Fannie Mae’s new Loan Quality Initiative (LQI) mandates went into effect on June 1, 2010. The changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and fraud by borrowers.

Fannie’s so-called “loan quality initiative” will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers, among other changes. These last minute credit checks could result in a closing delay, pricing adjustment, or, worst, loan approval cancellation.

The last-minute credit report will be designed to find out whether a borrower has obtained — or even shopped for — new debt between the date of the loan application and the closing. If borrowers have made applications for credit of any type — for furnishings and appliances for the new house, a car, landscaping or a new credit card — the closing could be put on hold pending additional research by the lender.

If you’ve taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.

Many lenders already pull second credit reports right before the closing, but the Fannie Mae mandate makes this mandatory across virtually all mortgage lenders and products sold on the secondary mortgage market. Borrowers should avoid obtaining or applying for new credit, or even increasing utilization of existing credit, before their closings. 

Feel free to call me if you would like more information on the new loan process, or if you want to learn more about owning a home Northern Virginia.

When you buy a home, chances are high that you will eventually sell as your life changes over time.  In the United States, it’s estimated that homeowners change residences every five to seven years.

So when you are house hunting, it’s important to keep resale value in mind.  Some features you may find desirable may not appeal to others when the time comes to put the house on the market.  That would hurt both your ability to sell the house and to get a good price.

As you start your search, consider these factors that will affect resale value:

Exterior Features

Location:  If you find the property that offers most of the features you are looking for and it’s going for a bargain price, don’t rush into it.  There may be a reason the house is selling for a bargain, so carefully consider where the property is located.  When you resell, for example, couples with small children are likely to be searching for quiet streets, large yards and proximity to shopping and schools.  Rectangular lots generally sell better than oddly shaped or awkwardly situated properties.

For many buyers, the determining factor is the neighborhood.   A home in a safe area will always realize a better price than the same sized home in or near a less desirable neighborhood.  In addition to a low crime rate, many buyers are also looking for a high-achieving school system.

Maintenance:  A beautifully manicured lawn with landscaping may have curb appeal, but it is likely to be expensive and time consuming to keep up.  You may be willing to pay a premium for it but the next buyer may not.  A house with little to moderate landscaping generally has the best resale value.  More buyers will also choose a home with exteriors, decks or patios that are made of low-maintenance materials.

Swimming pools:  Pools can pose resale problems.  Safety concerns means families with small children generally avoid them, as do buyers in regions where a pool is used only a few months of the year.  Buyers will also be aware of the maintenance pools require.  Keep in mind, however, in some upscale neighborhoods a pool is almost considered an essential.
Size:  Resale value is also affected by the size of surrounding homes.  Don’t buy the largest home in the area — a large house in the midst of smaller houses generally will sell for a lower price than if it is surrounded by homes of a similar size.  Conversely, small or medium-size homes near a larger dwelling tend to increase in value.

Interior Features

Bedrooms/bathrooms:  Homes with at least three bedrooms usually have good resale value. The price goes up if the master bedroom has its own bathroom.  In any case, the home should have at least two bathrooms and they should be updated for resale purposes.

Kitchens:  The center of many homes is the kitchen, which makes it the most important room in the house. Look for modern appliances, a large pantry, plenty of cabinets, attractive and spacious counter tops and adequate dining space. If there is a family room or dining room, the kitchen should be nearby.

Storage and space:  In general, lots of closets and well-organized storage space will entice buyers, as will plenty of natural light.  Walk-in closets add to the appeal, and garages boost resale value, particularly if they fit two cars.   A separate laundry room is typically a great resale feature.

Character:  One all-important aspect that will help sell a home is its character.   A home’s distinctiveness, however subtle, can charm a buyer. Small touches such as granite counter-tops, French doors, an antique fireplace, or a picturesque view through a bay window can often cinch the deal.   The more character your home has, the higher the resale value.

When buying a home, it all comes down to this:  Purchase a house that suits your immediate needs and desires, but keep an eye on its resale value.  You’ll reap the rewards when it’s time to move on.