Christi Nelson’s Oroville Real Estate Blog

Is there a difference between a Mortgage Pre-Qualification letter and a Mortgage Pre-Approval letter?  The answer is YES!

These terms appear to be similar, but are different.

Speaking as a REALTOR®, the difference is in documentation and verification. In other words, is the buyer providing copies of income pay stubs and bank account statements to the Lender or is the Lender simply relying on verbal information provided by the buyer?

 Mortgage Pre-Qualification is generally a process where a buyer contacts a Mortgage Lender/Mortgage Representative, often on the telephone, who then asks the buyer to provide some information. The information requested involves a current address and how long living there, a social security number and permission to order a credit report, annual income and hopefully the amount of down payment.

 After the credit check is ordered and received by the Mortgage Lender, the Mortgage Rep then estimates the amount of mortgage the buyer can afford and sends (via fax or email) a letter to the buyer with the title Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ or Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ and a purchase price of $__. This is usually done within a half hour or so of the initial phone call, and at best can be described as an estimate of potential mortgage ability and not Mortgage Pre-Approval.

Mortgage Pre-Approval,  in addition to obtaining a credit report, many Lenders require the buyer to provide proof of two years of work history, pay-stubs or income tax forms, copies of bank statements for source of funds verification and copies of charge card statements.

When the documentation is provided, it is then submitted to the Mortgage Underwriter for review and approval. The Mortgage Pre-Approval letter is worded something like this: Congratulations, You Are Pre-Approved for a mortgage loan in the amount of $__ and a purchase price of $__ subject to a Contract of Sale and a satisfactory Bank Appraisal on the home being purchased. While more time consuming than the previous pre-qualification practice discussed above, it is more thorough and more reliable, shortens the formal mortgage application and approval process and provides the ability for a fast closing if one is desired.

Mortgage Pre-Approval will give the buyer confidence in a price range and confidence in obtaining mortgage approval. In submitting offers, sellers will know they have a serious buyer who has taken the time to arrange for mortgage financing first.

Mortgage Rates
30 Year Fixed: 5.29%
15 Year Fixed: 4.79%
1 Year Adj: 4.81%
(U.S. Weekly Averages)

Oroville Sales Summary

2007-2009 (first quarter)

Here is the sales summary for the first quarter Jan-Mar of 2009

I have had many people ask me ”are things are starting to pick up in our oroville market”. So I have decided to post our weekly stats for you to come and look at for yourself. Oroville market is its own seperate market. We have not seen quite the devestation some areas have like Sacramento. For this we are lucky.  When the market was good we were seeing people from out of the area come to purchase property and vacant land. However, without those buyers we are relying on mostly buyers from our area or relocation buyers. As we begin to get more lending options available ,like the tax credit, we will see an increase in sales which we are starting to see right now. It still seems to vary from week to week. Mortgage applications slow with each small raise in the interest rates. So until buyers understand that 5.38% is fantastic they will probably be buying later  at 6-7% maybe more..!  When was the last time we had low interst rates AND property values at the same time? As I said before NOW is the time to buy!

I will be adding a chart showing the comparison of 2007/2008 and 2009 up to the first quarter to get you caught up. Come back for weekly updates on how our market is doing!

REO stands for real estate owned. This term is used when referring to a home that has gone through the foreclosure process, failed to find a buyer at the auction, and is now owned by the bank. One of the major benefits of buying a bank-owned REO property vs a Foreclosure is that buyers can purchase the home free of title liens and other claims. Lenders generally expunge all second and third liens, as wells as delinquent taxes, HOA and mechanics’ liens.  In addition, there are no tenants to deal with or evict and the property evaluation process can be done easily.

Making an Offer

Offers are usually FAXED to the bank by the listing agent. There is no formal presentation. It may take a few days to get an answer, so be patient. Keep in mind: nothing happens evenings and weekends (banks are closed)

Since there is no face-to-face presentation to the bank, provide the listing agent with a pre-qualification or better yet, a pre-approval letter when submitting an offer. Most times you will be required to go through a certain lender for that letter, and not doing so could cause you to lose the property. However you may choose any lender for the actual financing of the purchase, once you have an accepted offer.

Usually, if you didn’t offer full price, you can expect to get a counter offer from the bank. It will be the banks agreeable terms so read everything carefully as they only put what they WILL do and everything else in your offer is VOID. The counter offer can come with additional bank addendums to the contract and should be read carefully by both you and your real estate agent. Be prepared, these counter offers and/or addendums can be many pages long, and they are nothing to be afraid of. Just make sure you are agreeable to all the terms they have set.

Property Condition

Banks always want to sell a property in “as is” condition. Most will provide a Section 1 pest certification, but not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but they may not agree to do any repairs.Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct. The banks usually give 7 to 10 days so know what inspections you want and order them as soon as you have an accepted offer.

I highly recommend everyone get a full home inspection! 

Even though you agreed to “as is,” always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the transaction instead of putting the property back on the market, but don’t take it for granted. They are required to get as much as they can for the property and may not do any repairs, willing to put it back on the market! Keep in mind it is all just a file to them. There is no personal connection as with a typical seller.

 While chatting with other parents at a baseball game, we began to discuss the market and if it was the right time to buy. As we discussed how property values have dropped and interest rates were still at an all time low. I said “Yes, now is absolutely the time to buy!” One of the parents made a statement that was amazing to me. He said “sure that’s what all Realtors would say” Of course that’s what we would say! That is what our profession is all about. Educating the public as to what the market is doing and what they should do if thinking about buying real estate.

Consumers, who are hesitant about purchasing a home today because they fear price depreciation, need to understand that real estate is cyclical and that prices will increase again. Home buyers should view a house as a long-term investment and not be fixated on short-term prices. Consumers should purchase a house if they plan to live in or hold the property for at least several years. This will allow the market to stabilize and homeowners to possibly profit from their investment, if they decide to sell. 

Interest rates are still at a fantastic low, especially if you compare it to the market of the 80’s where they could be up to 18%. That’s like charging the purchase of a home on a credit card!

So as buyers have been sitting on the fence waiting for the bottom and low interest rates, the rates are starting to creep up. 

Here is an example of the difference in a mortgage payment with a small change in interest rate:

Weekly national mortgage survey

So the answer is Yes, now is the time to buy.

Happy Househunting!

Qualified, first-time home buyers using a Federal Housing Administration (FHA)-insured mortgage now can apply the $8,000 federal tax credit toward their down payments, the Dept. of Housing and Urban Development (HUD) announced today.

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent down payment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today’s announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. 

For more information, please visit:

 http://www.hud.gov/news/release.cfm?content=pr09-072.cfm

What Is an FHA Loan?

An FHA loan is offered by a conventional lender, but the government agrees to insure the loan, meaning less risk for the lender in case the borrower defaults. FHA loans are attractive to buyers as well, as they require lower down payments and are available to those with less than perfect credit. There can be some requirements the property will need to meet for an FHA loan so consult your real estate professional as well as your loacal lender regarding Oroville’s FHA loan limits.

 A short sale is a sale of real estate in which the proceeds from the sale are less than balance owed on a loan secured by the property sold.
In a short sale, the bank or mortgage lender agrees to reduce a loan balance due to an economic or financial hardship on the part of the borrower/mortgagor.
A short sale typically is done to prevent a home foreclosure. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. For the home owner, one advantage includes avoidance of a foreclosure on their credit history. A short sale is typically faster and less expensive than a foreclosure for the banks.
This negotiation is all done through communication with a bank’s loss mitigation department, and usually your real estate professional. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
In short, a short sale is nothing more than negotiating with the bank a payoff for less than what they are owed.