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Need An Extension On That?

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June 14, 2010 – Comments (8)

OK so I read in the Washinton Post over the weekend that there is some talk of the chances of the tax credit being extended for those home buyers who cannot seem to get to the closing table before the end of I think it is June when this thing officially expires?  I would love to hear any and all comments.  Unfortunately it will not surprise me in the least to see them extend this.

Somewhat separate note, but still related (sort of), as I understand it, now lenders (rightfully so) are running credit checks again after they have approved the individuals for the loans and before they are to go to close.  It is basically a stipulation more or less...their credit has to check out before they can officially close on the loan.  Seems that historically it has been a problem (can you believe this?) that some people actually had the nerve once they were approved for the home loan to then go ahead and run big time credit purchases from Home Depot, Lowe's whatever furniture store you want to insert here in order to furnish or otherwise refurbish the house they were about to buy.  Credit did not matter at the time because they had already been approved for the home loan but it wasn't showing on their credit history yet because the loan had not closed.  Then they would go to closing with a truckload more debt than they had when they applied and were approved for the home loan.  Bottom line was that in reality they could not then afford the home.  Kinda makes you wonder why these lenders didn't run the second credit check before.  So now folks can potentially go to closing, get denied because of their own irresponsibility in borrowing too heavily, and still have the possibility of getting the home loan after all, which they will still no be able to afford, and get a tax credit to boot! 

Wasn't it Yakov Smirnov who said, "America, what a country!  I love it!"

JMo

8 Comments – Post Your Own

#1) On June 14, 2010 at 4:31 PM, davejh23 (< 20) wrote:

I had commented on this last week.  Headline read: "Lawmakers consider home tax credit extension"

When I saw this headline, I thought they were actually rushing to extend the tax credit.  That, I believe, would have sent a clear signal that any "recovery" is not self-sustaining and caused the market to crash.  It looks like this still only applies to those that signed contracts before April 30th.  Does it really take 5 months to close?  If a buyer signed a contract today, I bet most credit-worthy borrowers could rush to close in 3 weeks. 

The Realtors group has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.

How swamped could they be?  These borrowers should have had applications in 6+ weeks ago (many should have closed by now), and new mortgage applications have fallen 40% in the last month.

In any case, even if it gets extended, I don't think it will really change anything.  The National Association of Realtors estimates that about 180,000 homebuyers who already signed purchase agreements are likely to miss the deadline.  I have a feeling that they're being held up by more than just "swamped" lenders.  Most of these deals could, and probably will, still fall through.

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#2) On June 14, 2010 at 4:34 PM, miteycasey (30.51) wrote:

Better than making a loan without checking job status and assets.

 

My father just bought a new home after his divorce.His last home purchase was the early 1970's.

He said it was a joke. All the lenders cared about was his credit score, not his ability to pay for the loan.

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#3) On June 14, 2010 at 5:49 PM, awallejr (81.55) wrote:

They absolutely need to do this.  A 2 month closing window was unrealistic.  The April 30th contract cutoff date was fine, but alot of people will get hurt come July 1st due to events simply beyond their control (like waiting on banks to approve short sales).

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#4) On June 14, 2010 at 6:43 PM, TMFJMo (70.50) wrote:

They absolutely need to do this.  A 2 month closing window was unrealistic.  The April 30th contract cutoff date was fine, but alot of people will get hurt come July 1st due to events simply beyond their control (like waiting on banks to approve short sales).

While I understand where you are coming from, I actually think that the window to get this done was quite realistic.  My wife and I just bought a house up here in VA and went from finding the home to the closing in less than 30 days.  Now there is no question we pushed them to get it done, and what is worse is that we didn't qualify for any tax credit as it was not our first home and we have not quite owned our first for five years (man so close).  So they did not even have the incentive to try to get us in for the tax credit.  We just didn't want to have to deal with renting just to move again to the place we wanted to buy.  So I was on the phone/email with the lender daily to find out what else they needed.  Not saying everyone is like we were, and we did not buy a short sale or foreclosure.  Personally, I don't see how any of these short sales could even qualify for that tax credit anyway.  It takes a year to get those things done.  And foreclosures shouldn't count as you are already getting the house for cheap...the credit is already built in :)

JMo

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#5) On June 14, 2010 at 6:49 PM, davejh23 (< 20) wrote:

"The April 30th contract cutoff date was fine, but alot of people will get hurt come July 1st due to events simply beyond their control (like waiting on banks to approve short sales)."

You needed a signed contract by April 30th...not just a submitted offer.  If a short sale wasn't approved by that date, you do not qualify for the tax credit.  Two months was a very generous window, allowing plenty of time to close.  Most lenders can close in 30 days, and there is nothing that should delay closing for a qualified buyer beyond 2 months.

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#6) On June 14, 2010 at 9:57 PM, awallejr (81.55) wrote:

The payoff bank's ultimate approval (which is what a short sale is about) does not dictate the date of the contract.  That is between buyer and seller.  So the contract needed to be signed by April 30th, but if the payoff bank drags its feet passed June 30th before accepting a "short payoff" then no credit.  Of course there is no guarantee that the payoff bank would agree to accept the short sale, in which event the contract is voided.  But its needed approval did not have to be done prior to June 1.  Do not confuse short sales with foreclosures.  They are different.

I do alot of real estate closings in NY and trust me a 2 month window to close all these deals is too short.  Yes you could close a sale in a week given certain circumstances, but most do take months now especially with banks checking and rechecking information.  It hurts no one by extending the closing period since the April 30th cutoff date has come and gone.

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#7) On June 14, 2010 at 10:32 PM, awallejr (81.55) wrote:

And davejh23 as an illustration.  I had first time primary homebuyers entering into a short sale with a signed contract dated April 15.  The payoff bank agreed to the short payoff May 15.  We closed last week.  They ABSOLUTELY qualify for the tax credit. The payoff bank's acceptance did not, I repeat, did not have to be made by April 30th.  The payoff bank is not in title, it is simply a secured creditor.

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#8) On June 15, 2010 at 2:07 PM, frolet (71.50) wrote:

well I've been under contract on a short sale since January, waiting on approval from 2 banks.  I structured the contract to terminate if it wasn't closed by June 30th.  We'll see if how quickly the banks move.

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