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There is a growing belief among many experts that 2012 will be the year housing turns the corner and starts heading in a more positive direction. Whenever we write a post like this, we unleash the hordes of critics who say we are again wearing rose colored glasses or are puppets being controlled by the National Association of Realtors (NAR) and other industry groups.

It is for that reason we will not be covering the projections of those groups. Instead, we want to share the beliefs of other organizations.

Washington Post:

“Housing Market and Economy Showing Encouraging Signs.”

The Wall Street Journal:

“From Bottom Up, Signs of Housing Recovery”

USA Today:

“Housing Outlook is More Upbeat”

CoreLogic:

“CoreLogic’s chief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.”

Freddie Mac:

“With the New Year comes a sense of cautious optimism. There are some positive signs in the job market and consumer confidence; housing is starting to raise hopes for continued gradual economic recovery.”

Fannie Mae:

“The housing sector will likely take incremental steps forward in 2012 …according to economists at Fannie Mae.”

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Getting a home signifies financial security and an investment for the future. Owning a home is part of the American Dream. There are some surprising reasons why you can’t get a home.

1. Down Payment – You may have the required 10%-25% on the asking price of the home you are interested in but how you acquired it and how long you’ve had it could keep you from getting the home. Many times relatives offer young couples the down payment. Lending institutions take this into consideration when looking at the ability of a homeowner to keep up with mortgage payments. Saving the down payment over time lends to the credibility of money management.
2. Credit– Credit history is an ongoing process. Student loans are one of the first obligations a person may have as an adult. Late payments may have a bearing on your ability to acquire a home later in life. Credit scores are also affected by utility payments. Any recurring bill that is paid late may come back to haunt you even though your financial situation is now more sound. Your debt to income ratio ideally needs to be under 45%. Less than a 3 month asset reserve in a bank account will generally keep you from getting a home. Check your credit score with all 3 agencies and make sure there is nothing being reported incorrectly. You need to aim for a score of 660 or better.
3. Job Security – Your job history may be why you can’t get a home. Lenders look for stability. If you jump from job to job, regardless of monetary or career improvement, lenders see you as a financial risk. When the economy takes a downward turn, employers tend to retain employees with seniority. Also taken into consideration is the risk of the job.
4. Parent History – If your parents have a questionable credit history, you may be dealing under their shadow. If parents foreclosed, you may be affected. If they were late with mortgage or credit card payments, you may be looked upon as having the same traits. If you are asked information on parent particulars, you may need to look elsewhere for home financing.
5. Location – The location of a home may affect whether or not a lender is willing to risk mortgaging it. LNG routes, Super Site areas, fault lines, destructive weather patterns all have bearings on mortgage risks lenders are willing to take on.
6. Inspection – More and more, home inspections are being required to seal the closing deal. Hopes have been dashed to learn major expenses must be incurred to pass inspection for the approval of the sale.
7. Condition – Fixer-uppers may offer pricing that appears affordable. If you have no background of construction or home improvement projects completed, lenders are leery to finance such undertakings. They may require a lump sum amount be in an account to cover the improvements necessary to ensure the property does not result in a loss to the lender.
8. Liens – If you owned property before and were subject to liens for unacceptable reasons such as credit card debt or unpaid taxes, you may not get the home you desire. A current homeowner may also have substantial liens that need to be satisfied at closing either from the sale itself or as additional costs to the buyer.
9. History – The history of the home may be the deciding factor that keeps a lender from financing in your behalf. A murder, haunting, nearby sinkhole, or other less favorable activity, bear upon the lender’s willingness to finance such a home.
10. The Bank – Economic conditions and bank lending history may be the reason you can’t get a home. Banks may be leaning toward only very secure clients to up their lending credibility. If a bank turns you down, look to other options before you decide to settle on thinking you can’t get a home. FHA, VHA, or a first time buyer program offer other alternatives for which you may qualify.

If you can’t get a home loan with one lender, chances are good that another institution will also turn you down. You should take some time and work at increasing the good points that will work in your favor. Try again when your situation has improved.

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For the longest time, I have listened to other loan officers talk about why people should do business with them; and 95% of the time their presentations boil down to three things – price, product, and service. On the pricing front, they talk about low interest rates and/or closing costs; on the product side, they position themselves as experts in a particular loan program (like a 203K or reverse mortgage); and on the
service side, they discuss turnaround
time or how available they are.

Let me just say that, in today’s marketplace, virtually every lender (and therefore, every loan officer) has very similar pricing, pretty much all the same products, and service is difficult to prove until you give them a loan to work on. My point being is that the changing lending landscape (tougher underwriting guidelines, loan officer licensing, stricter appraisals, and such) has eliminated virtually 70% of loan officers in America. The remaining people have been vetted and represent a very high quality group of professionals. (Not that there aren’t always a few bad apples, but there truly are very few.)

So, when borrowers shop for loans on the old “price/product/service model”, how does a consumer differentiate between loan officers?

• Ask for referrals – If you have a friend, co-worker, or family member who had a good lending experience, ask who they used. Talk to people who deal with multiple lenders (real estate agents, attorneys, accountants, etc.) and leverage their comparative experience into making good choices. Loan officers who earn referrals typically go beyond price/product/service.
• Seek out a mortgage advisor – Even today, with limited loan programs, there are many factors to consider when choosing the right mortgage. Your future income, the length of time you expect to be in the home, and your risk tolerance should be discussed before ruling out adjustable rate mortgages, for example.
• Look for transparency – Demand a lender who freely and competently discusses rates and likely rate movements. Don’t buy into the idea that rates are conjured up in a mysterious way. Rates are derived by activities in the bond market and your loan officer should be able to explain, in layman’s terms, the factors that affect rates and upcoming events and economic reports, as well as, the most likely impact they will have.
• Accessibility of information – Are you looking for printed materials and/or videos to guide you through the process? How about online workshops or home buying seminars?
• Seek out a resource – You may need other professionals when buying a home (from insurance people, to home improvement people, to legal help). A good loan officer has a network of high quality referral partners to help you.

Many of the criteria for choosing a loan officer are less tangible than the old “price/product/service model”, but frankly, they may prove more valuable over time. Happy searching!