The Changing Landscape of Lending

Underwriting Guidelines have changed quite a bit and it keeps changing. A few of the major changes are Debt-to-Income Ratio, how long credit documents are good for, use of retirement, stock and bonds as assets, credit score minimum, and verification of employments.

Below is an example of how this will affect the borrower:

· Debt-to-Income Ratio – A Debt to Income Ratio is calculated based on the amount of gross income in relation to the amount of monthly debt obligation (credit card bill, car payment… etc). Previously lenders were allowed to go rather high on the ratio. Up to about 55% debt to income ratio. The new change is 45%. How will this affect the borrower? The borrower will be qualified for a lower loan amount.
· Credit documents – Credit documents such as the credit report will go from 120 days to 90 days. This means you’ll have to updated your information to the lender as it will only be good for 90 days.
· Assets – Lenders were able to use 100% of the fund in stock and mutual accounts and 70% for retirement fund. Now, they are only allowed to use 70% for stock and mutual fund accounts and 60% for retirement. If you are planning on using funds from either account to show proof that you have enough cash for closing cost, you’ll have to make sure that there is more than enough or cash out on it and transfer it to a savings account (which the lender can use 100% of the fund).
· Credit Score – Minimum credit score is 620. Make sure FICO scores are high. The higher the score the better.
· Verification of Employment – Make sure that there are no furloughs or projected furloughs (unless they have been account for at the beginning of the loan process). The stability of your job is very important so make sure everything stated on your loan application can be verified.

More changes will be announced in the next few months. For more information, please call Linda Le, Loan Officer at 808-561-5943 Stay tune for more…

The Tax Credit is Back!

First Time Home Buyers---it really is YOUR time to buy a home! And just to remind you that a first time home buyer is defined as not having owned a home for three years. So, if you’ve owned a home before, but have been renting for the past three or more years, you are considered a FIRST TIME home buyer!!

The deadline for the purchase of that home has now been extended, and expanded! You can still get that $8,000 tax credit if you close on your home by July 1, 2010. You must have an accepted contract on or before April 30, 2010. This gives you 61 days in which to close the contract. Not a lot of time in this day and age. Because of all the people who are trying to take advantage of this tax credit, the lenders, appraisers, and all the other people who need to process your transaction are overloaded.

Also, the income limits the new tax credit has placed on first time home buyers have been expanded. The limit was $75,000 for a single person, $150,000 for a married couple. That limit is now $125,000 for a single person, and $225,000 for a married couple.

In addition, where there was no restriction on the cost of that new home, now it cannot be greater than $800,000.

So, first time home buyers, get out there and find a property. I would love to help you find something. Please call me. Tiare Dutcher 808-753-5327.

Uncovering a Best Buy Property!

There are number of ways to determine if a property is a best buy. As previously mentioned there are three popular approaches: 1.) for investors, rental property that yields a positive cash flow with minimal down payment. 2.) Property where the asking price is substantially below like kind homes that have sold within the last six months. 3.) Property where the quality or condition is above average, in a highly sought after area, in a neighborhood where the inventory for sale is relatively nonexistent and are selling at or below market value.The following is an example of the first approach. In Waikiki, Oahu there is a unique category of property called condo-hotels. These are hotels where the rooms in most cases are privately owned and leased back to the hotel or to a management company. However, some find it more profitable to manage the units themselves. Some of the more affordable and attractive buys are studio or one bed room units that have full kitchens.

In today’s market condo-hotels have unique financing issues. Due to various stigmas associated with transients and other uncertainties banks are reluctant to provide financing. As a result the prices for these types of purchases have dropped considerably. So in order to get into this lucrative market cash offers and seller financing is the order of the day. For those individuals who are able to maneuver in these waters it can be very rewarding. If you are interested in learning more about this unique market please feel free to contact Abron Toure at the Coldwell Banker, Waikiki Office my cell is 503 475 6872. Mahalo!

Hawaii Real Estate Market Update

This past week was a good one for Hawaii real estate news.

The October Statistical Report showed the following positive factors for Oahu's real estate market:

281 Single Family Homes sold. This is up from 243 last October. This is the second consecutive month that home sales have improved vs prior year.

381 Condos sold. This is up from 316 last October. This is the third consecutive month that condo sales have improved vs prior year. This indicates a trend.

The median sales price for single family homes was $605,000. This was 15.6% under prior year's median price of $625,000.

The median sales price for condos was $295,000. This was 9.2% below prior year!


While unit sales out pace prior year, median sales prices are still going down and haven't quite levelled off yet. These indicators verify that this continues to be an EXCELLENT time for QUALIFIED BUYERS to purchase a home.

This along with the extension of the First Time Home Buyer credit to April and the expansion to include home owners that have lived in their homes for 5 of the past 7 years who are purchasing a home, adds more potential Buyers to the mix. This will create more impetus to positively effect the recovery of the residential real estate market.

If you're ready to take advantage of the new Extended and Expanded Home Buyer Tax Credit Program call Dwight Ellis at 808 351-1507.

Next week we'll discuss Days on Market, Months of Remaining Inventory and Neighborhoods to watch.