Everyone keeps talking about how hard it is to get a mortgage with today’s tighter lending standards. Many people actually disqualify themselves without even talking to a mortgage professional! But with both money and houses on sale, now is a really great time to buy. In fact, 8 of 10 homeowners would say now is a great time to buy a home.

So if you are thinking about moving up, moving down or just taking advantage of ridiculously low interest rates, here are some tips to help you present a stronger application.

1. Income Documents

Most lenders want to see a full month of paystubs and the last two years complete Federal Tax returns. If you are on a pension or social security, they will also want to see the award letters. Assembling them ahead of time and holding on to every paystub you get is a good idea even before you find a home and/or submit your mortgage application because it will save you time later. (more…)

“As of September 1, 2011 appraisals will change drastically. We now must complete appraisals in what is defined as UAD or Uniform Appraisal Dataset format. This is a GSE Fannie, Freddie requirement.”  I saw this blog just this morning posted by Bobbie Smith, a Realtor up in the Poconos. An appraiser in her area, Mary Thompson, was giving her a “heads up” about new appraisal rules coming this September that will make all our lives even more challenging. As a result of the difficult housing market of the past few years, appraisals are the most difficult part of every real estate transaction.

“What does this mean for you? The new reports will look foreign to you and your clients with all the codes we have to use in the reports, so you will have to be versed on what the codes mean. Instead of the old days where we described a property as being Good in condition or Good in Quality of Construction, we will now be using codes such as Q=3 and C-2, etc. It will be far less user friendly to read and more automated system friendly. Fannie and Freddie want consistency across the board for all appraisals nationwide and the codes are the way they are trying to get this accomplished. They have clearly defined what Fair, Poor, Average, Good, Very Good and Excellent Quality and Condition should entail. No more leeway in how appraisers determine this on their own. Lenders are also gearing up for uniform delivery of their loan packages and the UAD is part of this whole process.” READ MORE

You can buy a new home using an FHA Reverse Mortgage and there are so many potential advantages for those over the age of 62, especially for the self-employed. Let me explain -

Normally when you apply for a mortgage, your credit score and your income determine the amount of money you can borrow to purchase a home. Then, of course, the home itself must appraise for an amount that justifies the loan. If you are buying a home selling for $400,000, for example, and you are able to put $150,000 cash down, you must still qualify based on your current income and credit history to borrow $250,000. The home also needs to appraise for at least $400,000. What if your retirement income doesn’t qualify for this amount or what if you are self employed and can’t truly show “personal income”. The bank won’t lend you the money. (more…)

That’s the key to making money in the stock market but how many can discipline themselves to actually do that? To buy when stock prices are low requires a strong stomach and a belief that things will get better. Don’t you want to wait until the stock starts going up just to make sure you should really trust the trend before you buy in? Several months ago the talking heads on TV were all doom and gloom and yet today the market has recovered much of it losses. Timing the market is tough.

Housing markets also have their cycles, moving from sellers’ markets to buyers’ markets to a more balanced “normal” market. Does that mean you should sell your home just because prices have risen to a point where you can make a great return on your original investment? If it is an investment property, perhaps; but if it’s the home of your dreams, probably not. If you did sell, would you be able to buy it back when prices eventually cycled to the bottom in the next buyers’ market? What if prices don’t go down for ten years or more or even worse, what if they keep going up?

Should you buy a new home just because of a buyers’ market? If you will be in the market to buy in the next year or two, would it be a good idea to buy now while prices are still depressed and interest rates are extremely low? YES. To take advantage of a buyers’ market, you have to be a BUYER. When the housing market cycles back to the sellers’ advantage, it will be too late. For the leading edge of the Baby Boomers – the ones who are 62 or 63, this is your last buyers’ market. Unless you are planning to stay right where you are when you retire, now is the best time to buy your retirement home and here are a few scenarios that will help you “time the market”

• You have significant equity in your current home or own it outright. At the peak of your career, you still enjoy a good income and can qualify for a conventional mortgage or an ARM for the purchase of a “second home”. You buy a home now where you want to live later and wait to sell your current primary residence until you actually do retire or until prices have recovered. Then you have the option of paying off the mortgage on your new home if the plan was to live mortgage free.

• But what if you can’t quite qualify for a traditional mortgage on a second home? The old way to tap into the equity of your primary residence was a “home equity” loan, but those are difficult to get these days. If you are over the age of 62, however, there is another option that can help you time the market – a Reverse Mortgage. Qualifications are based on your home’s value, your equity in that home and your age, not your current credit score or income.

• You’re already retired, but selling your primary residence now means taking a lot less than it is really worth. A Reverse Mortgage in your area, let’s say, would give you $250,000 cash with which to buy your retirement home now as a second home. You will make absolutely no payments with the reverse mortgage until your primary residence is sold and you will be buying the new home now for a great price when “Cash is King”. With this option, you can “Buy Low and Sell High” and have no mortgage payments for either home.

I am no expert on Reverse Mortgages, but there are well known, reputable and reliable companies that are and they can answer all your questions. Fees are front loaded and the perception is that they are pricey. If it allows you to buy in a buyers’ market and sell later when prices have recovered, how much of a difference could that make? What would your house sell for in one year or two? Do you live in a historically strong market where house prices could rebound by 10%, 20% or more? If your wealth is tied up in your current home and you plan to relocate when you retire, a Reverse Mortgage may be the answer that allows you to time the market.

You can also buy a home with a Reverse Mortgage. Depending on your age, you may need to have a 30% to 50% down payment, but you can then apply for a Reverse Mortgage instead of a standard mortgage. You pay the closing costs and live in this home for the rest of your life with no mortgage payment. Even if you live another 30, 40 or 50 years, you will never make a mortgage payment on this home. What about your estate? Any remaining equity in your home will go to your estate when it is sold.

How can you buy a home and have no mortgage payment even though you still have a home to sell? If this is you –

• You are 62 or above
• You have significant equity in your primary residence
• You don’t feel comfortable buying a new home until your current home is sold
• You know where you would like to buy and realize this is a good time to buy
• You plan to pay cash and do not want a mortgage when you do retire

then, read on. There are ways to take advantage of this market without taking a hit on your current home.

When I say “Reverse Mortgage” some people will automatically stop reading and that’s fine. In this market, it is just another financing vehicle and for leading edge Boomers and older, it could be the perfect answer. A Reverse Mortgage is not credit score driven, there are no income requirements, no employment verifications, and no assets required (other than the cash if a purchase).  Here’s a few examples of how you might benefit:

Scenario One:
If you have no mortgage balance on your current home or have significant equity, you can apply for a Reverse Mortgage on that home and use the proceeds to pay cash for your new home. I know, you don’t want a mortgage. With a Reverse Mortgage, however, there is no monthly payment. In fact, there is no payment due until you do sell the home.

Why not just get a Home Equity loan? In some cases, this is a smart option with low interest rates. Closing costs are low and the interest paid is deductible. But you will have a monthly payment and it will increase as the market improves and interest rates inevitably rise.

Reverse Mortgages are front loaded and the perception is that they are pricey. If it allows you to buy in a buyers’ market and sell later when prices have recovered, how much of a difference could that make? What would your house sell for in one year or two? Do you live in a historically strong market where house prices could rebound by 10%, 20% or more?

Scenario Two:
You can also buy a home with a Reverse Mortgage. Depending on your age, you may need to have a 30% to 50% down payment, but you can then apply for a Reverse Mortgage instead of a standard mortgage. You pay the closing costs and live in this home for the rest of your life with no mortgage payment. Even if you live another 30, 40 or 50 years, you will never make a mortgage payment on this home. What about your estate? Any remaining equity in your home will go to your estate when it is sold.

It’s an option worth considering as you plan for your future. As a Seniors Real Estate Specialist, I can refer you to a specialist who will be able to explain your options much more clearly than I can. The truth is there are so many ways to take advantage of this market. Ready, willing and able buyers are getting some tremendous deals. Don’t wait until they are gone and the Sellers are back in charge.

Let me rephrase that – Buy now and wait to sell until the Sellers are back in charge. A Reverse Mortgage just might be the key to your financial future.

For more information -
• Visit AARP and try their Reverse Mortgage calculator
• Visit the US Department of Housing and Urban Development (HUD) and read their excellent summary of the FHA Reverse Mortgage Program – HECM

Every case is unique! Ask us for a referral to a local mortgage professional who can sit down with you and explain the programs and help you choose the right one