A FUNNY THING HAPPENED ON THE WAY TO CLOSING...

 

 

                                          behlerblog.com








  Here you are, your loan is ten days from closing.  You have made it through the approval process, inspections, and appraisal.  You have been packing your boxes, the apartment has been leased to a new tenant. The excitement is building for the day the dream home will be yours. What could go wrong now?

  Let me tell you, one of the toughest calls any of us at Tippecanoe Mortgage has to make is to an approved buyer who at the last minute is no longer approved.  How the heck does that happen, you ask?

 Or for that matter-that?

  Sometimes loans don't close at the last minute because of a notation the appraiser makes-such as the home is located on a private lane with no driveway maintenance agreement or the well is shared by the neighbors and there is no shared well agreement. But more often than not, the loan is sent hurtling off the rails by something the borrower does themselves.

  In our loan application packet we have a form that is formally called The Borrower's Acknowledgment Form. I call it the "Don't Do Anything Silly" form. The form is a list of things a borrower should not do prior to the closing of their home loan.  They include such things as:

1) Do not open any new credit cards

2) Do not increase balances on credit cards or loans

3) Continue to make all monthly payments on time

4) Do not take out any new bank loans, 30 days same as  cash loans  or co-sign for anyone on anything

5) Do not quit your job or change your job without speaking to your lender first

6) Do not take early occupancy of the property without speaking with your lender first

7) Do not spend your down payment money prior to closing

8) Do  not buy a new car unless it has two bedrooms and a bath because more than once, it has caused a loan to crash.

  These sound like pretty common sense items, right? This list was derived, sadly, from real people doing exactly the above mentioned things who then were denied right before closing.

  If new credit is opened debt ratios can become affected- and possibly create a situation where the monthly consumer debt is too high for the rules of the mortgage.

  Most lenders do a last minute credit pull prior to closing-so if you have bought new appliances and put them on a credit card or taken out an additional bank loan to cover them-it will be discovered.  Likewise lenders also check employment immediately prior to closing. We have had borrowers who quit their jobs thinking that the lender wouldn't find out. They always do.

  One situation  that we have encountered more recently is moving into a home prior to closing. With most loans it is okay, however it is a distinct no-no if your loan is an FHA loan. FHA does not allow pre-occupancy. So be sure to ask if your loan allows pre-occupancy prior to moving your furniture in before closing.

 Paying your rent and current mortgage is also important. Just one late rent or mortgage payment while in the loan process will earn you a denial. Credit is updated throughout the process so be informed that non payment will no doubt be caught.

  So keep the credit cards in your wallet, drive what you have been driving all this time, and pick out the new appliances and furniture but don't pay for it until you are safely closed. Once you own the home you can go back to a more normal way of living. It's only 30-45 days. A new house is definitely worth it.

This is what we want to see on closing day  

clipartbest.com

Not

fbemoticons.com

 

RENNOVATION ANYONE?

  You have just found the perfect home-spacious, on a beautiful lot with mature trees, great schools, walking distance to amenities.  It is everything you need in a house except...

                                                  lisamillberg.wordpress.com
Yeah-the kitchen is something out of a bad dream about the 1970's.  And of course the rest of the house is covered in that nasty shag carpeting that was awful even in 1976. You hate to pass this one by-everything else is right about it.  As it happens we may have the solution (but you knew we would didn't you?)

  Even in this day of extreme regulation on mortgage money, there is still money available for renovation and repairs.  May we present the FHA 203K streamline mortgage loan.

 A great question to ask.  The FHA 203K Streamline loan is a method of purchasing a home and obtaining extra mortgage money to do upgrades and repairs.  Many of our clients use this loan in conjunction with the purchase of a bank owned property-bank owned properties being notoriously in need of repairs due to being vacant and not maintained for years at a time. Here are the facts about the 203K streamline:

1) 15 or 30 year fixed rate FHA loan-having all the attributes of a normal FHA loan including 3.5% down payment, fixed rate, upfront mortgage insurance premium and monthly mortgage insurance.

2) Up to $35,000 available which can be added into the loan to make non structural repairs and upgrades to an existing property.

3) The key phrases are cosmetic and non structural repairs.  If a roof truss is shot or floor joists are eaten away with termites, this loan won't work.

4) This loan however will repair or replace windows, damaged siding, roof shingles, carpet, paint, trim, kitchen cabinets and bathroom fixtures, appliances, leaky plumbing, furnaces and air conditioning-essentially-anything of a non structural nature in the home.

5) The buyer must have a legitimate contractor who can serve as a general contractor to organize the work. All work is estimated upfront prior to submitting the loan. The contractor must be licensed or registered as an entity by the state. This means that Uncle Bob who does odd jobs on the side is not considered a legitimate contractor.

6) All work is inspected and signed off on by a HUD appraiser.  I will mention-this is a highly regulated process that has to be completed within a specific time frame. Essentially if you want the money you have to play by HUD's rules.

7) This loan is for owner occupants only, but can be used to refinance a home and make repairs and upgrades.  Many homeowners take out a home equity line of credit or a cash out refinance to pay for upgrades.  In the current world of mortgages the maximum loan you can obtain is 85% of the appraised value. So the mortgage, closing costs plus money for upgrades has to be encompassed within the 85%.  If one uses the 203K streamline the borrower may be allowed up to 110% of the improved value as determined by the appraiser.

  Overall this is not a particularly difficult loan to obtain or administrate. Many buyers are frightened off because there is some homework required prior to submitting the loan application. Homework  revolves around determining exactly what the property needs to meet FHA guidelines (an electrical upgrade perhaps?) as well as what the homeowner would like in amenities. In our opinion it is a very legitimate method of bringing a dated home up to current standards.


  At Tippecanoe Mortgage we have experience with working with this loan. It is a good way to create equity in a home, plus reuse, repair, and recycle is a positive mindset.  There are many great homes that only require a bit of a facelift to be functional again.

  So if you want to turn this

 

                                                    blogsvillagevoice.com
 Into this

                                                 decorepad.com

Don't be afraid to investigate this great renovation loan.  

Lava lamp anyone?

                                                        www.walmart.com

HOW DO I DECIDE IT IS TIME TO BUY?

                                                     www.vabaycountry

 If you are a first time home buyer or a former home owner who has been out of the market for awhile you have probably been hearing that NOW IS THE TIME TO BUY-all caps, shouted from the rooftop by every source of information you can think of.

  We would agree with the general statement that now is an excellent time to buy, however we would amend that to say, but is it an excellent time for YOU to buy?  There is overwhelming enthusiasm about the issue.  Everyone you meet says, "DO IT!"

                                                 www.askaxworld.com

  Let's think about that for a moment.  In order to assist you making the decision-and it is a big decision - I'd like to go over a couple of points that you might want to ponder.

                                              yougottabekidding.wordpress.com

  No, sorry, wrong point.  The following is what you should be thinking about if you are deciding to buy a house:

1) Job Stability- We interview many young people who are just out of school or have scored their first job.  They are eager to purchase a new home and begin this new adult life.  But one of the first items that a loan underwriter is going to review is, how likely is the applicant to remain at the current job, and does that job support a house payment? Many people believe that because they are paying rent, they will be approved for a mortgage at the same amount, or that the fact alone means that they have the income they need to purchase a home. A mortgage lender is in the business of giving mortgage loans to people that they are relatively sure will pay the money back. So when they look at employment, they are looking to see if the potential borrower has a stable job, has completed all probationary periods, receives enough income to cover the mortgage plus other consumer debt and does the job relate to what that person studied in school?  This is where the person who is just out of high school and has not progressed to post high school education may be at a disadvantage depending on the type of employment. Lending allows "experience" to those who have obtained positions in their field of study in post high school education. So even if a borrower has a well paying job, if he or she has just graduated from high school the lender may require six months or a year on that job, whereas a person who just graduated in a two year degree program for a technical skill may be able to obtain mortgage financing after they have completed all probationary periods because their work is in their line of study.

                                                      redbubble.com


2) Credit Depth- I have spoken at length of this before.  One of the biggest hurdles that young people must overcome in their quest for a mortgage is developing a credit profile.  Some people had forward looking parents who assisted them by co-signing loans or credit card applications when they were in school so there would be a credit footprint when they graduated. (My children can thank me-when I next see them.) However, not every child has that advantage or every parent thinks of this.  Credit rules have changed significantly in a very short time. It used to be considered a good thing to be debt free, right?  If a borrower wants to borrow money for a mortgage-they will need some credit history- a year is sufficient. It can be made up of a credit card, a car payment, and a student loan. Or two credit cards and an auto loan.  Revolving credit, such as a VISA or Master Card carry the most weight.  If you have no credit or have just opened accounts, you probably aren't quite ready.

3) Savings- can you show a pattern of savings?  It can be a 401K from work, or a savings account.  Lenders like to see that mortgage applicants have the ability to save money.  While there are several loans available that do not require the borrower to have reserves, I always wonder what happens when the furnace quits.  A loan won't necessarily be declined due to not having savings, but I think it is an important point to consider.  Once a homeowner, the repairs fall on you. There will be no landlord. So if you have trouble saving money for any reason, think about how you will make repairs to the home you buy.

                                                   clipart.com

4) The cost of renting VS the cost of owning- Many people wish to buy because of the recent increase in rental costs.  In a lot of cases they can find a nice home for a lower payment than what they are paying in rent. In addition when you pound a nail into the wall, it is your wall.   In an earlier blog I cited that using this year's appreciation and projected interest rates a renter will break even on home ownership in three years. Not paying rent is a powerful incentive to buy if you are going to be in the same community for the foreseeable future.

5) Tax Benefits- Pure and simple you will save money on your income taxes by owning a home. A portion of the interest you pay on your mortgage will be deducted.  In addition property taxes are normally deductible as well, plus any improvements you make to the energy efficiency of your home.
So you may be in a tax bracket in which owning a home would be an advantage on your taxes.


  No one can make the decision for you. The decision is personal.  A buyer has to be ready, able and willing to buy. The above points cover those three criteria. Many people are ready and willing but not able. Conversely some may be very able but not quite ready.  Buying a home is a commitment. We never want to talk someone out of buying a home. Personally I think it is a terrific step to take. However, it is not for everyone at all times.  Consider carefully and then decide if this is the right step for you.

PICKY...PICKY...PICKY

                                                              sodahead.com


 When we consider the phrase Picky...Picky...Picky, this is what we think of- a choosey eater, someone who refuses to try something new or is suspicious of anything they haven't experienced before.

 But you all know I write about the mortgage business, not a food blog.  What I am referencing is the fact that we mortgage brokers find ourselves at the beginning of the Picky-Picky season.  The volume of loan application is up.  Lenders have become quite busy underwriting a greater number of new mortgages.  And with more volume comes more rejection.  Loans that were not a problem to get approved over the winter months are now being tossed overboard.  Why? Because the investors can-they are busy, because pipelines are full and there is no incentive to work on more difficult transactions.

  I understand the dilemma.  There are borrowers whose circumstances are head twisters.  These are the loans that as a mortgage loan originator I believe in, but to get them to the closing table for any number of reasons can be Herculean feat.

  During a recent conference call with one of our investors I learned a jaw dropping statistic-only one in 500 loans with a credit score of 660 or below is approved.  1 in 500! At Tippecanoe Mortgage many of our clients are in the 620-660 range and we close many loans with those scores. But during the busy time of the year it is definitely more difficult. 

  While I think it is a true statement that almost any loan no matter the credit score, job time, or assets will get looked at more critically in the post financial reform era, the lower the score drops below 740 the bigger the magnifying glass.

  Last year 70% of borrowers with credit scores over 740 were approved. For those with credit under 680 the percentage changes to 30%.

  In most cases a mortgage loan that the borrower has credit scores of 640 or above is going to be approved eventually-but any issue such as over drafting the debit account, total debt ratio being at or just above the standard percentage, income variances over the past couple of years, or a late payment or two on a credit card may be enough to require maximum hoop jumping to get the job done.

  If your credit score is below 640 it gets even tougher.  Most underwriters won't stamp the dreaded

on a file without giving the borrower a chance to obtain documentation to refute or explain the situation.  It is highly likely that rent checks or mortgage history for the previous 12 months will have to be produced. There might be some collections that will have to be paid off, and certainly any tax liens or judgments will have to be released. Perhaps some credit card debt will have to be eliminated. These are typical requirements.

 A careless phrase from an appraiser that wouldn't have mattered during the winter months, repair issues on a property, or a job gap, work on the loan may come to a screeching halt until a resolution is found.

  For instance- one recent loan's approval status revolved around income calculation. The credit score was in the mid 600's. The borrower, over a period of several years had shown an income history that was consistent. However, the guaranteed hourly pay was lower than the regular income. The underwriter chose to only use the guaranteed hourly pay rather than the historical income level that was earned over the past three years. Seems that when times get busy common sense can get tossed out the window.

  A borrower with several jobs over the past two years, or less than a year on a job that was different than what they had been doing prior to the current job might raise an eyebrow.  Income that is less than the past year will definitely be scrutinized.

  The purpose of these musings is not to discourage people from making mortgage applications, rather it is to encourage borrowers to do whatever possible to co-operate with their lender so that documentation can be provided, good explanations given, etc. to solve whatever the problem is and move to closing. The borrower who thinks that the process will never end is not alone-many people are running this gamut.
 
 The good news is that as a mortgage broker, Tippecanoe Mortgage can provide you with several lender choices.  Many times if one lender can't or won't work with a specific scenario, another will.

 Closed loans equals happy borrowers-we do everything we can to get our clients there.

mompopculture.com

FORECLOSURES- YOU'VE HAD ONE...NOW WHAT?

  www.forsaleinspain.com


I guarantee that not one person who bought a primary residence prior to the mortgage meltdown years of  late 2008-2011 ever believed upon receiving the keys at closing that they would one day lose their home due to an inability to make the payments. Sure-there were borrowers who had no business being approved for a mortgage. Even so, even the most challenged buyer intended to make the payments.

  The upshot of 2008-2013 is this-the market is improving. Homes are appreciating again and people are back to work. The economy is getting better. The massive inventory of foreclosed homes is greatly reduced and diminishing. Give it another year or two and the foreclosure crisis will be nothing but a bad dream.  But what about the people who lost their homes?

  Here is one thing I can tell you-Americans are an exceptionally resistant lot. During the worst of the downturn we would have people call our company and say: "I'd like to apply for a mortgage."
 "Great," we would reply-"Have you selected a house?"
  "Yup-123 Main Street, USA. That's my house!"
  "Oh, so when we close your loan that will be your house."
  "No-I mean that's my house. The bank took it back last month."

  Even people who had gone through the trauma of eviction, the foreclosure process and bankruptcy were ready to jump right back in the saddle and buy.  Unfortunately what many of them found out was that they were able to obtain financing to buy a new home because of the previous foreclosure. The story of financial hardship created by the economy wasn't a sell that mortgage companies were buying or were able to buy-all the rules regarding mortgage loans having changed in the aftermath of the worst financial disaster since the Great Depression.

  Foreclosure along with its sisters, Short Sale and Deed in Lieu of Foreclosure, have all been treated the same by lending. You lose the house or sell it for less than what you owe, or give it back to the bank and you lose the ability to be loaned money for another.  Many people who lost their homes were told or heard through the grapevine that this meant that it would be as long as ten years before they would be able to purchase another home.

  Sadly enough, many real estate professionals including lenders gave home owners the wrong information about Short Sales and a Deed in Lieu of Foreclosure. Home owners were counseled in many cases that a short sale or Deed in Lieu of Foreclosure wouldn't impact them as badly as a foreclosure would.

                                                        www.eventingnation.com


  This advice was dead

                                         www.now-here-this-timeout.com
  Not only did short sales and deeds in lieu of foreclosure severely impact people's credit scores-the same rules apply that apply to a foreclosure in terms of future lending.

  So what are those rules? The rules are:

 Three years have to elapse between the sale of the house at the sheriff's sale before the home owner is eligible to apply for a mortgage loan. The loans available to the home owner would be government loans-FHA, VA and USDA.  Conventional lending requires 7 years unless the borrower can put down more than 10%-then it is 4 years.

  So hat happens at the sheriff's sale? Why is that the date that starts the clock?  This is the date the deed transfers out of the homeowner's name into the new owner's name-normally the bank.  So if you had a foreclosure you will need to go to the county in which the home was located and obtain a copy of the sheriff's deed-easy enough to do-just give them the address and ten bucks or whatever they charge and there is the proof of when the deed transferred.  Many folks don't know when the sheriff's sale occurred as they left the home long before that happened.  The same is true of short sales and deed in lieu ofs.  Three years from the transfer of the deed.  If you had a short sale you will have a settlement statement proving title change and if you had deed in lieu of there will be a paper trail from the bank. These documents are normally required to prove the three year seasoning period. Of course credit has to have recovered and any bankruptcies will have to have been seasoned two years from date of discharge-date of discharge-NOT date of filing. Normally the bankruptcy is discharged before the sheriff's sale as foreclosures take a while to go through the legal process.

  There are some exceptions- often differing from lender to lender. Conventional lending will allow two years from a short sale on a conventional mortgage if the borrower puts 20% down. This eliminates the need for mortgage insurance so the rules are a little less strict.  Someone who has had a short sale may be allowed a new loan after 2 years if there were no delinquent mortgage payments the twelve months preceding the short sale-an event that we don't normally see-but it could happen.  One of our lenders allows less than three years seasoning on a short sale if the borrower qualifies for a USDA loan and there is no outstanding FHA, VA or USDA mortgage debt.

  However, for most people the rule of thumb is that if you have had a foreclosure, short sale or deed in lieu of foreclosure, you will be eligible three years from the date of the sheriff's, shorts sale settlement or transfer of deed in a lieu of foreclosure situation for an FHA, VA or USDA mortgage. You will need the settlement statement showing the sale for short sales and the deed showing the transfer out of your name for the other two.  You will also have to have rebuilt credit.

 So there is good news  that there is home ownership after foreclosure-it just takes a little time.

DOWN PAYMENT-WHAT'S RIGHT FOR YOU

  Typically there is a sum of cash required for the down payment on a mortgage loan. The pressing question most people need an answer to is, how much cash?

www. billboard.com


Oh- I wasn't talking about him- no one can have too much Johnny Cash-I was referring to:

                                                            mindmillion.com

This kind of cash-the spending kind.

  There are a few no money down programs available-a very few. Chief among them are VA and USDA.  In some states there are down payment assistance programs that provide the funds for down payment on FHA loans.  A couple of things we need to keep in mind about those. (other than VA) These programs typically have income and or geographic restrictions- and in some cases higher credit requirements. So they solve the down payment issue for a few people. The vast majority of people do have to figure out how much down payment they will need and where it will come from.

 First how much-

  The lowest down payment loan available today is the FHA mortgage loan with a required investment of 3.5%.  When you stop and think about it, 3.5% isn't much to ask when one is talking about asking the lender to foot the bill for the rest of the loan. (And yes, there is money in it for them) Most people are able to come up with 3.5%. This money can be a gift from a family member, a withdrawal from a 401K or come from savings and checking.  My concern for folks who can't find 3.5% is that if there isn't money in the budget for a down payment, how will repairs to expensive items such as furnaces, roofs, etc. be done? I feel more comfortable when I am doing a 100% mortgage if there is some savings that the home owner can fall back on for repair items.

 Another option if someone has good credit scores and enough income to be able to set money back for a down payment is the 5% down conventional mortgage.  This loan is a bit more attractive than the FHA. While both offer 30 year fixed interest rates, the FHA actually being lower, the conventional mortgage has much  lower monthly mortgage insurance and no upfront mortgage insurance premium.  Typically even with the higher interest rate the total payment will be lower. The other new thing that is being offered on the 5% down conventional mortgages is that some lenders allow a 5% gift from a family member for down payment. We currently have two lenders that offer this benefit.  The credit score does need to be 720 or above if a gift from Mom and Dad is how the down payment will be funded.

                                            www.hercampus.com 
So where does this money come from-money doesn't grow on trees-

 Wouldn't you love to have one of these in your back yard? I would.  Anyway-where can money come from for down payment?

We already talked about gifts from family members and 401K's.

Many folks are able to put aside their tax return check or an annual bonus check to help seed the down payment. I have had some borrowers who have been able to sell boats, trucks, or other items of value for the money. If that is how you obtain the down payment be sure whatever you sell is well documented-checks copied, title copied etc or if it is cash-it will need to be in your bank account a full two months before it can be used as down payment. The same goes for money you may have under the mattress-it has to be in your bank account for two months before it can be used as down payment money.

  For those who are really good penny pinchers of course you can put down any amount of money over 5%-however, payment Nirvana is reached when a 20% down payment is possible on a conventional loan as the mortgage insurance is eliminated at that point. The same is not true of FHA-though the mortgage insurance is reduced depending on how large the down payment might be.

  Perhaps as time goes on we may see a few more 100% possibilities turn up-but it is never a bad thing to have a little money to put down on a home. As we move to more full employment we are hopeful. that most people will have a bit to put away so that home ownership can become a reality.

ALWAYS GET A SECOND OPINION

                                           interactive.wwxxi.org
  If you went to the doctor and he told you that you had two weeks to live you might decide you needed to get a second opinion. Likewise if a mechanic told you that your engine was shot when all you thought you needed was an oil change you would probably seek another opinion prior to replacing your engine or buying a new car-or at least I hope you would.

  In mortgage lending it is no less important to obtain a second opinion.  In many cases I represent the second opinion that people seek. Why? For people that don't know me or my company or our reputation, the most natural move when considering obtaining a mortgage loan is to stop by their local bank. Most folks have their bank accounts, credit cards, and auto loans from their bank. So it is not unreasonable for people to go there first. They need  to borrow money. Who has money to lend? Why the banks do.

  Many people also have the idea that the "best" lenders are banks. What comes to mind when one says "best" with regard to mortgage loans?  Low rates, an easy process because after all, they are your bank, they know you-at least that is what most folks think.

  I am not going to kick banks in the shins with this essay-but I am going to tell you that your bank may not be the "best" place for you to get your mortgage loan. It might be-but but then again, maybe not. Banks do other things besides mortgage loans. They have depository accounts, financial services, auto loans, credit card divisions, and many types of consumer lending products. A bank doesn't necessarily specialize in one thing-other than storing your money. (At a very low return, I might add.)

  The bank may not in reality have the lowest interest rate. Lately this spring our company has been able to give quite a few of our clients lower rates, better closing costs, and a faster path to closing than the bank we were in competition with. But let's say that all things are equal-the rate, the closing costs, the speed with which the mortgage can be closed.  Even so we offer something banks don't- more flexibility. What that means to you as a consumer is more choices and more opportunity.  We specialize in mortgages.  That is all we do. We won't sell you another credit card, ask you to open a a Christmas account, try to refinance your car, or offer investment services. It's also true we won't give you a toaster or a savings bond if you do a mortgage with us-we have to draw the line somewhere 

 www.iconarchive.com

  Many people are savvy enough to know that their credit score is important when obtaining mortgage financing. The credit score impacts the interest rate, the loan program and whether or not you will ultimately be successful in being approved for your mortgage loan.  While not true across the board, it is often true that banks require higher credit scores to approve borrowers for a mortgage loan. This is especially true of FHA, USDA, and VA borrowers.

  So far this spring we have had a parade of clients who have been turned down by their bank because their credit score wasn't as high as the bank required-however, the score was perfectly fine for the mortgage program for which they applied. In this one way banks tend to be quite conservative-they are looking for examples of excellent credit.

                                             salon.com

As we know all too well-there was a mortgage meltdown in 2008-caused by speculation in housing, the sale of worthless loans, and the subsequent economic crash that impacted a large segment of the population.  So it stands to reason that people who formerly had impeccable financial credentials have had some bumps and bruises on their financial profile. There are many examples of folks the banks turned away that we have been able to approve.

                                                         www.lakemarysphysicians.com

  It's not that we can approve anyone-we can't. The lender, no matter if they are a bank, broker or mortgage banker has to have a reasonable expectation that the borrower has the habits and ability to repay the loan. So if someone has never paid a bill on time in their life-we probably can't help that person. But given that we have more than one source of money we are able to help more people than a bank. We choose our investors carefully so that we can cover as many niches in the market as possible-so what may not be possible at one of our lenders may be possible at another.

  So the moral to the story today is-get a second opinion-whether it is interest rate, closing costs or if you have been declined by another lender. I can't promise anyone that our rates will always be better or that we can approve your loan for sure-but all you have to lose is the time it takes to find out.