Getting Preapproved for a Home Loan

So, you’ve found the home of your dreams. With a great credit history and a well-paying job under your belt, that home is pretty much yours, right? Not quite. Unfortunately, your bid for the perfect home might not appear as strong as other bids that are accompanied with a letter of preapproval.

Preapproval is an estimate documented and verified by a lender regarding your likelihood of continued employment, your income level, the cash available to you for closing costs, and potential liability. In essence, it gauges your ability to pay back a loan and affords you with an opportunity to show home sellers that you can pay for the home you are purchasing.

Preapproval is not to be confused with prequalification, which is just an informal discussion between you and your lender about what amount you might be approved for given your financial background. There is no verification involved in prequalification and there is no guarantee that the lender will grant preapproval for a loan.

When you are ready to get preapproved for a home loan, here is what you will need to submit to your lender:

• A completed loan application
• Two years of your most recent W-2 forms
• Most recent monthly pay stub
• Last two years of federal tax returns
• Purchase agreement (if you have one)
• Profit and loss statements (if you’re self-employed)
• Two years of your most recent corporate returns (if you own a corporation)
• Your last three months’ bank statements on all accounts (for down payment verification)
• Any bankruptcy paperwork (if applicable)

You may run into lenders that charge a fee for preapproval, usually no more than a few hundred dollars. This does not mean that lenders that offer free preapprovals are the better choice; the terms and interest rates of their loans may be undesirable. Regardless, make sure that you plan to purchase a home in the next 3-6 months, as your letter of preapproval will only last that long depending on the loan. Once you’ve started the process, you should expect to be preapproved anywhere from one and a half weeks to three weeks.

For additional assistance in determining what you may be able to get preapproved for, try using the Ginne Mae homeownership calculator, or speak with a realtor for more advice about which lenders to choose.

Top 11 Things Home Buyers Should Avoid

Buyers commonly do things that jeopardize the safe and timely close of their mortgage loans. The "don't do" list includes several things that adversely impact credit scores. Lenders increasingly use credit scores to assist in mortgage credit decisions including: loan approval, loan pricing, and loan product availability. So, pay close attention to the following list. Buyers should never do any of the following between the initial loan application and closing escrow.

1) Don't forget to make the payments on any of your present loans or credit cards. This is obvious, but there's a lot going on once you start the process and once in awhile it happens – in the rush of events you forget to make a payment. And since credit reports have a normal 120 day shelf life, it is quite likely that an updated report will be necessary before finding and closing on a house. If a late payment shows up, this can put the loan (and escrow close) in jeopardy.

2) Don't fail to inform your loan agent of any changes to the transaction. Last minute changes such as lender holdbacks, seller credits or required termite work can create havoc with closing dates.

3) Don't quit or change your job. Lenders are likely to call your employer just before the loan records to verify you're still there. If you aren't, the lender will stop the loan from recording.

4) Don't leave town without leaving a contact phone number until all loan approval conditions are met. You may be needed for a decision or to provide additional documentation.

5) Don't consolidate credit card debt from several cards into one. A new card with one balance at the limit GIVES a lower credit score than three cards, each with balances below the limit.

6) Don't sell stock for down payment without keeping a record of the liquidation. Same reasoning as 7) above.

7) Don't move money designated for down payment from one account to another. This creates confusion. If you move funds, advise the lender in advance and keep a detailed paper trail.

8) Don't file for divorce. Once you file for divorce, most lenders will not make a mortgage loan until the final decree, setting forth settlement terms, is recorded.

9) Don't incur any new debt. This increases your debt-to-income ratio, potentially reducing the amount you can borrow. It can also lower your credit score because new debt has a negative impact on credit scores.

10) Don't respond to "you are pre-approved for a credit card" mailings. A credit inquiry might result, and thus the same impact as 11), above.

11) Don't even go shopping for a car, not to mention, don't buy one. If you must visit the showroom, don't give your social security number to anyone. This enables the dealer to check your credit. Each credit inquiry lowers your credit score even if you do not buy a car.

Tax Credit Extension is Green-lighted Through April 30th, 2010

After much impatient foot-tapping as the extension was reviewed by Congress and the House, future homebuyers should be thrilled with the news that President Barack Obama signed the bill proposed by Senate to extend the homebuyers’ tax credit today. The 2009 tax credit was set to expire November 30th; the looming due date was the cause of much contention and frustration as potential homebuyers scrambled to get their finances in order to take advantage of the credit.

The new tax credit extension now specifies that a contract for the sale of the home must signed by April 30th, 2010. In addition to the potential $8,000 that first-time homebuyers can receive based on the price of the home, existing homeowners are also eligible for up to $6,500 on the purchase of a new home, if they have owned their current residence for at least five years. Income requirements were also raised according to an Associate Press article.

This news will have a substantial impact on future buyers in major real estate markets that Movoto serves, such as Portland, Houston, Chicago, Miami, Los Angeles, Phoenix, and Nashville.

Portland and Eugene, Oregon Real Estate Listing Prices Decrease, While Buyers Await Tax Credit

On the tail-end of the anticipated extension of the Federal tax credit for first-time homebuyers—and the expansion of the credit to repeat homebuyers—the real estate markets of Portland and Eugene, Oregon have maintained a consistent percentage of distressed properties in their respective markets. The prospective extension may potentially add incentive to purchase a home in a sector of the market that has already caused a lot of commotion in the residential real estate world.

Movoto.com considers a property distressed when the description of the home in the Multiple Listing Service (MLS) has an agent note that defines the property as bank owned, in foreclosure, short sale, or REO (a term used to indicate the property is bank owned). Many buyers continue to target the distressed market to take advantage of decreased prices. Tony Lozzi, a Movoto agent in the Portland market feels that house hunters can definitely benefit from the reduced prices, but also feels that they should be wary. “There is no doubt that people gravitate toward foreclosures and short sales,” Lozzi divulged. “Beauty is in the eye of the beholder. But with distressed properties, there can be a lot of unknowns and latent issues.”

Distressed properties made up 6% of the total market in Portland, Oregon, compared to 3% in Eugene, as of November 1, according to Movoto.com. While the distressed property supply was substantially fewer in Eugene, these percentages have remained consistent since October of this year. Both cities also saw significant decreases in listing prices for homes for sale. From October to November, Portland saw a total of 620 price decreases and Eugene’s inventory saw 85. While both cities had a different level of distressed property saturation and a different number of price decreases, statistics for both Portland and Eugene property listings followed the same trend: an unchanging percentage of distressed properties listed at falling price points.

As real estate buyers in Oregon await Presidential endorsement of the tax credit extension, real estate agents also anticipate a possible surge in buyer activity due to the opportunities available to buyers in this market. Tony Lozzi adds, “The tax credit extension will definitely help boost sales in the Portland real estate market at a normally slow time of the year.” For information about the Federal tax credit, visit the IRS website.

Have You Heard? Creative is King

What drives online banner ad performance? The publisher? Ad frequency? Creative? Time of week? Ask this question of a few of your marketing and advertising colleagues and you’ll get several answers and probably heated support of a few different favorites.

Personally, I’d argue that creative is king. And to support my point I’ll share two recent studies that highlight the impact of ad creative on campaign effectiveness.

The first study from online ad research group Dynamic Logic analyzed more than 170,000 online ads and found that creative factors have the strongest influence on ad recall, brand awareness and purchase intent. The creative rules Dynamic Logic proposes are:

1. Each frame of an ad should stand on its own with a complete branding
message
2. “Reveal” ads that only reveal the brand at the end are not effective
3. Keep the messaging simple – no more than 2 messages
4. Use human imagery (real estate is an exception – see below)

In previous research, Dynamic Logic has claimed that creative can determine 50-75% of an ad’s effectiveness and their current research strongly supports creative as the major determiner of ad effectiveness.

The 2nd study by Zillow.com extends the analysis of creative impact to the real estate market. Zillow compared their top 50 (in terms of click-through rate) ads with the bottom 50 and found that their real estate oriented audience clicks on ads that:

1. Have a picture of the exterior of a house taken on a sunny day
(all 50 ads)
2. Mention a specific area (42 ads)
3. Have a price on the ad (22 ads)

By the way, Zillow also found that real estate buyers click much less on ads that have pictures of agents – in real estate it appears the human touch isn’t quite as effective!

Zillow’s study is of individual house listing ads. Does this also apply to new home community ads? In Movoto’s experience the same principles definitely apply to new home community ads. We’ve noticed that new home community ads with great pictures of homes in the community that also include prices and location information achieve higher click-through rates on Movoto.com.

Or course all the factors matter – publisher, frequency, time of year, targeting and creative – but I hold that creative is king. The good news is you control creative and the rules for a top performing new home banner are easy to follow. Now, if I could only find a queen.

Forecast for Homebuyer's Tax Credit Looks Good

Advocates of extending the $8,000 tax credit for another year may get an early Holiday gift. Senate has reportedly reached a tentative deal to keep the tax credit for another year, as well as expand its reach to existing homeowners, according to The Wall Street Journal.

Currently, first-time homebuyers with an income of $75,000 for singles and $150,000 for couples could claim a tax credit of up to $8,000 by Nov. 30. The new extension could include homebuyers who have owned their home for a consecutive five-year period in the past eight years and raise the acceptable income level to $125,000 for singles and $250,000 for couples. Existing homeowners would be eligible for a tax credit of $6,500 if the bill passed.

Just as the previous tax credit was meant to stimulate the economy, the new proposed tax credit is expected to help more homebuyers purchase the homes they desire while helping the housing market recover. The cost of the increased proposition is still the prevailing concern, but for now it seems focus has switched to how to attach the proposition to existing bills making their way to the Senate floor, which could significantly ease its reception.

This could be extraordinary news for homebuyers who currently own and first-time homebuyers who might not have been able to buy before Nov. 30!

Houston Real Estate Market Recovered Despite Rising Unemployment full version

Movoto Online Real Estate is reporting that housing prices in Houston have risen significantly in 2009, despite the alarming nation-wide increase in the unemployment rate. The national rate of unemployment reached 9.8% in September 2009. Although the cities of both Houston and Dallas have a lower unemployment rate than the national average, each city has still seen a continuous increase throughout 2009 to approximately 8.1% by the end of September 2009. The unemployment surge has had little effect on the recovering real estate market in both US cities as homebuyers have continued to buy and the average price of a home for sale has increased during the same period.

The average price of homes for sale in Houston in the first quarter of 2009 fell to $180,373 compared to an average price of $199,747 in the same quarter of 2008. The unemployment rate rose 1.7% in this period. The prices have shown a recovery in the last 6 months with an average home price of $213,117 in the third quarter of 2009, despite a corresponding 2% rise in unemployment beginning the first quarter of 2009.

The Dallas real estate market showed similar results. The average price dipped to $186,167 in the first quarter of 2009 compared to the average price of $203,433 in the same quarter of 2008. The market showed resilience in the third quarter of 2009 as the average price rose to $205,900, despite the rise in unemployment to 8.1% by the end of September 2009.


The number of home sales in both cities remained strong and was unaffected by the continuous increase in the unemployment rate. In Houston, the number of houses sold dropped from 6635 in August 2008 to 4336 in September 2008. However, homebuyers continued to purchase homes in 2009. Approximately 5654 houses were sold in Houston in September 2009, a 30% increase over the number of homes sold in September 2008. In January 2009, the number of houses sold in Dallas reached a low point over a one-year period, bottoming out at 2340 houses sold. The number steadily increased to 4010 houses sold in September 2009. Compared to the number of houses sold in September 2008—4293 houses—demand for houses in Dallas has recovered as well.

Inversely, the number of active listings for homes for sale in the two cities showed noticeable decline in the second half of 2009 as compared to the same time period last year. The metropolitan cities of Houston and Dallas faced parallel increases—though below the national average—as the adverse effects of rising unemployment on the population of the two Texan cities have not significantly influenced demand for housing.

In Houston, the overall number of listings in 2009 remained much smaller in comparison to the number of listings in 2008. At any given month, the average difference of active listings from 2008 to 2009 is 508. Distressed properties such as foreclosures and short sales increased as a percentage of the total market in Houston in October 2009, and in the past 6 months, median price per sq. ft. dropped 6% from $88 to $83.

Similarly, Dallas’ number of active listings in the third quarter of 2009 equaled 71,193, which is 14,304 less than the third quarter of last year. The number of active listings showed a steady decline in the past 6 months, which is a buoying response in the Dallas housing market. Though Dallas’ market is considerably more stable than Houston’s market, the median list price suffered a minor 3% drop in the last 6 months and the median price per sq. ft remained stable.

As unemployment rates went up in both US cities, the total listings went down in comparison to 2008; however, demand remained strong in 2009. Overall, the shadow of increasing unemployment rates did not negatively affect home sales or price in Houston or Dallas.

About the Report:

Movoto.com compiled real estate listing, sales number and price data from various sources including data from the Multiple Listing Service. Unemployment data was gathered from Economagic.com and Bureau of Labor Statistics. The data cited within this report was pulled at the end of October 2009.

About Movoto, Inc:

Founded in 2005, Redwood-City-based Movoto provides a unique online home buying solution that combines easy-to-use research tools with ready access to a network of pre-qualified and experienced local agents. Movoto’s current coverage of homes for sale in Arizona, California, Florida, Georgia, Maryland, Massachusetts, Oregon, Texas, Illinois, North Carolina, New York , Virginia and Washington. For more information, visit Movoto.com.

Choosing Real Estate: Condos vs. Houses vs. Townhomes

Comparison shopping is usually the best way to make a decision when making a purchase, and in the world of real estate, it’s no different. Buyers must ask themselves the fundamental question: should they buy a house, condo, or townhome? Sometimes the differences aren't as obvious as one might think. A Minneapolis-based real estate site gives a great definition of each of those pieces of real estate:

Owning a house: you own a piece of land and all the structures on in, including the house and garage.

Owning a townhouse: you own a section of a building from the ground to the sky and have your own private entrance from the street, much as with a house.

Owning a condo: you are buying air space in a building and a share in the common areas.

Restrictions exist as well; since the owner of the house is responsible for all maintenance on their home, it is safe to assume that those obligations that an owner of a townhome or condo isn’t responsible for must be compensated for in some way. That is where Home Owner Association fees (HOA) come in, which vary from community to community. Before purchasing your condo or townhome, review the most current HOA meeting minutes to anticipate HOA fee increases or even complaints made to the association about noisy neighbors. The information could change your mind about buying in that community!

Also, take a walk through the complex and take note of the unit locations, the amount of sunlight they receive—which could affect utility bills—neighbors, access to local amenities and schools, and noise from the street, highway, or community pool. It may even be a good idea to view the property several times at different points in the day when noise levels can vary. Ultimately, these things can affect the quality of living for you or a possible tenant; a little detective work in exchange for a peaceful living situation doesn’t seem too big a price to pay.

HOA fees can add up over time and numerous restrictions can become stifling to the creative vision of your ideal home. By the same token, lawn maintenance, general upkeep, and repair may be more than a homeowner cares to handle. Every potential homeowner must choose the best option for their lifestyle, and take all variables into consideration before taking on the exciting prospect of buying a home.

Tax Credit for Homebuyers May Increase to $15,000

The New York Times reported that Congress is attempting to pass a bill that will allow all buyers—not just first-time home buyers—to cash in on a $15,000 tax credit meant to stimulate the economy. This would increase the Federal Government’s tax credit program from a $15 billion stimulus to a possible whopping $100 billion dollar future venture.

The National Association of Realtors is in full support of the potential increase, and believes that “expanding the credit to all buyers and raising it to $15,000 could be what brings down inventories and creates stabilization in the housing market.”

Of course, opposition exists. JP Morgan Chase feels that the venture will be a positive spark in the housing market, but thinks that the tax credit should be limited to first-time homebuyers. Others feel that adding such a significant dent to the deficit may put us in a bind in the coming years.

The Consumerism Commentary does a good job of laying out the details of the new stimulus package:

“The credit would be 10% of the purchase price of the house, up to $15,000.
This idea is modeled after a $2,000 tax credit for homebuyers that helped the
country rise from a recession in 1975. The credit would be spread over two
years. For example, if you buy a house with a purchase price of $300,000, you
would qualify for the maximum credit of $15,000. The first year you claim the
credit, you would receive $7,500, and you would receive the remaining $7,500 the
next year.

Additionally, in its current form, the requirement to repay the credit
over time will be waived. The estimated cost of this amendment is $18.5 billion.
This credit, which was once set aside for first-time homebuyers, would now apply
to anyone who purchases a house, including investors, speculators, flippers, and
any family struggling to afford a place to call home.”

So homebuyers should keep an eye out and fingers crossed for new developments in the housing market!

Real Estate Pictures on Listings

As a homebuyer, a picture can say a thousand words (or a hundred thousand words, depending on the price of the home). Second to the advertised price, pictures are a major selling point for a home and can seriously affect the amount of interest generated.

If you’ve ever searched for homes online, you may have seen properties with pictures that lack the artistic vision of an experienced photographer. In the rush to sell, sometimes little details in real estate photos can escape the seller’s notice: dishes in the sink, dim lighting, a curious pet making a cameo appearance, or an unflattering angle of the house. Also, inexperienced sellers may forget to photograph the best features of the house, like a spacious yard, or excellent view, or even—surprisingly—every room of the house.

These details can determine whether or not you will have potential buyers clamoring to take a look at your property. Without enough quality photos, buyers may assume that the seller has something to hide, or that the home is just not as quaint or chic as the description implies. To avoid this, try these handy tips from The Wallstreet Journal to turn your listing into something marketable. Remember, these tips are aimed at sellers, but buyers should be aware that listings with less than attractive pictures aren’t total duds. You may be missing out on a great home!

• Take interior photos at twilight when the light coming through windows better matches the interior levels.
• If a room is empty, bring in a prop like a chair to give it a sense of scale.
• Outside, keep the sun behind you, shining on the face of the home. If the main entry is always in the shade (on the north face), shoot it on a partly cloudy day to lower the contrast.
• For empty houses, try to capture rooms that are together, like a master bedroom and bathroom, to add interest to the image.
• Keep the camera straight and level. Tilting it makes side walls appear slanted.
• Outside, remove garbage cans, cars, seasonal decorations, flags and plaques. Inside, put away toys and clothes on hooks.
• Wait for shafts of sunlight to come through the window; they create a friendly mood.
• Move furniture so it doesn't hide architectural features like a fireplace.
• Each room looks best at a different time of day, so give yourself a day to take your pictures.
• Turn all the lights on in the house, and shoot the exterior at dusk. It will look welcoming.
• Never photograph a house dead on, or when it's backlit by the sun.
• Compose photos so corners aren't in the center of the frame.
• If an interior is empty, stand back as far as you can to show how large the space is.
• Figure out where the sun rises and set, and shoot when the sun is 45 degrees from the angle you want to take the shot. If a façade faces north, shoot just before sunset or on a cloudy day.
• Turn off your camera's flash; it will make the most spectacular room look like a scary, semi-lit dungeon.