Prequalified or Preapproved: Which Is Right For You?

By Ryan.Whitmore@nafinc.com October 5, 2017

This is it. You’re ready to make the move into homeownership. From all the online searching you’ve done, you know you need to get “pre-something-ed” to prove you are a serious buyer. However, which is it: prequalified or preapproved? Both sound good, but they serve different purposes.

Getting Prequalified

When you ask a Loan Officer to perform a prequalification, you can do it online, by phone, or in person. They’ll ask you to share information, often verbally, on your credit, your income; assets (savings, investments, retirement accounts the amount of equity you have in any real estate you currently own); and the amount of debt you owe.

It’s a conversation that helps establish some financial parameters before you start looking at and making offers on homes by helping you answer two key questions:

  • What price range should I be looking in when I start my search?
  • Am I ready to do this, or do I need to save more or pay down more debt?

While the process is useful, especially for first time homebuyers, it isn’t rigorous enough to distinguish you from the other attendees at an open house or when you request a showing. The reason is that the letter is based off something akin to a “best guess” by the Loan Officer, it’s not reviewed by an Underwriter, and doesn’t address the question that matters most to sellers, Real Estate Agents, and to you: Can they/we expect to be approved for the type of mortgage needed to buy this home?  To answer that, you need to be preapproved.

Preapprovals Open More Doors

The preapproval process is like a test drive before you submit your application for a mortgage. The Loan Officer and an Underwriter will verify the facts and figures you discuss, along with your credit history. This process can also help pinpoint things you might want to improve—or errors that you’ll want to correct—before entering the formal application review process. Loan Officers will also begin looking for mortgage programs that might apply to your financial situation. The preapproval process is more rigorous than a prequalification and because it is fully underwritten, helps ensure your home buying process with go more smoothly.

In addition to ordering your credit report, Loan Officers may ask for copies of:

  • Last year’s W-2s.
  • Current pay stubs.
  • Brokerage and other savings account statements.
  • Your monthly expenses.
  • A current mortgage statement and homeowner’s policy (if applicable).

Once you are preapproved, you’ll receive a letter to share with Real Estate Agents and sellers. After you have an offer accepted on a property, you will still need to officially apply for a mortgage. That review process will involve a deeper dive into the information you’ve already provided, as well as into the specifics of the property itself. Fortunately, having a preapproval also means faster service and turn times to get you into your home sooner, so the official mortgage application is likely to be easier than with just a prequalification.

Why Bother Getting Prequalified?

The prequalification process takes very little time or effort on your part. Any cost is typically limited to that of ordering a credit report. When you already have an idea of the area where you want to look and what type of home you can afford, skipping the prequalification step can make sense. Its best use is as a preliminary step for those who need a starting point.

By comparison, for most buyers, a preapproval is a step they shouldn’t skip. Having a letter from a lender that states you are preapproved can be especially helpful in neighborhoods where the existing home inventory is tight…and when the home you are looking at is perfect. Being preapproved makes it easier for the seller to accept your offer over that of a buyer that hasn’t taken this extra step. 

10 Tips to De-Stress Moving Day

By Dylan.Tortarolo@nafinc.com October 5, 2017

The prospect of moving is often accompanied by an emotional cocktail of excitement and anxiety over starting a new phase in life. It also leads to a list of to-dos to complete before the moving van pulls up.

Don’t stress! Here are ten tips to help keep you calm and in control of your move. After all, you have places to go.

1. Make a master list of what you need to do.

The first item should be to reserve a mover. Then, prioritize checking off items on the list each day. Also, consider making a bucket list for people and places you want to see or things you want to do before you leave. Try to work in as many of these activities as possible before you go.

2. Purge what you won’t use or need in your new place.

Many sites and services allow you to identify buyers for things you no longer want. Some services/apps, like Everything But the House, will even send someone to your home to conduct an online estate sale for you. ThredUp, a clothing reseller, will pay you a flat fee for your unwanted clothes. Similar options exist for books. For larger items, charitable organizations will often come to you to pick up used furniture and household goods.

3. Start collecting boxes.

Most grocery stores are happy to have you relieve them of boxes. Those left over from the liquor department are the best—not only are they reinforced, but they come with dividers to protect glass items.

4. Pack gradually.

Start packing unnecessary items as soon as possible. Gradually working room by room, makes it less overwhelming when you are packing a home you’ve lived in for a while. By moving day, you should be down to what you need with you as you travel to your new home.

5. Use cling wrap in new ways.

To protect against leakage, remove the caps of any open containers you are moving. Put the wrap over the opening and screw the cap back on. Cling wrap can also be used to “seal” dresser drawer contents so you don’t have to pack their contents separately.

6. Use smaller boxes for heavier items.

Limiting the weight of each item helps reduce the probability that the box will fail. Also, your back will thank you later.

7. Take photos of anything you are dismantling.

It helps to have a photo of any items that need to be broken down and reassembled in your new place. That way you’ll have a head start on putting it back together. It will also be easier to see if something is missing or a connector needs to be replaced.

8. Invest in bubble wrap.

Cushion fragile items with bubble wrap instead of newsprint or paper. It will keep your items cleaner. Where dishes are concerned, pack them on their sides rather than stacking them to reduce the risk of damage.

9. Label boxes.

The more specific you are, the easier it will be to unpack. At a minimum, label each box with the name of the room it is being moved to and number it. This way, you will know the order in which to unpack the boxes.

10. When it comes time to say goodbyes, don’t.

Friendships don’t have to end with a move. Instead, tell people you’ll see or talk to them later. Given apps like FaceTime and texting, it is easy to maintain relationships at a distance.

Does Flood Insurance Make Sense for You?

By Jonny.Moore@nafinc.com October 5, 2017

Whether you live in a coastal area or in the heart of the Midwest, weather happens. Accurate forecasts can help minimize the potential for storm-related issues by giving homeowners time to prepare. However, solid construction and having appropriate insurance coverage are two of the surest ways to minimize the financial impact.

Weathering Storms

While most homeowners’ insurance policies cover water-related damage caused by rain coming into your home through a compromised roof or windows, once the water is on the ground and the damage is due to flooding, it is a different story. Flood damage requires separate coverage.

The availability and cost of flood insurance, however, depend on where you live. Flood insurance is only available through a government program called the National Flood Insurance Program (NFIP). Your community needs to be a participant in this program for you to be eligible to purchase flood insurance.

Flood insurance is voluntary except for homes located in a federally designated flood plain zone. These homes are required to have coverage if they were financed with a federally backed mortgage.

With premium rates for this type of policy established by the NFIP, it eliminates the need to contact multiple insurance agencies seeking the best deal as you would do with other insurance policies. The only price variance would be for homeowners who are eligible for subsidies.

However, the NFIP establishes the premiums you pay based on your location and the type of coverage you request. The cost can range from a few hundred dollars a year for coverage that might help offset some of the cost of repairing your basement and the replacement of its furnishings, to several thousand dollars a year for full structure coverage (up to $250,000) and the replacement of personal belongings (up to $100,000).

Talk to Your Insurance Agent

When buying a home, talk to your insurance agent to determine the status of the areas where you are looking at homes. This will help you assess the availability of insurance and its cost versus the risk—factors you may want to consider before placing your offer.

When you have this conversation, be sure to address the following points. They will help you determine the level of insurance that makes sense for you.

 Specific circumstances covered and the likelihood of them occurring.

  • Any agency fees that might be charged in relation to this type of policy.
  • Whether coverage is for actual cost or the replacement value.
  • The likelihood that the NFIP may adjust local maps in the near future and alter the cost and nature of the coverage needed.

Weighing Your Options

Whether you decide flood insurance coverage is necessary, be proactive. Like the weather, things can change. Monitor adjustments in your zone map and construction in your immediate area. New developments, infrastructure projects, and even a neighbor’s landscaping choices can alter the path storm waters may take. Being preventative can help you protect your home, its belongings, and your bank account in the long run. 

DIY or Go Pro?

By jeff.moore@nafinc.com October 5, 2017

image: http://www.newamericanagent.com/uploads/images/naf-when-to-diy-b2c-infographic.jpg

DIY or Go Pro infographic

It's More Affordable to Own Than to Rent

By Tammie.VanDeusen@nafinc.com October 3, 2017
As rent prices continue to climb higher in many of the country's larger metro areas, saving for a down payment on a future home purchase is becoming an increasingly serious concern for a number of prospective home buyers.
The latest Real Estate Markets Report from Zillow revealed there are only 12 markets among the nation's 100 most populous metro regions in which both rental units and local home prices have been deemed affordable based on the median earnings of the area's residents—and that's almost exclusively because of skyrocketing rent prices. Through July, renting was officially more expensive than ever in 88 of those 100 real estate markets. Following three months of relatively modest movement, national rents increased 0.6 percent from June. Much of the issue associated with rental affordability is derived from the fact that rent prices never plummeted during the recession the way home values did, meaning their recent climb began from a higher starting point.

Affordable Homes for Those Who Earn and Save

What is perhaps most indicative of the current cost of renting in a metro area, is that through June, homeowners in only six of those 100 metro markets were paying a greater proportion of their monthly incomes toward their mortgage than apartment dwellers were toward their rents. With mortgage rates hovering near historically low levels—through Aug. 21, Freddie Mac data revealed 30-year FRMs had reached new lows for the year—buyers are allocating approximately 15 percent of their incomes toward homeowning each month. By comparison, during the pre-recession, housing-bubble era, the average American owner was spending more than 22 percent of his or her monthly income on mortgage payments and other associated costs.
"The affordability of for-sale homes remains strong, which is encouraging for those buyers that can save for a down payment and capitalize on low mortgage interest rates," said Stan Humphries, Zillow's chief economist. "But the health of the for-sale market is directly tied to the rental market, where affordability is really suffering. As rents keep rising, along with interest rates and home values, saving for a down payment and attaining home ownership becomes that much more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt."
Humphries added that the wage gap between renters and buyers remains wide—around $30,000 in salary separates the average person in each contingent—and until wages grow at a more substantial pace, the challenges faced by renters will remain in place. Home value appreciation rates have slowed, which certainly helps with affordability, but in order to save for a down payment, the average renter simply needs to begin earning more.

6 Tips For Managing Your Financial Reputation

By Alfredo.Arteaga@nafinc.com September 29, 2017

6 Tips For Managing Your Financial Reputation

 

ipad security symbol

Consumers and Loan Officers received a wake-up call in early September with the announcement of a data breach at Equifax Inc., one of the three credit-reporting bureaus. While such lapses happen, one of this size and scope occurring at a firm some consumers pay to protect their financial information—and others have no direct relationship with—highlights the need for added vigilance. Whether it was your information that was compromised or information you use in your job, greater care and awareness about safeguarding personal and financial information may be warranted.

What to Do

Generally, people gravitate to one of two extremes. Either they accept that breaches happen and do little to protect their information or they allow their anxiety to make them overly cautious. The best response resides somewhere in between, by being preventative and regularly monitoring your information even as your lenders, banks, and credit card issuers do the same.

The following tips will help you take quick action if you suspect an attempt is being made to improperly access or use your information.

#1: Stay informed. When you hear of a breach, be proactive. Find out if you were directly impacted instead of waiting for the company to reach out to you. In the Equifax matter, you can find out if you are among the 143 million affected by visiting www.equifaxsecurity2017.com. The site will also provide you with a course of action if you were.

#2: Put your information on lockdown. Freeze your record at each of the three credit bureaus: Equifax, Experien and TransUnion. Fortunately, you need only call one of the firms to initiate a freeze at all three. You can always grant access to your credit report once you enter the mortgage process through a temporary lift of the freeze. Then, you can speak with your lender about the right time to put the lock back on.

#3: Resist the urge to click. When you receive emails looking to confirm financial or personal information, don’t. No matter how official the email looks, pick up the phone and call the institution using a number you found that’s not on the email to confirm what information is needed and why.

#4: Monitor your information. Periodically check your own credit report. You can order copies at annualcreditreport.com. Signing up for an alert service is fine, but it only notifies you to activity after the fact. That enables you to take action, but it is not preventive.

#5: File your tax return as early as possible. Thieves who gain access to Social Security numbers often attempt to file earlier than you in hope of a snagging a tax refund. While the IRS is vigilant and has a protocol to guard against this type of fraud, it helps to be defensive and file early, even if you have to amend later.

#6: Change passwords regularly and agree to two-step verification processes. Many firms will now text you an access code before allowing you to reset a password. Additionally, some financial companies want to verify your identity, even if you entered the correct user name/password combination, by texting a confirmation number to your phone. Agreeing to this extra step creates an added layer of security.

Keeping your personal information safe is the goal. However, should you have any reason to suspect it has been compromised, report the theft and contact your state’s attorney general’s office. Also, notify your financial institutions. Being proactive is your secret advantage when keeping your information and finances safe.

6 Tips For Managing Your Financial Reputation

By tina.nikkhah@nafinc.com September 29, 2017

6 Tips For Managing Your Financial Reputation

ipad security symbol

Consumers and Loan Officers received a wake-up call in early September with the announcement of a data breach at Equifax Inc., one of the three credit-reporting bureaus. While such lapses happen, one of this size and scope occurring at a firm some consumers pay to protect their financial information—and others have no direct relationship with—highlights the need for added vigilance. Whether it was your information that was compromised or information you use in your job, greater care and awareness about safeguarding personal and financial information may be warranted.

What to Do

Generally, people gravitate to one of two extremes. Either they accept that breaches happen and do little to protect their information or they allow their anxiety to make them overly cautious. The best response resides somewhere in between, by being preventative and regularly monitoring your information even as your lenders, banks, and credit card issuers do the same.

The following tips will help you take quick action if you suspect an attempt is being made to improperly access or use your information.

#1: Stay informed. When you hear of a breach, be proactive. Find out if you were directly impacted instead of waiting for the company to reach out to you. In the Equifax matter, you can find out if you are among the 143 million affected by visiting www.equifaxsecurity2017.com. The site will also provide you with a course of action if you were.

#2: Put your information on lockdown. Freeze your record at each of the three credit bureaus: Equifax, Experien and TransUnion. Fortunately, you need only call one of the firms to initiate a freeze at all three. You can always grant access to your credit report once you enter the mortgage process through a temporary lift of the freeze. Then, you can speak with your lender about the right time to put the lock back on.

#3: Resist the urge to click. When you receive emails looking to confirm financial or personal information, don’t. No matter how official the email looks, pick up the phone and call the institution using a number you found that’s not on the email to confirm what information is needed and why.

#4: Monitor your information. Periodically check your own credit report. You can order copies at annualcreditreport.com. Signing up for an alert service is fine, but it only notifies you to activity after the fact. That enables you to take action, but it is not preventive.

#5: File your tax return as early as possible. Thieves who gain access to Social Security numbers often attempt to file earlier than you in hope of a snagging a tax refund. While the IRS is vigilant and has a protocol to guard against this type of fraud, it helps to be defensive and file early, even if you have to amend later.

#6: Change passwords regularly and agree to two-step verification processes. Many firms will now text you an access code before allowing you to reset a password. Additionally, some financial companies want to verify your identity, even if you entered the correct user name/password combination, by texting a confirmation number to your phone. Agreeing to this extra step creates an added layer of security.

Keeping your personal information safe is the goal. However, should you have any reason to suspect it has been compromised, report the theft and contact your state’s attorney general’s office. Also, notify your financial institutions. Being proactive is your secret advantage when keeping your information and finances safe.

6 Tips For Managing Your Financial Reputation

By brian.keranen@nafinc.com September 29, 2017

6 Tips For Managing Your Financial Reputation

ipad security symbol

Consumers and Loan Officers received a wake-up call in early September with the announcement of a data breach at Equifax Inc., one of the three credit-reporting bureaus. While such lapses happen, one of this size and scope occurring at a firm some consumers pay to protect their financial information—and others have no direct relationship with—highlights the need for added vigilance. Whether it was your information that was compromised or information you use in your job, greater care and awareness about safeguarding personal and financial information may be warranted.

What to Do

Generally, people gravitate to one of two extremes. Either they accept that breaches happen and do little to protect their information or they allow their anxiety to make them overly cautious. The best response resides somewhere in between, by being preventative and regularly monitoring your information even as your lenders, banks, and credit card issuers do the same.

The following tips will help you take quick action if you suspect an attempt is being made to improperly access or use your information.

#1: Stay informed. When you hear of a breach, be proactive. Find out if you were directly impacted instead of waiting for the company to reach out to you. In the Equifax matter, you can find out if you are among the 143 million affected by visiting www.equifaxsecurity2017.com. The site will also provide you with a course of action if you were.

#2: Put your information on lockdown. Freeze your record at each of the three credit bureaus: Equifax, Experien and TransUnion. Fortunately, you need only call one of the firms to initiate a freeze at all three. You can always grant access to your credit report once you enter the mortgage process through a temporary lift of the freeze. Then, you can speak with your lender about the right time to put the lock back on.

#3: Resist the urge to click. When you receive emails looking to confirm financial or personal information, don’t. No matter how official the email looks, pick up the phone and call the institution using a number you found that’s not on the email to confirm what information is needed and why.

#4: Monitor your information. Periodically check your own credit report. You can order copies at annualcreditreport.com. Signing up for an alert service is fine, but it only notifies you to activity after the fact. That enables you to take action, but it is not preventive.

#5: File your tax return as early as possible. Thieves who gain access to Social Security numbers often attempt to file earlier than you in hope of a snagging a tax refund. While the IRS is vigilant and has a protocol to guard against this type of fraud, it helps to be defensive and file early, even if you have to amend later.

#6: Change passwords regularly and agree to two-step verification processes. Many firms will now text you an access code before allowing you to reset a password. Additionally, some financial companies want to verify your identity, even if you entered the correct user name/password combination, by texting a confirmation number to your phone. Agreeing to this extra step creates an added layer of security.

Keeping your personal information safe is the goal. However, should you have any reason to suspect it has been compromised, report the theft and contact your state’s attorney general’s office. Also, notify your financial institutions. Being proactive is your secret advantage when keeping your information and finances safe.



6 Tips For Managing Your Financial Reputation

By Beny.Rabuchin@nafinc.com September 29, 2017

6 Tips For Managing Your Financial Reputation

ipad security symbol

Consumers and Loan Officers received a wake-up call in early September with the announcement of a data breach at Equifax Inc., one of the three credit-reporting bureaus. While such lapses happen, one of this size and scope occurring at a firm some consumers pay to protect their financial information—and others have no direct relationship with—highlights the need for added vigilance. Whether it was your information that was compromised or information you use in your job, greater care and awareness about safeguarding personal and financial information may be warranted.

What to Do

Generally, people gravitate to one of two extremes. Either they accept that breaches happen and do little to protect their information or they allow their anxiety to make them overly cautious. The best response resides somewhere in between, by being preventative and regularly monitoring your information even as your lenders, banks, and credit card issuers do the same.

The following tips will help you take quick action if you suspect an attempt is being made to improperly access or use your information.

#1: Stay informed. When you hear of a breach, be proactive. Find out if you were directly impacted instead of waiting for the company to reach out to you. In the Equifax matter, you can find out if you are among the 143 million affected by visiting www.equifaxsecurity2017.com. The site will also provide you with a course of action if you were.

#2: Put your information on lockdown. Freeze your record at each of the three credit bureaus: Equifax, Experien and TransUnion. Fortunately, you need only call one of the firms to initiate a freeze at all three. You can always grant access to your credit report once you enter the mortgage process through a temporary lift of the freeze. Then, you can speak with your lender about the right time to put the lock back on.

#3: Resist the urge to click. When you receive emails looking to confirm financial or personal information, don’t. No matter how official the email looks, pick up the phone and call the institution using a number you found that’s not on the email to confirm what information is needed and why.

#4: Monitor your information. Periodically check your own credit report. You can order copies at annualcreditreport.com. Signing up for an alert service is fine, but it only notifies you to activity after the fact. That enables you to take action, but it is not preventive.

#5: File your tax return as early as possible. Thieves who gain access to Social Security numbers often attempt to file earlier than you in hope of a snagging a tax refund. While the IRS is vigilant and has a protocol to guard against this type of fraud, it helps to be defensive and file early, even if you have to amend later.

#6: Change passwords regularly and agree to two-step verification processes. Many firms will now text you an access code before allowing you to reset a password. Additionally, some financial companies want to verify your identity, even if you entered the correct user name/password combination, by texting a confirmation number to your phone. Agreeing to this extra step creates an added layer of security.

Keeping your personal information safe is the goal. However, should you have any reason to suspect it has been compromised, report the theft and contact your state’s attorney general’s office. Also, notify your financial institutions. Being proactive is your secret advantage when keeping your information and finances safe.

Working With Those Who’ve Served: What You Need to Know

By Tammie.VanDeusen@nafinc.com September 28, 2017

Whether they are still active or retired, U.S. service members account for 21 percent of all homebuyers and sellers. As a market segment, this demographic is very attractive. These individuals and their families move more frequently, and a bit farther, than their peer groups. They also tend to rely more heavily on Real Estate Agents to help them find their homes and close quickly. So, it’s important to help them understand their options, both in terms of housing and financing.

What’s Different About the Military Buyer Clients who are still active in the military tend to buy higher priced homes than their civilian peers. This may have something to do with the access they, along with veterans, have to the VA home loan program. This program gives active military—as well as—veterans a decided advantage by making homes more affordable.
The VA home loan program was developed several decades ago. It takes into account the special financial circumstances military personnel face due to repostings and periods of deployment. As a result, the program offers six key advantages to active military and veterans:

  1. No down payment required
  2. No mortgage insurance
  3. A limit on closing costs
  4. Lower mortgage interest rates
  5. Flexible credit standards
  6. 100% cash out refinance
A recent survey by the National Association of REALTORS found that slightly more than one-quarter of active military homebuyers do not take advantage of the VA home loan program. Additionally, a bit less than half of veterans use it for purchases or refinancing. This represents an opportunity for Real Estate Agents to educate military homebuyers on the program's benefits, such as the fact it may be accessed throughout a veteran’s life. There is no limit to the number of times the program can be used, nor does the benefit expire for those who are eligible.

Veterans and qualifying spouses should be encouraged to check their access to the VA program by requesting a Certificate of Eligibility from the U.S. Department of Veterans Affairs. They will need this anyway, if they do decide to borrow under the program.
Understanding the Nuances For Real Estate Agents, becoming familiar with the advantages of a VA home loan program is essential to assisting military clients. As an example, the VA has a set of minimum property requirements (MPRs), though these primarily impact condo purchases. While some purchases are allowed, the list of condos that may be financed using a VA home loan is limited. The list is maintained online here, making it easy to identify potential issues before going under contract.

Helping Without Asking Possibly the biggest barrier to helping active and retired military clients get the most out of the VA and other loan programs and incentives available to them is, in many states, veterans are considered a protected class. Depending on where you are located, you may be prohibited from asking questions about your clients’ military service.
An effective way of making sure clients are aware of these programs and incentives is to create a summary table of all programs, grants, etc. available to buyers in your area. This can be included in the welcome kit you hand your clients as they start to search for a new home. This way, you still provide essential information that may impact which homes they will be able to afford without asking for their military service status.