HOW DO I CHOOSE A LENDER?

                                                             careercast.com

  How does one go about choosing  lender? How do I know who will give me the best rate? Is there someone out there that won't charge closing costs? What if I have to bring a LOT more money to the closing table than the lender told me I would need? Will they cheat me? Can the lender promise that my loan will close on time? Are they asking me for too much documentation? What if there is a pre-payment penalty and I didn't catch it in the paperwork. Should I read all the documents prior to loan application? I don't understand what they mean.

 All these are good questions-but they really just skim the surface of what you need to know when choosing a lender. First and foremost don't worry about your lender cheating you or having to bring more money to the closing table than was disclosed to you at application. Federal law has just about made those worries obsolete. Whatever the lender has disclosed to you at application with regard to your fees is what they are going to be unless there is a significant change in some facet of your loan. There are circumstances that can generate a change in fees such as a re-inspection on your appraisal-but what you see on your estimate should be within a few hundred dollars of what they will be when you close.  Title companies and lenders are now held to a very high standard with regard to fees.

  Isn't it best to go with the company that has the lowest interest rate? I often talk to folks who think that it is all about the interest rate.  Low rates are great-but I often tell clients that if they have found a rate that is significantly lower than every one else in town-something is off. It is not unusual for lenders to quote low to get the client into the bank/mortgage loan company. And it is true that rates change daily so if a lender quotes you a rate and it takes you three days to go in to talk about your loan, the rate may have changed-and not necessarily for the better.  Choosing a lender because they quote you a lower rate is somewhat like throwing a dart at a moving target. Perhaps you will get lucky-the again...

                                              bleedbigblue.com

  Rather than make the interest rate your criteria for choosing a lender, let's try a different approach.

  Many people think the logical place to start is their own bank or credit union.  And that may work well for many folks-but keep in mind that the bank or credit union has one source of money so you may not be getting a look at the best options out there. And from personal experience at my own credit union-let's say I have been very unimpressed with how they go about consumer lending-who gets the thumbs up, or is declined and the reasons behind the decision.

 Another option and in my opinion a better option would be to take a look at a mortgage broker such as Tippecanoe Mortgage. We offer money from several different sources and we don't expect you to move your depository accounts in order to obtain the mortgage. We have the ability to approve a broader range of borrowers due to the multiple nature of our investors. Of course I would say that since I work for a mortgage broker but it is true that we offer a choice.

 Let's look at some other things you may want to consider in your search for a lender-such as:

ownlessandlivemore.com

 



 

The experience of both the loan originator and the company they work for is critical.  Lending has changed dramatically in the past six years. It is important to choose someone who has worked continuously through the changes.

 

Communication is another exceedingly important factor in today's world of mortgage lending.

 

 

                                                huffingtonpost.com

 

That should go without saying (but is going without saying communication?) What a borrower needs is a lender who will answer their questions, explain unfamiliar procedures, documents and terms, and keep the borrower in touch with every step in the process.  Communication begins prior to commitment to the lender. If a loan originator can't call you back when he/she is trying to make the sale, how well will they communicate throughout the process? That is a good question to ask yourself.  And by the way, communication isn't just about -

                                                         dreamstime.com

 



Communication is also about bad news.  Low appraisals, unexpected inspection results, factors that affect the interest rate to the worse, denials-there is plenty of bad news to go around in the mortgage business that must be communicated with solutions.

  The ability to find a solution to problems is another hallmark of a good company that employs knowledgeable experience originators. Many people have issues or situations that put them "out of the box" with regard to mortgage lending. Maybe it was a job lay off or a foreclosure.  Perhaps it was relocation, or working for a temp agency, or a fire that destroyed the previous residence.  All of these are problems that have come across my desk to be solved in the past 12 months.

  But how do you know how an originator communicates? Or whether or not they are good problem solvers?  Ask around.  Often the best referrals come from friends and family.  At Tippecanoe Mortgage a very large percentage of our business comes from past clients.  If we have done a good job for someone they are only too happy to talk about it.

  Check various lender's websites.  If all they offer is basic information in a generic format, you may want to shop further. Our new website www.tippecanoemortgage.com  is stuffed full of information that is useful to the consumer-including a link to this blog as well as an online application.

  There is so much more to choosing a lender than selecting the lowest interest rate. Consider all aspects of the process you are about to enter into prior to going with the lowest rate-there is a lot more to the equation than the bottom line.

WHAT HAPPENS AFTER I SIGN ON THE DOTTED LINE?

                                                         www.pull the curtain.com

  Pay no attention to the man behind the curtain....but really, that is how loans get done-all the work  goes on behind the curtain.  What the borrower knows is one day they come in and sign a bunch of papers and then wait, occasionally being summoned to run around and gather things for underwriting and then they close.  So I thought that for today's blog I would take a moment and talk about what happens when I slap a file shut that has your name on it containing all the documents that you just signed.

  Typically once a loan application has been signed there are a few things that the originators at Tippecanoe Mortgage have to do to prepare the loan for submission. One of the tasks is obtaining an electronic approval known as DU or direct underwriting.  The file is uploaded to the Fannie Mae website and submitted for electronic approval. This is a first check on whether or not the loan has all the qualifications required for Fannie Mae to purchase the loan. Typically, if what we have entered onto the application is correct we do receive an approval. (If we felt we wouldn't you probably wouldn't have gone through the exercise of signing a loan application.)

  Once we have those results we turn the file into the person called the loan processor who works with the file on a daily basis as it goes through underwriting. The processor is a very important part of our whole operation. While I may be the face of Tippecanoe Mortgage that you see or hear from on a regular basis, for all intents and purposes the loan is off my desk.  My role is to communicate what the lender needs from you in order to approve the loan, information that is relayed to me from the lender by the processor. Our processor is a critical link in the smooth management of the loan.  Once in awhile I am called upon to use problem solving skills to obtain information or solve some type of issue with the loan package, appraisal or title work that has to be resolved prior to closing. For the most part at this point my role is communication.

                                               stephaniepais.com
 As I mentioned the processor's job is to prepare the loan file for submission to the lender which is done electronically. Then she communicates with underwriting to be sure that all the items needed to make an underwriting decision are available to the lender.

  During this process the fees that are charged are evaluated using a government compliance model by the lender to be sure all government regulations are met. At the same time the title work is ordered so that there is a title history available on the property and title insurance issued to protect the buyer against any claims that might turn up that were not found. In other words if Uncle Frank wandered off to Alaska fifty years ago and turns up claiming that he owns the house...the buyer is insured so that their interest is protected.

                                                ochistoricalblogspot.com

   At this time we also track down home owner's insurance for the property, obtain verifications from the borrower's employer, verify bank statements and rental payments. Once in awhile we have to update credit payments on the credit report. The appraisal is ordered at this time to ensure that the home is worth the purchase price.  Just a bit of added information on appraisals-we are not allowed to talk to the appraiser. Our role in the process is to place the order.  We are not informed of when the appraisal will occur, nor are we allowed to discuss the appraiser's report with the appraiser when it is returned.  All we can do is check with the listing agent to be sure that the appointment has been made. From that point we have an idea of when it will be returned and can check to see the ETA of the report but until it is made available to us we are as in the dark as anyone else.

  The most time consuming portion of the process has to do with gathering all the conditions set out by the underwriter to approve the loan. Both the processor and I work on these items-me contacting the customer, the processor all non customer related items.

  At some point I will lock the interest rate. Typically we have until about five days prior to closing to set the rate for the term of your loan. Some folks prefer certainty and ask me to lock them in at the time of loan submission. Others have a bit more of a gambler's nature and are willing to play the market so to speak, in hopes that they will get a bit better deal. If my client is one of those folks I always keep a close eye on what is going on because the rate the buyer wants may only be available for a few short hours.

mathwire.com

 Once the underwriter has received everything needed that satisfies the requirements of the loan they will issue what is known as a "clear to close." This means the loan passes all the smell tests for the rules of the loan and the rules the eventual investor has set for the loan to be sold. Then the loan will be lined up to go to quality control for a next to final check to be sure everything required is in the loan file. Quality control is concerned with any documents that might not be complete or verifications that may have been left out of the file.

 While quality control is going on, back at the ranch, the processor at Tippecanoe Mortgage is ordering the documents needed for the lender to create the loan package a well as sending any invoices that need to be paid at the time of closing. Some of these invoices might be home owner's insurance, any inspections left unpaid etc.  In some cases we are required to pay off credit cards or collections in order to close so invoices for those items would be included. The lender will do a final check to ensure that the borrower is still employed. Once all this has been done the lender will allow the closing instructions to be sent to the title company and the final closing details are finished up. Once in awhile someone other than the seller will be signing for an out of town or unavailable seller so the title company is required to handle the legal documents that allow a third party to sign for the seller. Once in a great while the buyer cannot be present, but if that is the case, the buyer's power of attorney has to be cleared by underwriting before the clear to close is issued. 

 Prior to the clear to close the title company has done a last minute update to be sure no liens or judgments have been filed on the property in the time between the initial title search and the closing date. Property taxes have been verified and sent to the lender so that escrows can be calculated and tax pro-ration amounts are correct. The final step for the title company is to create the settlement statement in accordance with Federal regulations and have that statement approved by the lender. Once all that has been done, and only then may closing proceed.

  Whew! It' s finally over, one would think!

                                                  allthingsd.com
   But you would be wrong.  There is a post closing audit that happens as well. Normally the borrower will be totally unaware of this process, but every once in awhile something pops up that is incorrect or missing.  At closing the borrower is asked to sign a form that he/she would assist in correcting or completing anything needed for the file.  Blowing a request for a new signature or document is not a good idea. The lender has remedies, including calling in the loan-so pay attention the ten days after closing to any and all communication from the lender.

  Chances are you probably never wanted to know all this...

 I know-it's detailed and it's really not very interesting...but this is the life story of your mortgage loan.

I HAVE TO BE OUT OF MY APARTMENT IN THIRTY DAYS...

                                                   movinginsider.com


 One of the most pressure filled situations to put yourself in is to decide to buy a home thirty days before the apartment lease is up.  Unfortunately many new homebuyers find themselves in this situation when they haven't taken the time to become educated about the process of home buying and how long it can take to find a suitable home  as well as make  mortgage application and the time line to closing.

                                                   m-b-west.blogspot.com

  Well, yes, it is something like that.

  If the buyer is not a picky shopper, theoretically the process can be completed in thirty days.  However, that requires a fast purchase, a fast lender, and absolutely no snags or issues that arise during the process.  If you are a regular follower of this blog you know that a loan process without issues almost NEVER happens. And a plan can reduce those issues by addressing them upfront. At Tippecanoe Mortgage we are all about P.L.A.N.N.I.N.G.  I can't say it any better than that. Purchasing a home is not an impulse buy (in most cases.)  In fact since it is probably the single most  significant financial purchase you will make in your life, you probably owe it to yourself to do a bit o preparation before you run out of time on your current situation.
 
 Where to begin....let's see...

Before you begin looking at homes-yes even before you decide to wander through an

                                           news.deltanews.com

 You need to be sure you are in a position to buy that open house should you decide you can't live without it...in other words you are allowed to be impulsive, you just can't be impulsive before you have been practical and prepared.

  I have written a past blog on this but there is nothing better than being ready, willing, and ABLE to buy the house of your dreams. And if you haven't looked into the ABLE part, someone else may snap it up before you can speak with a lender, much less become pre-approved or...

walk into that open house with a pre-purchase underwritten approval offered by our company, Tippecanoe Mortgage to any qualified buyer in Indiana. Once you have the pre-purchase underwritten approval you ARE 30 days from moving out of your current digs because any questions about you as a qualified buyer have been answered.

  And for those of you who currently own homes and are ready to trade up-the aforementioned plan works for you too!  Many folks who haven't purchased a home in a few years assume that buying another home will happen- no problem.  This isn't necessarily the case.  Lending is a whole new world and the loans that sailed through so easily the last time will move much more slowly. Not necessarily because of you, just because the process is now built for Federal compliance not for speed.

  And of course you, Mr.and Mrs. Current Home Owner also have to deal with selling your property, closing your property and working through any issues on that transaction.  Just as a word to the wise, owning two properties isn't nearly as easy as it was a few short years ago. Deciding that you will rent your current home rather than sell it can be done, however, you need to be able to afford both payments as rent can't be applied to offset a mortgage payment unless the home has been rented and declared on two previous years tax returns as a rental-so they kind of cut us off at the pass on that one.

                                                  myloveofoldhollywood.com

   Most of our lenders can close a loan in 30-40 days depending on workload, but please keep in mind that is from loan application-not from when you began a housing search. Consider what you are looking for, talk to a lender like us to confirm your price range, do some searches with a Realtor to see what is actually available in your range and then set your time line. For most people who don't have a house to sell first, 60 days should be ample time. Hope you come by soon for a pre-purchase underwritten approval and you can keep it simple and fast!

BUYING A FORECLOSED PROPERTY

                                          fox6news.com

  As an industry professional, I enjoy watching HGTV shows-such as Flip or Flop, Property Brothers and Rehab Addict. (I have entered the HGTV contest to win the smart house in Nashville multiple times...well, daily...ok...in the interests of full disclosure as many times a day as they will allow.) In all those programs, the buyer or star of the show purchases run down homes, gives them a fabulous makeover and ends up with a beautiful home worth two times as much as they paid for it.  I often wonder if television programs like these influence buyers to dream about their own version of these shows-buying cheap and harvesting the equity from a repaired and restored home.

  And it is a fact that bank owned properties or HUD owned properties often sell well below market value-largely due to their condition. If you are considering purchasing a bank owned property let me list some facts in order to take the fantasy out of the equation.

1) The foreclosure process takes time-6 months to a year. Typically the original home owner will have vacated the home long before the sheriff's sale returns the home to the bank.  In the meantime the home has been sitting empty-or perhaps has even been occupied by squatters. In many cases the copper from the plumbing has been stripped, air conditioning units stolen, and perhaps the property has even been vandalized.

2) Banks aren't in the housing maintenance business. Depending on the condition of the property when the bank takes possession, the bank may or may not make some repairs. This is why you often see the properties sold "As Is".

3) Being vacant is hard on a house-seals on the plumbing dry out, if the property hasn't been properly winterized pipes may burst, leaks grow mold.

4) The bank that owns the property really isn't interested in making repairs in order to sell it-


www.kiji9ji.ca


Which means the repairs will fall on you.  So the first question is-

1) How will you get the money to make repairs? Do you have cash reserves?

  While there are a couple of rehab loans available-often the rules and controls on those loans don't appeal to buyers-not much sweat equity is allowed-nor can your Uncle I Fix It on Weekends do the work. Those loans can solve the problem -but the property has to fit within certain parameters and often it doesn't.

2) Most bank loans won't allow you to close on a property if certain condition issues aren't present. For instance, I can't tell you then number of borrowers I have met with that are frustrated because the home they want to buy is built on a slab and somewhere along the way, someone removed all the carpeting. Crazy as it sounds, lenders will not loan on a property that has bare concrete or subfloor showing.  Well fine you say, I will run out to the Home Depot and have them install carpeting.  Then we can close.  Except, the bank that owns the house won't allow the work to be done to make the house acceptable to the bank that is loaning the money (might even be the same bank).  In bank owned properties borrowers aren't allowed to make repairs prior to closing even if they are willing to pay for it themselves. 

  How the heck are you supposed to buy that house?  Unless you are using one of the FHA rehab products or a Fannie Mae rehab product, the only answer is cash.

                                        gcbusiness.org

Got any of that lying around?  Unless you are an investor or make your business flipping homes, chances are, you don't.

  HUD does give preference to owner occupants when the foreclosed homes they have taken into inventory go up for sale. HUD uses a bidding process and owner occupants get first crack in the bidding process.  In most cases HUD will have assessed the property prior to putting them on the market for condition and also had them appraised. In some cases the buyer can even use the HUD appraisal rather than ordering a new one for their own loan.  If the home is assessed as up to FHA condition standards, generally speaking there should be no problem obtaining financing (though in order to use the appraisal generated by HUD the loan must be an FHA loan.)   If on the other hand, repairs need to be made, and  there is mold, lead based paint present in the home, or termite damage-then one of the three FHA rehab loans will be required to repair and buy the property if the buyer can't pay cash.  HUD also will not allow a buyer to repair a home prior to closing.

  For small repairs, up to $5000, Hud sometimes allows a repair escrow that can be added into the borrower's normal FHA mortgage.

  On specific properties HUD also allows a down payment of $100.

  In any case, there is a huge amount of bureaucracy in the purchase of a bank owned property.  HUD has specific methods and procedures in the purchase of the homes in their inventory.  Many banks rely on a stable of attorneys to negotiate and make decisions as to the disposition of their homes.  Let me tell you something-attorneys can take a long time to get back to you-hope you aren't in a hurry to close.  HUD is a bit more timely but they have a specific process and they don't deviate or make exceptions.

  I don't want to discourage anyone from considering the purchase of a foreclosure. What I would say be sure you know what you are buying. Have the home thoroughly inspected (which can also be a problem as most likely the foreclosure you are looking at will not have the utilities on and in order to do a thorough inspection utilities need to be on-one more item that most likely will be on the buyer's dime.)

  In Indiana there are also tax implications.There are big discounts on taxable value based upon living in a home-a foreclosed property will have as much as triple the tax liability as a home that is currently owner occupied. What this means is that the first year you own your previously foreclosed property you will be  paying taxes that were assessed while the home was non owner occupied-or bank owned. It will be the second year you own the home that your discounts or exemptions kick in and lower the taxes on the property. So while you may get a great buy overall-you will pay more for while. Long term you probably will do just fine.

  Be patient -if you have to be out of your current living situation in a month or even three months a foreclosed property may not be for you. There is no guarantee that the sale will conclude on schedule-there are too many layers of bureaucracy and too many hoops to jump through. So be sure you have a Plan B for housing if the transaction goes on too long.  And plan to spend a long time waiting for answers.

                                                       icanhaz.cheezburger.com

                                  

THAT LUNCH AINT FREE

                                                          www.stripersonline.com


I am sure you have heard the adage, "There's no such thing as a free lunch."  In lending this is particularly true-even with 100% financing programs such as VA and USDA.  However it is not unusual for a borrower who is using one of these programs to expect that there will be no expense to him or her.

  Nothing could be farther from the truth.  It is true that with these loans there are no down payment expenses-but there are costs incurred before the loan closes. Typically these can range from $800-$1200.

  The first item that the borrower will encounter is what is known as earnest money.  This isn't money for the lender, rather this is a deposit that is given at the time the borrower writes the purchase agreement with his Realtor to put the property under contract.  Typically the earnest money ranges from $500 to $1000 though I have seen it as low as $100 or as high as several thousand dollars.  This money is put into the listing broker's trust account to be held until the loan closes. At that time it is applied to the closing costs or down payment of the loan if there is one.  The money itself is a token-a gesture if you will, to the seller to let him know that the buyer is "in earnest" or serious about their offer.
  It is true that this money may be at risk if the buyer decides for no good reason to default on the contract. Within the body of the contract are many different reasons why the contract may be declared void, but if a buyer changes their mind for no discernible reason the seller may be able to keep the money. This decision is made by a judge in a small claims court (in the state of Indiana anyway) so the Realtors involved and the real estate companies are not a part of the decision as to whether or not to release the money to either party.

  The second expense that the borrower will incur is for any inspections that they wish to have performed on the home.

 

 

www.aaronshomeinspections.com   


  The cost of a whole house inspection will run anywhere from $250-$500 or more depending on what all is inspected. Today's inspectors have been schooled in detecting many of the common problems that come attached to real property including well, septic and termite inspections, radon gas, and a variety of other whole house issues.  While a buyer doesn't need to feel they have to act on everything the inspector cites, often safety hazards and potentially expensive repair items are found in the inspection.  It is well worth the money.
 
 It is not uncommon for a borrower to ask me if they need to go to the expense of an inspection.  Not if you don't mind if you end up like this:

                                             stepbystepinspections.net

Even a brand new house is worthy of an inspection-I have know of one or two that have burned down due to an electrical wiring error.  More than one set of eyes never hurts.

 
The third major expenditure you will have does have to do with the lender. That is for the appraisal.
Many buyers assume that the appraisal is a closing cost and can be paid at closing.  It is a closing cost-but ever since 2010 when appraisers were required to work from third party companies known as Appraisal Management Companies, it is pretty much a rule of thumb that appraisal money must be collected up front. As a lender we do not deal with individual appraisers or appraisal companies anymore. In fact we are blind in the process.  While we do collect the money for the appraisal and we order it and pay for it from the Appraisal Management Company that serves a particular lender, that is the end of our participation in the process. The AMC sets the pricing for an appraisal and handles all the communication with the appraiser. As a lender we can send messages through the AMC for the appraiser but we are not allowed to speak directly to any appraiser. So if the money isn't paid-the appraisal doesn't happen.  A credit is issued at closing for the appraisal-but it will have already been paid for.  Once the appraisal has been done no matter what the result, the appraiser has done his work so is entitled to be paid.

  Depending on what the appraiser finds, while unusual, the appraiser may feel there is cause for further inspections to assure the lender that the home is sound and in decent condition.  The most common of these might be a roof or structural inspection. Those additional inspection costs are incurred many times by the buyer-though it is not uncommon for the seller to pick up the tab for those as well.

  Other costs that may be incurred are moving expenses or the cost of temporary housing if your lease is up prior to being able to take possession of the home.

  100% financing sounds great-and it is but 100% financing shouldn't be confused with no money out of pocket. Buying a home for nothing is a fantasy that is sold by late night hucksters.

                                      orlandograce.org

   Be sure to have some money set back no matter how much you intend to put down. You will need it.

WELL AND SEPTIC-A BIG DEAL FOR MORTGAGE LENDING

 

                                          pimov.com

Many folks dream of a home in the country-a few acres, a bit of land, space for a family to grow. Nothing wrong with that-I too once had a home in the country.  For the most part other than the mowing in the spring, fall and summer, the road to civilization being closed due to ice and snow in the winter, and the size and number of the mosquitoes, it was great. I had a huge vegetable garden, a bird feeder that attracted an amazing number of different types of birds, raccoons in my kid's wading pool, and other assorted wildlife that delighted us. Initially I was thrilled because there was no city water or sewage bill to pay. What could be better? The house was older-built in the 1940's. The sellers were the second family that had owned it, an elderly couple who didn't really have a recollection of where the septic tank was located other than it was "out back" the Mister said, waving his arm in the general location of the back forty.  It dawned on us after we owned the house for  awhile that perhaps "out back" wasn't an accurate enough description of where the septic might be.  If there even was a septic. Our worst fear was that perhaps our septic tank was a field tile that drained into the adjacent ravine.

  Wells and septic systems are the two items that create more litigation than any others with regard to real estate sales; and for good reason. Obviously human beings need clean water to drink unpolluted by ecoli bacteria, farm chemicals and lead. And we also must have clean, safe and efficient removal of sewage. It is when there is a malfunction or issue with either of these two vital systems that the trouble begins. Typically they are expensive systems to fix or replace.

  When a home is being purchased is the time to examine the well and septic.  I always highly recommend that the well be tested for contaminants. If the loan that a buyer is using is a government loan are specific requirements that the well water be sent to a laboratory for tests to be sure the water coming from the well is safe to drink.  VA only requires a bacteria test as long as that is what the county in which the property is located requires. USDA and FHA require a more extensive test that tests for nitrites, nitrates, and lead.  USDA will always require a well test.  FHA makes the test dependent on the appraiser's discretion.  Part of the issue is where the well is located with relation to the septic tank, septic field, house, and property line. HUD has set distance requirements to protect home owners from pollutants that could come from the septic or the house or nearby tilled fields that could potentially seep into the well water.  It is the appraiser's job to be the eyes of the lender and to determine if there are any issues with these distances. Which means that the appraiser has to be able to locate the septic system and its relationship to the well. Last I checked, most septic systems are buried, so unless the house is newer and/or the county requires permits sometimes it is hard to know where the septic is located other than "out back."

 

                                         landandfarm.com

If the appraiser can't locate these systems the lender will often order that the septic be found and the distances measured as a condition to close the loan.

  Since the appraisal happens about one third of the way into the lending process, it is highly recommended for the buyer to have a whole house inspection at the time of acceptance of the offer and ask the inspector to run the well tests and the dye test on the septic tank to determine if there are any issues.  If the inspector can't find the septic tank or field, more investigation needs to be done. 

  Personally I believe the time to find everything possible about your new acquisition is prior to closing on it whether the lender requires it or not. Once a property is closed, there are very few remedies other than litigation if it is discovered that there are issues with the well and septic system. If for instance the well is located too close to the septic system and the water has ecoli in it, (bacteria from human or animal waste) wouldn't you want to know prior to closing the loan? If you know early in the process it is possible to request that the seller put in a new well or the price of the home be adjusted so the buyer can put in a new well.  No lender will allow a closing to happen if the water is found to be polluted. 

  The week before closing is a bad time to find out you can't close a loan on your dream home in the country because of bad water or a non functioning septic system. Get these tests done early in the process-locate where these systems are. (I have had transactions in which several households are sharing one septic, or the well is located on the neighbor's land-it s good to know these things so that your well doesn't turn out to be nothing more than a wishing well.

 

EXPANDED CREDIT SCORING FOR MORTGAGE LOANS

  As most people who are shopping for a mortgage know-it's all about the credit score. There are other factors involved of course but the credit score is the singular indicator whether or not a borrower is deemed a good risk for repaying a mortgage or not.

magnifazine.com


 The typically accepted scores across the board are 640+ for government loans, though there are banks and credit unions in our market that have raised the requirement even higher for their specific institutions.

  However HUD is moving in an opposite direction allowing FHA to approve mortgage loans with credit scores as low as 550.  Once again the choice of doing a loan with that credit score is left up to each individual lender. At Tippecanoe Mortgage we do have investors that will work with credit scores at that level, however, there are many specific conditions placed on the borrower with this type of credit score. Some of these qualifiers are:

Are twelve months cancelled checks available for rent payments to demonstrate on time rent?

If there are open collections (and for credit scores at this level there often are) have any new ones been opened in the previous 12 months?

If there are open collections, is there a payment plan that has been in effect showing 12 months payments on the open collections?  If not the borrower may be required to payoff some or all of the collections-particularly utility collections or credit card write offs. If there are open medical collections, what happened and has any attempt been made to pay them?

If there are open judgments or tax liens they will be required to be paid.

Are there compensating factors such as a pattern of savings, good job history and income, or low debt
ratios that show that the borrower has demonstrated positive factors to be considered in the loan approval decision?

Has the borrower made on time payments on their consumer credit items such as vehicles and credit cards for a twelve month period?

If they currently have a mortgage, has it been paid on time for the past 12 months?  How high are credit cards charged as compared to their limits?

Does the borrower have any insufficient funds checks over the past 12 months?

Is the down payment a gift or the borrowers own funds? Some lenders require a down payment to be the borrower's own money if the credit score is below 620. Some do not. Does this sound like

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 No doubt about it, it is a lot of work. But before we start waving a big unfair banner...

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Let us consider a couple of points-

1) Lending is all about risk.

2) If someone is going to loan someone else a large some of money, the loaner wants to be able to make a fair assumption that the loanee will be able to pay the money back.

3) If past is prologue-and in many situations it is-if a borrower has shown no habit of repaying debt in the past, chances are they won't repay debt in the future.

  The lender is the entity that is taking all the risk-and let's face it-lending money for mortgage loans is about reducing risk and making a profit if you are in the business of lending-so there have to be assurances that the borrower has the ability to repay and high odds that they will repay the loan.

  What FHA and HUD are saying with the reduction of acceptable credit score is that they recognize that times have been hard in recent years and some people through no fault of their own are in situations that have diminished their ability to become homeowners.  By lowering the credit score eligibility, HUD is allowing those people to get back on the housing horse so to speak.  But even if you are one of those folks, no doubt there is

  At Tippecanoe Mortgage we want to encourage everyone who wishes to own a home the opportunity to do so. However, we also have to be realistic.  Many times we make suggestions for the borrower to improve their situation prior to ever completing a mortgage application. Closing loans in which the credit score is below 640 is tough. It consumes an inordinate amount of time both in origination, processing and underwriting.  Therefore when we submit a loan with a lower credit score we want to be sure the borrower has a reasonable chance of becoming approved.  Not only are we burning clock and money when we work on these loans, the borrower is spending money as well for inspections, appraisals etc.  It is important to understand that loans with credit scores nationwide under 680 have an approval rate of 1 in 500. Typically our percentage of approval down to a 640 would be more than 95%, but the lower the score the harder it is.  If you are highly motivated to purchase a home we may be able to help you, just keep in mind that what we want for you is: