Part I

1. Not checking you credit:  Long before you begin searching for a mortgage, you should know where you stand in the credit department.  A low credit score can lead to a higher rate or perhaps no mortgage at all.  It has been said that 80% of credit reports contain errors. Check you credit early (several months in advance) to better deal with any problems.
2. Applying for other new credit at the same time:  Be sure to avoid applying for any new credit before and during the mortgage process.  You will be perceived as a greater risk, at least initially.  Applying for a new credit card, furniture purchase or new car loan may ding your credit score enough to bump your interest rate or ruin your chances of getting a mortgage.
3. Not seasoning your assets:  Lenders will review two to three months of current bank and asset statements to view your savings patterns and look for large deposits.  Some borrowers seem to think they can transfer funds from a relative's account days before applying, but this simply won't fly.  Always remember that lenders will be looking at your last 2-3 months of bank statements and that any large deposits will be questioned if not from income or legally acceptable sources.

Here are the bare-minimum lending guidelines which would qualify the average borrower for an FHA loan - perhaps the loosest guidelines around:

• 3.5% down payment, based on the purchase price of the home (e.g., $7,000 on a $200,000 home), or a gift of that same amount
• Closing costs + prepaid expenses can run up to 6%. FHA allows the seller to cover the costs in the form of a seller concession; and
• Generally, lenders require a minimum FICO Credit Score of 640. Some banks may lend to borrowers with a lower FICO score, but may require a larger down payment.

Additionally, borrowers will need to document their income, assets and job histories, including current paycheck stubs, two months' bank statements and two years of W-2 forms/tax returns, and:

• generally, a minimum of two years have passed since the discharge of a bankruptcy;
• a minimum of three years have passed since a foreclosure;
• anywhere from zero to three years have passed since a short sale, depending on the circumstances surrounding the short sale.

With credit drying up, should I take advantage of promotional credit card offers?

It's true that credit may be harder to obtain these days as many financial institutions are re-evaluating how they extent credit. Such changes in lending practices can be seen in the form of higher credit requirements to open accounts and lower credit limits being offered. That said, we don't recommend that you accept promotional credit card offers just because you are being offered them. Opening new accounts can indicate increased risk to lenders and can hurt your FICO® score. Every individual's situation is unique, but as a general rule, you should only apply for credit when you need it.

Will spending less and saving more improve my FICO score?

While putting more money towards savings is usually a good idea, it's not necessarily going to improve your FICO® score. Your FICO score does not consider the amount of disposable cash you have at any given time. Therefore, the amount of money you keep in savings doesn't impact your FICO score.

As far as spending less, that could have an affect on your FICO score. If you typically use your credit cards for purchases and you don't always pay off the balance on those credit cards, then you may notice an improvement in your score by curbing your spending habits. Your FICO score factors in the balance on your revolving credit accounts (for example, credit cards). It's a good idea to keep the balances on your credit cards low and pay them off each month. By limiting your spending, you may accomplish both!

The Fannie Mae National Housing Survey polled homeowners and renters between October 2010 and December 2010 to assess their confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy.  This is the first in a series of findings from the survey.

Views Among "Generation Y" (18 to 34 years old)

• Despite their homeownership rate falling from a peak of 43.7 percent during 2000-2009 to 39.8 percent in 2009 per the U.S. Census Bureau's American Housing Survey, Generation Y remains positive about homeownership.
• 61 percent of Generation Y perceives buying a home as a safe investment and 59 percent believe buying a home has a lot of potential as an investment.
• Generation Y aligns closely with other generations when considering reasons to buy a home, but assigns a slightly greater value to its impact on their societal status, a place to raise children and the possibility to build wealth through ownership.
• The Fannie Mae National Housing Quarterly Survey found that 36 percent of Generation Y Americans are homeowners, while among Generation X (35 to 45 years old) the incidence goes up to 73 percent and 79 percent among Baby Boomers and to 85 percent among the oldest Americans.

There were a lot of headlines about a potential bailout of the FHA insurance fund in the past few years. Major changes made by FHA have helped shore up the performance of their book of business and the fund is getting stronger. These changes have taken the pressure off for now. But we are not out of the woods. Of particular concern are the recent proposals for elimination of Fannie Mae and Freddie Mac as well as the 20% down "Qualified Residential Mortgage" requirement. FHA loans would be exempted from this requirement. If Fannie and Freddie were eliminated and FHA represented one of the only alternatives for less than 20% down, at least at market rates, there is the potential for FHA to get deluged with business. Imagine FHA with a 70% market share. (The government wants FHA's share of the mortgage pie to be no greater than 15% to 20%). If that were to happen, we would expect FHA to become even more conservative--and a 5.0% minimum down payment would not be out of the question. Of course, this is all hypothetical, but this industry has not finished metamorphosing.

What has FHA done to shore up the program thus far? Last week they implemented another increase in the monthly mortgage premium insurance. Changes were also announced in refinance programs, condominium approvals and more.

Souce: HousingWire 

The number of employees in the home loan industry declined 51% between February 2006 and February 2011, which equates to a loss of 257,000 jobs. February 2006 marked the peak of employment in this sector at 505,000 individuals. The current industry workforce contains 248,000 employees, according to Bureau of Labor Statistics data compiled and released by the Mortgage Bankers Association. The MBA said 191,300 workers in real estate were employed in February, along with 56,700 loan brokers. Those figures are down 5.5% and 7.2% from one year earlier, respectively.

Different professions around the industry are feeling the ramifications of job loss. According to Chicago-based trade group the Appraisal Institute, the number of appraisers nationwide has declined about 8.1% since 2007, and that trend is expected to continue. Four years ago there were more than 121,000 active appraisal licenses and certificates held by about 98,500 appraisers, compared to 110,000 certifications for 90,500 appraisers in 2010.

The number of active lenders in the industry is also dwindling. As of June 30, 2010, there were 7,821 commercial, savings and foreign banking institutions in the United States, according to data from the American Bankers Association. Lenders consolidated throughout the decade, as the latest figure is down 21% from 9,907 banking institutions in 2000.

FED INTENT - The Fed announces its plan to raise, lower or maintain short-term interest rates at the end of every Fed meeting.  This practice did not exist until 1994.  On 3/24/11, the Fed announced plans to hold quarterly news conferences where the Fed chairman will answer questions about Fed policy decisions.  The first ever quarterly news conference will take place on 4/27/11.  The Fed was created in 1913.
(Source: Federal Reserve)

LIGHTS ON - 44% of the electricity in the USA is generated from coal, 23% from natural gas, 20% from nuclear power, 7% from hydropower and just 2% from wind power.
(Source: Energy Information Administration)

The service at Ann Arbor Mortgage was better than anyone could expect.  Everything went exactly as it had been explained.  There were no surprises and each step happened like clockwork.  Bill Holmes kept in close touch with me from start to finish.  He worked around my time schedule and accomplished a quick closing to accommodate my vacation plans.  Thanks Ann Arbor Mortgage!  I'd recommend you to anyone.
 
M.V.

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Pete Stegler has now worked with us on the purchase of two homes. We have felt able to rely on him completely; he takes a heartfelt interest in his clients and works tremendously hard to ensure he has done his best for them.

Thank you, Pete!  

Catherine R.