your lender or prospective lender are listed in the Documents Needed for a Mortgage Application Worksheet. As you prepare to apply for your loan, you can use this checklist to make sure that you have all the necessary information.

Refinances Surge

May 6, 2011 By MortgageDaily.com staff

Declining rates this week helped spark lots of new refinance activity, though a healthy increase was also recorded for purchase business. Meanwhile, the spread between jumbo mortgages and conforming loans tumbled. The U.S. Mortgage Market Index from Mortech Inc. and MortgageDaily.com for the week ended Friday rose to 227 from the previous week's 203. But the index still sits below its 239 level of a year ago. Driving the increase was a 15 percent jump in refinance inquiries. Refinance share rose to 47 percent from 45 percent. This week's share reflected a 34 percent rate-term share and a 13 percent cashout share. Purchase inquiries were also stronger -- up 9 percent from last week. Conventional lenders reaped the rewards of the latest boost in business, with the Conventional MMI climbing 13 percent. The FHA MMI was only 3 percent higher. The share of shoppers who opted for an adjustable-rate mortgage fell to 10.45 percent from last week's 10.79 percent. Still, overall ARM inquiries were up 10 percent. The average 30-year fixed-rate conforming mortgage was priced at 4.843 percent this week, falling from 4.940 percent last week and 5.065 percent 12 months earlier. Compared to the conforming 30-year mortgage, the jumbo 30-year was priced more attractively this week. The jumbo-conforming spread dropped to 53 BPS from last week's 60 BPS. The 15-year also gained in appeal, with the spread between the 15-year and 30-year mortgage inching up to 80 BPS from 79 BPS seven days prior.

Commercial Real Estate: Big Trouble, Small Bailout??

Commercial Real Estate: Big Troubles, Small Bailout
Maurna Desmond, 09.04.09, 12:19 PM ET

High-flying financiers are sweating a coming wave of mortgage defaults tied to office and apartments buildings. Unfortunately for them, too big to fail doesn't apply to the $6.5 trillion U.S. commercial real estate market.

Unlike the multitrillion-dollar government intervention launched to keep the American housing market from cratering, Washington has done little to ease a looming crunch on the commercial side. "Housing probably gets more attention because it's a big part of household wealth and, at its peak, it was a much bigger portion of the economy than [commercial] real estate," says Abiel Reinhart, an economist at JP Morgan.

"It's one thing to bailout mom and pops on Main Street but another to bailout these big boys with big paychecks," said Peter Slatin of Real Capital Analytics, referring to the government's multi-pronged effort to help struggling homeowners. "People were trading buildings like trading cards."

The commercial real estate debt market, half mortgage-backed securities and half whole loans, has been virtually frozen since markets seized up in the summer of 2007. The situation will get worse as loans come due and values continue to deteriorate. "This is a drip, drip, drip transfer of ownership, not a flood of properties hitting the market," said Slatin.

California billionaire and Colony Capital Chief Executive Tom Barrack talked with Forbes in July about the struggle for survival in a downturn. "The object of the drill for everyone in commercial real estate--and this is everyone in the world--is just get to the other side of Death Valley. If you can make it to the other side of Death Valley, there's hope." (See "Commercial Real Estate: From Bad To Worse.")

The Federal Deposit Insurance Corp.'s Public Private Investment Program (PPIP) was a program supposed to help the sale of illiquid assets by combining private capital with government leverage. But it's not yet off of the ground. The only government lending program now in place is the New York Federal Bank's Term Asset-backed Lending Facility (TALF). This program recently expanded to include bonds backed by commercial mortgage-backed securities, allowing holders of CMBS to refinance their loans into lower interest bonds.

So far, just $2.1 billion has been issued through this program. Larger firms like Vornado, Westfield, DDR and Simon Properties are positioned to complete TALF transactions, according to Stephen Blank, senior fellow at the Urban Land Institute. "I don't think people expect TALF will save the entire industry, but it will jump start the first round of securitizations," says Blank.

Unlike the broad sweep of turmoil caused by the collapse of housing, most of the pain related to commercial real estate will be absorbed by investors and the firms that loaned them money, especially regional banks. Life insurance companies and pension funds like TIAA-CREF, CALPERS and CALSTERS, will also feel the pinch. Private equity funds of all sizes, from the Broadway Partners and Tishman Spier to the Carlyle Group, bought big using leverage, intensifying pain as the rout continues.

Most Americans will feel the impact through diminished municipal tax revenue, hurting funding for schools and other government-funded enterprises. Swaths of empty office buildings also have the potential to blight central business districts.

Industry advocates understand that there is limited sympathy for commercial real estate players and are tailoring their appeals accordingly. "We've been careful not to be painted as an industry looking for a bailout," says Chip Rodgers of the Real Estate Roundtable, a trade group. "TALF is a collateralized loan program. It's not a giveaway."

Others warn that helping stakeholders too much could slow a recovery, risking an American version of Japan's lost decade. "Part of the process is letting lenders and borrowers duke it out," said Tony Thompson, chief executive of Thompson National Properties and former board chairman of Grubb & Ellis. "Some people are gonna die and some are gonna reinvent themselves and some are gonna integrate themselves into the government fabric."

Tough love isn't the only solution. The Real Estate Roundtable estimates some $1 trillion in new capital is needed to restructure the $300 billion to $500 billion loans that need to be refinanced each year for the next eight years. "There is a need for the government to step in and develop a mechanism to bridge the gap. Everybody is still in a holding pattern," said Rodgers.

Of course it's not all bad news. For investors with cash, there will be plenty of opportunities for predatory plays. "There already has been a lot of carnage and there's likely to be a lot more," said Rodgers.

If you are about to be foreclosed on a commercial property or know someone who is and can't get a refinance, we can help!!   Call UCS