GIVE IT THE TIME IT DESERVES

                                                                                                                      clipartbest.com

  I read a rather astonishing statistic the other day.  It had to do with online inquires to real estate and mortgage loan websites.  The statistic was that the average consumer expects an immediate response to a web inquiry. At best case, the consumer views thirty minutes as a reasonable expectation for a response, before said consumer moves on to another real estate company, agent, or mortgage loan company.

  Wow! Has doing business ever changed in the past several years.  Given the popularity of instant messaging, texting and emailing, it seems that instant answers have become the expectation of the American public.  Whether this is a reasonable or unreasonable expectation, probably depends on the type of business one is engaged in. 

  Let's take cable television for example.  My cable company advertises on line chatting as available 24/7. So if I log on with a question, I do anticipate being able to receive an answer even on a Sunday morning. But that is fair game- the website says there is chatting available at all times. 

  It might be that huge national companies such as Quicken, Bank of America, or Wells Fargo have live 1-800 numbers or websites that someone can dial up an answer instantly, but most of us in the housing industry are local operations manned by your friends and neighbors and folks who live in your community.  We can't be on call 24/7-though I know some real estate agents and loan originators who do take calls at all hours. I don't. And here's why:

  I once answered a call at 3:00 a.m. (thinking it was an emergency) only to discover it was a past client who hadn't been able to sleep because she was concerned about a relative using a lender that wasn't me and wondering if the lender was charging reasonable fees and interest rate. At three in the morning, having been awakened out of a sound sleep I wasn't in any position to give the woman a coherent answer of any kind. I might have been able to tell her my name-but that is debatable. I made the decision that call was evidence that too much availability and familiarity allowed her to think that I was available to ease her stress-even in the middle of the night.  It was a very bad thing-for me at least.

  There was no urgency about the question she asked, other than on her own list of priorities. At 3:00 a.m. my priority is to get enough sleep that I can field any questions that come my way during business hours.  There are few mortgage emergencies that occur at 3:00 a.m., or after 5:00 p.m. or Sundays for that matter.  Our lending sources while they may work weekends, holidays, and after 6:00p.m. from time to time don't answer their phones, the reason being that they are working these extra hours to catch up with demand.  It is highly unlikely I can obtain information on Saturday afternoon that wasn't already available on Friday evening at close of business.

  I have gone through this rather long winded explanation in order to convince you that even though we may not respond to your question instantly-we are very available.  And I want to impress you with this point:  Even though I may not be able to get with you within 30 minutes due to meetings with current clients, closings and loan application activity, I will get with you by the end of the business day.

                                                                                                         afterellen.com
So while it is true that operators aren't necessarily standing by, we are available within a  reasonable amount of time.

  And, if I know that a pre-approved client has hit the pavement looking for a home on a particular weekend I do try to be available so the client and their realtor so they can obtain the information they might need to write an offer.

  I don't believe that mortgage lending is necessarily a business in which instant access and a pull it out of my grab bag answers are necessarily good for the prospective or current clients.  There are general answers to general questions such as the income guidelines for USDA loans-but I would be hard pressed to say why that is a Saturday evening question as opposed to a Monday morning question. But whether or not YOU meet the USDA guidelines based upon credit, job history etc. is not an instant answer.  That requires a half hour interview, mortgage loan origination software, and a secure access to credit information, all of which I may not have available to me as I eat a hotdog at the football game.  It is very easy to give an incorrect answer based upon generalities.

  What I am asking is give us some time to respond to you. Most of us aren't set up to answer calls around the clock seven days a week. Obtaining a mortgage and financing a home are very important events and it is important that you know the facts before you make these big decisions.  For most of us buying a home is the biggest financial decision we will ever make-you want to make the right one and you want to allow the time to get the correct answers you need to make that decision.  IF you read this blog on a regular basis you probably have the idea that mortgage lending is complex and the situations of individuals vary infinitely. One answer does not fit all.
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 As for texting, I love texting-but I reserve it for quick bits of information that can be conveyed without lengthy explanation. If I am discussing the ins and outs of various types of mortgages I feel more comfortable with a more comprehensive medium-such as face to face. I know, how old school of me. But, I also think it is a good way to get to know each other and to create a good working relationship.  We are going to be tied together on this home buying thing for 30 days or more.

  However, I know you are busy and you may live out of town and you may not have the time for a personal meeting-that's fine.  We can talk over the phone, exchange emails, forms and faxes.  In fact, I just completed two loans for a client who lives in another state. I never met the man, but because of the phone calls and emails I developed a very comfortable working relationship with him. I am pretty sure he trusts me. 

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The trust thing-yeah, that's kind of important. For you. This is your money we are talking about. We don't have to be as tight as the Flying Wallendas, but you do have to believe that we are working for the same ends and I am looking our for your best financial interest.

 

By all means email me or my company, fill out the online interest form, or give me a call. I will get back to you-just maybe not with an instant message.

 

10 Common Mortgage Myths

                                                                                                4meidaapproved.com


  As with many other subjects, there are many misconceptions about mortgages.  Some of it has to do with the confusion in the many changes that have occurred since the mortgage meltdown of 2008-2009 and some of it is based on assumptions or conventional wisdom.  It is important to separate fact from fiction as you begin to prepare for your mortgage process as doing so will ease frustration and make for a smoother transaction.

1) The Bank always has the best mortgage rates.  That is certainly what the bank would like you to think-and sometimes it is even true.  However, banks no longer hold the monopoly on great rates and fees.  There are many other players in the game including credit unions, mortgage banks, and my personal favorite, mortgage brokers (who have access to money from more than one source). So my advice is to work with the mortgage loan originator who gives you the best service and can deliver what is promised. The fact is, it isn't only about the rate. It also has to do with experience, type of loan and source of money. Most of the time rates are going to be competitive for the same product and borrower profile.

2) My credit isn't so hot, so I have a co-borrower. The days of a well qualified co-borrower being able to lift a borrower with bad credit into home ownership are over.  Credit qualifying is  determined by the lowest middle credit score of each borrower.  If both parties have qualifying scores, the co-borrower may be helpful in an area such as debt to income qualification-but both the borrower and the co-borrower have to be able to qualify credit wise.

3) I know I have to have 20% down which is very discouraging. I will be ready for the old folks home by the time that happens.  The 20% rule hasn't been true for at least 31 years (which would have been 1983 when I bought my first home and put 5% down.)  The rule for conventional lending is 5% down (though Fannie Mae is bringing back the 3% down conventional loan before the end of this year we are told).  FHA requires 3.5% down and USDA and VA are 100% products.  The invention of mortgage insurance (paid on a monthly basis in the mortgage payment) is the method by which lenders hedge their bets on the lower down payment requirements. I look at it as paying your 20% over time rather than when you obtain the loan.  What is important to remember is that you do not need 20% in savings to buy a home.

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4) I have overdraft protection so NSF checks or debits don't matter. Here is where we have a big generational shift.  If a paper check bounces, most everyone knows that isn't a good thing. Not only is there the issue of the creditor not getting their money, there are all the overdraft fees that come along with it. Back when paper checks were in common use you could have as much as $35 per check that bounced charged to your account. A lot of us remember those- playing the float brings back fond memories does it?  But with the advent of debit cards and checking account balances in constant flux due to the computerized nature of banking these days, banks have come up with a new service-overdraft protection.  If you don't keep enough funds in your checking account, don't worry, you pay a small fee and the bank covers your debit with money from a different account. I have had the under 30 set tell me, "It's okay, my bank doesn't count it against me, they say it is not a problem." Sure, for the bank it isn't.  They get to collect a fee every time they "protect" your account.  The laissez faire attitude on the part of banks has given folks the idea that they don't need to keep an eye on the balance in their checking accounts-not carefully anyway. Here's the deal-while it may not trouble you that your bank is taking $8 or more every time you over draft (think of what all those $8 fees could buy when you add them up) it does trouble the mortgage lending underwriting world.  If someone is so cavalier about their checking account that they don't really watch the balance much, what if the debt that overdrafts is the mortgage payment?  If your loan file has some other holes in it such as not much history of saving money or low job time, a few NSF debits can sink the ship. So exercise a little discipline and begin a ledger. Hang on to your receipts and subtract them out of your account. No one's memory is good enough to remember the Starbucks latte they had yesterday, or filling up the tank with gas.

5) I had a foreclosure. So now I have to wait seven years in order to buy a house.  Not at all. You are eligible for an FHA, VA or USDA loan three years after the sheriff's sale that took the deed out of your name. Please keep in mind it is the sheriff's sale, not a bankruptcy discharge date that is the determining factor.  If your house was in a short sale it is three years from the date of the closing on the house. If you don't know when the sheriff's sale occurred, call the county where the property is located and obtain the sheriff's deed. It is a matter of public record and your next lender may ask for it to validate the date of the deed transfer.

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6) The house I am buying appraised for ten thousand more than I am buying it for. I can use the difference as part of my down payment.  No you can't.  Lending works off of the sale price not the appraised value. While it is good news that you have instant equity-all it means during the sale is that you have a good buy. The earliest you can access that equity will be 12 months from closing your loan. Fannie and Freddie require that you use the sale price of the property as the value until 12 months have elapsed.

7) I am getting ready to buy a home and have been shopping around for interest rates. I got a great quote from a lender. I am pretty happy I will get that rate on my purchase.  Actually, until you have a home under contract you can't count on getting that rate.  Interest rates change every day-sometimes more than once a day. Lenders can't lock in your rate until they have an address to marry it to. So if it takes several weeks for you to find and negotiate for your dream home, the rate that you liked so much may be gone. It's not bait and switch, it is just the way the world financial markets work.  Which is why I say, rate is a part of the picture, but not the whole story. Find a lender that you trust and they can keep you apprised of what the markets are doing.

8) Where I go to get my government loan doesn't matter because any lender can originate my loan.
Government loans don't roll quite the same as conventional loans and many lenders who don't originate government loans on a regular basis aren't familiar with the ins and outs of the products. In the case of government loans what you don't know about the product can hurt you.  For instance, in some circumstances, pre-occupancy is given to a borrower if the property is vacant and the borrower is approved and it appears that the loan is going to close in good order. That isn't a problem with a conventional mortgage product.  For FHA loans, it is a huge issue. If the borrower is living in the house at the time of closing, they must have been occupying the premises for 6 months. If they moved in six weeks ago, that will become a problem.  The government loans have some nuances that conventional lending doesn't.  If you are using an FHA, VA, or USDA loan-be sure your lender specializes in those types of loans. It may mean the difference between approval and denial.

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9) I want to buy a house in a few months so I am closing my credit card accounts so my credit looks better.  NOOOOOOOOOOOOOOOOOOOOOOOOOO! Please do not close your credit card accounts!  For one thing, closing your cards will lower your score.  Revolving credit is the most powerful item for good or bad on your credit report.  If you feel that you need to pay some accounts off, please do so, but do not close the accounts. You will need a minimum of three accounts open and they can be a student loan, a credit card, and a car loan if you wish, but do not start closing accounts prior to purchasing a home.

10) My credit isn't particularly good, but I have quite a bit of money to put down so obtaining my loan shouldn't be a problem.  Here is one big change between then and now. Seven years ago you needed either money or credit to purchase a home.  The ensuing changes have made the credit part of that equation much more important than the money.  If you have not established much credit but what you have is good, a solid down payment can help. But if you have poor credit, it doesn't matter how much you put down. Money doesn't cure all as it once did.

  So there you have it, the ten mortgage myths that I have encountered the most recently. As always, if you are considering purchasing a home, get your pre-approval house in order prior to writing an offer on a bricks and mortar house-be sure of where you stand.

TIME TO REFINANCE???

 

 

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 Guess what? Just when we all thought that interest rates were on their inevitable slow increase to what most people consider more normal levels, the news of the world has sent them down again.  With employment increasing, GNP increasing, and profits up every economic indicator was predicting that interest rates would be moving up as well. But bad news from the Middle East, Ebola fears, economic uncertainty in Europe has sent rates back down to levels we saw at the beginning of the year.  Which brings up the question:

                                                                                                           househunt.com

  Why yes it is.  I am continually surprised at the number of people who haven't refinanced.  We have been in an unparalleled situation with regard to interest rates for the past four years. They have been abnormally low.  For those of you who may be new to the housing market a more normal state of interest rates would be in the high 5's to middle 6's - perhaps even a bit higher into the low 7's.  When I bought my home in 2000 my rate was 7.25% and that was considered a low rate.  So if anyone is still sitting on a pre-2010 interest rate in the 5's or 6's, for Heaven's sake -refinance! Now!   Why wouldn't you?

  Well, yes, I suppose there is that. But let us help you make sense out of it all and unboggle your mind.  Perhaps you have been in your loan for ten years and you don't want to go back to a thirty year amortization.  Fair enough-however we can offer terms that will assist you in not losing the equity you have paid off and add more. The fastest way to achieving equity in your home is to lower your mortgage term.

  There may be some folks out there that have adjustable rate mortgages that they acquired in the past few years.  Now might be a good time to lock in that rate as a fixed rate.  While your low adjustable rate may still be in effect, what will your rate be like when it amortizes next year or the year after.

  Did you buy your home using an FHA product in the past few years? Many, many people did due to the prohibitive restrictions of conventional lending. Mortgage insurance on FHA loans is quite a bit more than mortgage insurance on conventional loans. Chances are if you purchased a home since 2010 using FHA you may be able to refinance and reduce your monthly mortgage insurance.

  Did you have a job interruption or financial difficulty back in 2009 or 2010 that made it impossible to refinance? Enough time has passed that you should look again. What about combining an old second mortgage or HELOC into one new loan-now might be the time.

  If you have a VA loan, VA offers a streamline refinance known as an IRRRL that doesn't require a new appraisal or income documentation. Costs can be rolled into the new loan. This is a great way for the veteran to lower his/her monthly payment.

  For those that have paid extra against their principal or who think that their property value has gone up now might be the time to eliminate your monthly mortgage insurance-or take a look at lender paid mortgage insurance programs that will eliminate it by virtue of the loan program you choose.

                                                                                                          pennyfrostmcginnis.com


Don't make me yell!  

                                                                                              michaelreid.net

 

 

 

I hate it when customers are sad-so don't wait on the refinance.  I know you are busy, I know there is are many priorities in your life, but I don't want to have to tell you that the ship has left port.

 

Louisville.com

 

Yeah, don't make me look at that face and have to tell you that rates have gone up so it doesn't make sense to refinance.

 

 





 

 

 

 



WHAT WILL I NEED FOR MY MORTGAGE APPLICATION?

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  Chances are you won't have to trundle your documents in using a shopping cart, but there are certain items that we need from you to document your job, income, assets, liabilities etc.  That only seems logical, right?  We kind of got in trouble with all those low doc, no doc, and no income loans that were all the rage in 2007.

  Unfortunately, I have had more than a few customers comment that they thought that the documentation requirements of mortgage lending was excessive.  This comes out of the feeling that once the customer has given the lender everything they could possible ask for, the lender wants something else-and at seemingly very inopportune moments-say the day of closing.
 wviz.com

 What's up with that is this: you may have heard of Fannie Mae and Freddie Mac. Those two corporations are known as Government Sponsored Enterprises. In other words, Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. (The certain sectors of the economy would be you and me-everyday people.)
 
That clears it up doesn't it? Actually, Fannie and Freddie provide money on the secondary market for more loans-in other words, make it possible for lenders to sell mortgages to make money for more mortgages.  So Freddie and Fannie have a stake in whether or not your mortgage loan defaults. Without Fannie and Freddie it is likely everyone would be required to put 20% down, because without that government backing, private investors would probably not want to offer low down payment loans.  Lending is, after all, about risk. No one likes losing money, not even big corporations.
 
Just to be clear, when Fannie and Freddie say "Jump!" and everyone in lending says, "How high?"  Part of the how high is that Freddie and Fannie want to be sure that every I is dotted and T is crossed before a loan is closed-or rather the lenders do so that Freddie or Fannie won't kick the loan back and require the lender to buy the thing back which in turn could impact everyone on down the line-even you. You might find yourself in a position in which your lender is bugging you for more documentation AFTER the loan has closed. Ignore them at your peril-they could call in the loan and you would have to find alternate financing. That doesn't happen often, but more frequently than most people would ever guess.That is why the documentation requirements seem so nitpicky.

  The following is the basic list of documents that you will have to provide in order to have your mortgage loan processed:

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W2's-the most recent two years - you will note I said the most recent.  They also need to be consecutive-not 2009 and 2012-this year for instance we need 2012 and 2013.

Pay stubs-the most recent 30 days (1 month)

Bank statements-the most recent 60 days (2 months)

Federal Tax returns- the most recent two years

A government issued ID such as a driver's license, passport, or military ID and a social security card (These are items required by the Patriot Act-so no wiggle room there. I lost my social security card doesn't work.)

 The above items are the basics that start out your loan file.  Along the way more items may added such as divorce decrees, child support orders, bankruptcy papers, sheriff's deeds, school transcripts, verification of payments from student loan companies, powers of attorneys, proof of legal entities, the proof of sale of your current home. The list is possibly endless.  Where we can be proactive we try to obtain these items for the loan file prior to loan submission but sometimes the layers of the onion begin to unpeel and it just seems to go on and on. Why do we have to make you dig around in musty old file drawers or moldy boxes in the basement?
 Divorce decrees and child support can impact income, deferred student loans will come into repayment at some point, people signing off on documents pertaining to a loan and a purchase agreement need to be legally entitled to do so...get my drift? No stone can be left unturned that could result in a legal issue with ownership of the property or your ability to repay the loan.

   Just as a word to the wise, substitutions don't work.  Maybe you don't want to get into the storage shed - it just seems like too much work so you try to slip in the W2 you found at the back of the file cabinet instead of the one requested.  Just forget about it. When an underwriter requests an item-that is the item they want. It is kind of like going to a restaurant and ordering mashed potatoes and getting grits. They are both white and kind of dense, but not the same thing at all-not really.

                                                                                                            canyoufreeze.com
 
 And the truth is that I absolutely hate to ask for one more thing when I have asked a borrower for everything but their underwear size, but sometimes in order to get the loan approved or cleared to close we need that one last thing. Those look like a 34 to you?

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   It is not our intent to drive people nuts with minutiae. Whether we like it or not (and often we don't like it) details, teeny-tiny micro details are the name of the game in mortgage lending. You can and will be denied your loan if you cannot or will not provide what is being requested, so as they say, it is impossible to fight city hall. I know it feels like a type of torture from time to time and even the most qualified borrowers have to submit if they want the money. (I don't suppose that any of you saw that even Big Ben Bernake was denied for a mortgage loan recently.  It seems that he went from a nice safe government pay check to self employment as a consultant and he doesn't have the required two years of tax returns yet. So the amount of money he had to put down, his truly amazing credit score and the fact that he was the Director of the Federal Reserve Bank didn't mean bupkis. If you are being asked for all those items, you are in excellent company. 

   The one thing that I always want borrowers to know is that we don't ask for items unless we need them. That, you can count on.

 

 

 

 

INCOME CALCULATION-IT'S NOT AS EASY AS YOU WOULD THINK

                                                                                                   systenaticrelativestrenght.com
 The trend now is to do online research prior to doing anything...whether it is buying a car, an expensive appliance, or even obtaining a mortgage loan.  What usually happens is a potential buyer drives by a home that strikes them as a property that may meet their needs.  They look the home up on the Realtor's website, get the price and the particulars of the home.  Then they search for a mortgage loan calculator and figure up the payment.  If they haven't spoken to a lender yet, the payment may or may not be realistic as interest rates are subject to credit scores, loan amount, and type of loan.  However, our intrepid buyer may not know all that yet, and sees that the payment is only $20 higher than what he has been paying for rent and believes he can afford the house.  He may be right, then again, maybe not.  There are many times when calculating income for a borrower may be just as vague as calculating the value of that golden egg.  There are so many factors that come into play, the price of gold not withstanding.

  Let's take a look at how lenders calculate income.  This should give you a bit more understanding of how much mortgage may be in your future.

                                                                                                         wearyourbeer.com

  Generally speaking you do have to be employed full time in order to obtain a mortgage. Full time hours vary but 35 hours plus per week constitute full time employment. The easiest calculation to make is for those who are salaried-or have a guaranteed income no matter how many hours they work. So if you are salaried at $60,000 per year, your income for mortgage purposes is $5000 per month. Mortgage calculations use gross pay, or pre-tax pay, not the net amount that is your paycheck. Hourly rates are easily calculated as well. Normally there is a number of hours per week that the employee is expected to work. That is base pay.  The number of hours is multiplied by the hourly wage. Sometimes folks just figure they work 40 hours per week when they work 36.  While it may seem that the difference in income between 40 hours and thirty six hours isn't much-over the course of a year it adds up to several thousand dollars which in turn affects how much an individual can spend on a house so accuracy is important.

  Overtime, bonus and commission calculations have additional rules.  In order to use any of the aforementioned types of income for mortgage purposes the employee must have received them for the past two years with the same company.  This is critical. Often people assume they can use the overtime whether or not they have a two year history or not. In fact, interruptions of employment can be an issue.  Let's take the example of an employee who had worked for the same firm for seven years and receive overtime pay.  Five and one half years into his employment he resigned and took another job.  Two weeks into the new job he realized he had made a mistake and returned to his old company.  A year and a half later when he made loan application, the brief interruption in service was nothing more than a faded memory. He applied stating he had been with his current employer 7 years.  However, when the verification of employment came back, the interruption in service had been noted by the employer.  The lender refused to let his overtime be used in mortgage qualification. His ability to afford the house he was buying was reduced. So you can see by this example, two years of overtime,  means two continuous  years of overtime.

  Another interesting quirk of lending is that if you have declining income in the present year, that is the income that will be used. In other words, averaging is fine as long as your income is growing, but let it decrease and averaging goes out the window. Good to know.

It is usual that someone who works part time inquires about a mortgage loan.  Most people understand that a part time situation doesn't normally earn enough for mortgage qualification.  But there are exceptions. One might be a retired person who works part time in addition to receiving retirement income, or the spouse of a borrower with full time income.  The rule on part time situations is that the position must be held for two years in order to count the income.  This is true in most cases if someone moves from full time to part time within the same company. So don't count on your part time job being allowable income when you are figuring what you can afford.

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  Self employed borrowers are another category of income that gets special treatment.  The biggest issue with self employed borrowers is that the benefit that their accountants create for them on their tax returns becomes a huge liability when it comes to mortgages. The job of accountants is to minimize tax liability but in doing so, if your accountant has not asked you the question, "Are you planning on purchasing or refinancing a home in the next two years?" he may be doing you a huge disservice. When looking at the income of self employed people, lenders want to know one thing:
How much is your net income.  Not how much revenue did your business take in, but how much net income after all the bills are paid did you receive.  If you are showing net income of $3000 on your taxes, chances are you won't be approved for a mortgage no matter how much your sales numbers were. For self employed folks, that net income has to be enough when averaged over two years to afford not only your house payment, but all your other consumer debt. So if you have been expensing away your profit, you will want a two year plan if you intend to purchase a home in the next few years.  You have to decide, pay lower taxes or buy or refinance a house. You cannot do both at the same time.

 

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I am going to stop right here and toss in a bit of free advice: if you are self employed keep your business and personal accounts separate.  If you drive a truck that is for your business make the payments out of the business account.  Have a separate credit card for your business. Keep a big bold black line between the personal and the business.  It is so much more difficult getting a mortgage loan approved when the business expenses have to be weeded out of the personal expenses. If they are separate we don't have to lump it all into your debt ratio.

  The last bit of information for today is for anyone who files a long form tax return-whether self employed or not.  If take losses or reoccurring expenses on your tax return, they will be deducted from your income. If your spouse is the one who is obtaining the mortgage, if you file taxes jointly and show a loss, the deduction will come off of your spouse's income.  In other words, less buying power.  Keep that in mind and discuss these situations with your accountant.


 

JUST SAY YES!

                                                                                                                forumsoneplus.net

  A few days ago I addressed issues that lending will not allow any longer. Among them was use undocumented cash, using income that isn't file on a tax return for qualifying purposes, or borrow extra money for repairs on a home without using one of the FHA rehabilitation programs.

  Lending these days isn't all negative-let's talk about what current lending rules ALLOW rather than dwell on what they don't.

1) Less than pristine credit.    

spongefanwikia.com

 

 

 

 

  Assessment of credit has undergone some easing in the past 12-18 months.  The FHA loan has always been a mortgage that made exceptions for those that had suffered difficult economic events, righted the ship, and were on the road to recovery.  However, during the past few years, even though FHA allowed lower scores based upon difficult events such as job loss or bankruptcy due to medical issues, lenders would not allow these exceptions.  Lately we are seeing the return to common sense lending with regard to folks whose credit scores may not have entirely recovered but have made obvious strides to correct their credit issues and get back on firm financial ground.  It is not uncommon to find a lender that will accept a credit score down to 580.  But keep in mind it isn't just about the credit score, it is about what happened, what has been done to prevent it from happening again, and how promising the future of the borrower looks financially.  Conventional lending too has eased somewhat on credit scores-now lending down to a score of 620 in some cases, though a cost analysis of both the conventional as well as the FHA loan would be in order to give the consumer the benefit of the best program.

 

  The Consumer Financial Protection Bureau is also taking a look at credit and credit scoring to determine what reforms need to be made in that regard.  Most recently they have determined that medical collections will not be scored the same way as other collections. In the next year or year and one half it should be easier for people who have endured medical hardship to obtain mortgage financing.

  I do not want to convey that these loans are easy approvals and will close with no question. Often the road to approval is a long hard slog, but with proper documentation they can close.

 

 

2) Low down payments. 

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  There was a lot of talk during the mortgage meltdown about increasing down payment requirements for mortgage loans.  It is true that many 100% programs did end up in the trash can.  But, there are still low down payment products available.  FHA requires 3.5%, conventional lending requires a 5% minimum but both of these types of loans do allow the down payment to be a gift from a family member.  Conventional lending used to have a 3% down mortgage.  From what we hear that one is making a come back before the end of the year.  Of course there are two great 100% financing programs left - -  VA which is the best loan available for a veteran and USDA which has income and geography limitations but it is possible to purchase a home with little or no money down.

 

 

3) Reduction of job time restrictions. 

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  It is probably still true that some lenders require 2 years at one job before they will approve a mortgage loan but this is no way an across the board requirement.  Time on the job requirements change by type of loan, previous employment situations as well as education experience.  For instance if  a borrower graduated from college or a technical program three or four months ago and is working in their field, the education is counted as job time.  If a borrower who works in a factory moves from one company to another company doing the same type of work, the previous experience counts.  Typically lenders do like to see two years of job time, but there are many exceptions to this rule.

 

 

4) Fewer assets required. 

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  Typically with government loans such as FHA, VA and USDA, the monies that have to be available just have to cover the costs of the mortgage-so down payment (in the case of FHA) any closing costs not being paid by the seller, and the costs of inspections etc.  While it is always a good idea to have some money saved up for emergencies or repairs once home ownership is upon you, these loans do not require what is known as "reserves."  However, in the case of lower credit scores, having some money saved whether in a savings account or a retirement account may give the underwriter another reason to approve the loan as a savings habit has been established and that is a positive thing.

 

 

5) Expansion of total debt ratios. 

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  The total debt ratio is the ratio that is computed using the total payments that go to consumer credit plus the house payment divided by gross income.  During the recession lenders tightened up on debt ratios.  Many banks would not allow a loan that had over a 38% total debt ratio to be approved.  Even during the worst days of the recession FHA, VA, and USDA wrote to 41% total debt ratios and FHA often capped at 43%.  Since the economy has improved somewhat, conventional lending will allow up to 43% and FHA often will got to 50% depending on credit, assets and other compensating factors. This year's QM mortgage rules (Qualifying Mortgage) on debt ratio limitations which is designed to protect consumers from having a house payment that exceeds their ability to pay, didn't involve government loans or Freddy Mac and Fannie Mae loans-which is essentially about all of the loans done in the US these days.  It does cover what is known as non-conforming loans or loans or loans that do not meet the criteria of having government backed guarantees.  In any event, many banks took the opportunity to reel in what they would approve or not approve even though the programs themselves allowed for higher ratios.

 

 

  So the take away from this little lesson in positivity is that mortgage lending while not the piece of cake it was pre-2008 is still alive and well. Before you get discouraged and think you can't obtain mortgage financing, look around. You may be closer to home ownership than you thought.






DON'T BE A SITTING DUCK!

                                                                                                               eslbagcaafe.com

   Today's news brings some distressing information from Arkansas pertaining to a real estate broker who was tragically killed showing a vacant home. Having been a real estate agent for ten years I understand the impulse to meet a potential client at a listing in the quest to make the sale.  No one in the real estate industry gets paid until the purchase is under contract, the mortgage loan is written and approved, and the deal is closed.  The need to pay the bills, get food on the table and keep the children in shoes looms large in the decision to show a property -- even to someone the agent has never met before. As the situation in Arkansas shows, this need can put agents in a situation that an spiral out of control with devastating consequences.

  I am sure that many real estate firms around the country will be reviewing their safety practices in light of this horrible event.  For my agent partners I would make a couple of suggestions:

 1) Resist the temptation to show a home to someone you never met.  If they tell you they have been pre-approved ask who the loan originator was that spoke with them and follow up with that person. While pre-approval isn't  fail safe, if a buyer has produced paystubs, bank statements, and identification it does lower the risk.  Due to the increased scrutiny on lending required by the Patriot Act, we are required to obtain picture ID, social security cards, and do a Home Land Security search form, as well as review discrepancies on credit.  If the person is giving a false name or social security number the credit report should pick it up.  The Federal Government takes questions of identity seriously, please take advantage of that fact.
 
 

                                                                                                                              mkg74.com

 One of the practical effects this may have is that as an agent you may want to consider offering the buyer an alternative to online lending. you aren't going to get much information about a client out of an online lender.  Most of the agents I know would prefer to deal with a local lender that they can count on to give them information pertaining to how the financing piece is coming along rather than try to find whoever it is in cyber space that you need to speak with in order to get the job done.  If you are a buyer reading this, by keeping things local you assist the efficiency of your own purchase process.  In my experience very few online lenders are going to give you a deal that is significantly better than what you can find in your own town. The advertising may not have anything to do with the actual loan you, the consumer is getting. 

  Lenders should be asking prospective buyers the hard questions about where they live now, where they have worked in the past - - questions that many real estate agents feel uncomfortable asking.  Listen, I have no problem asking a potential buyer just about anything. Divorce, child support, the reason for the bad credit two years ago, underwear size - - you name it we have to investigate it.  Because if they aren't really a buyer I want to know now and not spend a lot of time on something that is not going to be successful. I have to close loans to make a living, and you my real estate friends, have to have buyers who can buy so you can make a living too.

2) If you are an agent that does open houses as a marketing strategy, don't go it alone.  Either take another agent with you or call in your favorite Mortgage Loan Originator to assist you. Buyers almost always have questions about interest rates, programs and the short term future of lending. Bring in an expert to help. It's safer and you are building what may be an excellent partnership.

                                                                                                 cherrypointhomesforsale.com

 Okay consumers, this next section is for all you, HGTV watching, that doesn't look so hard, do it yourselfers.  Besides the fact that selling a home is in fact hard - -if it was easy there would be no real estate industry - - there are some things to consider besides the money you think you will be saving.

  Would you allow a stranger that pulls up into your driveway access to your home?  Think about that for a minute.  Some stranger pulls into your driveway one evening and says, "I have always loved the way this home looks.  Can I see the inside right now?  I might want to buy it sometime."  Would you let that person have access to your home? This person will be seeing the inside of your home, any expensive electronics, furnishings, where doors and window are, if there is an alarm system and what is even more terrifying, where your children sleep at night. Would you do that?  My friends, when you choose to market your home by yourself that is exactly what you do.  You are allowing perfect strangers whom you know nothing about into your home.

  It is a fact that our community is small, relatively speaking.  Maybe the chances of someone coming into your home to do you harm are less than what they might be in a larger city, but that doesn't mean it can't happen here.  Many real estate agents I know can speak to a visitor that came to an open house that might not have been there to see the house.  In my own case, working as a new home consultant I had a visit from supposed prospective buyers at the end of an afternoon that made the hair on the back of my neck stand up. In that case I thought they were casing the house for a potential hit and run theft rather than to do me harm -- but even the thought of that is enough that I don't want to let just anyone into my home. And folks, I know a lot about selling houses and could so quite capably myself but I would never sell my home without the able assistance of real estate agent.

  The fact is that a home owner is even less likely to ask any qualifying questions to a potential buyer, thereby putting themselves at even more at risk. If you are a sell-it-yourselfer- consider the additional layering of safety that listing with a real estate firm gives you. If your agent is doing their job they will know something about who is coming into your home. No commission savings is worth putting your family at risk.

   If you are a real estate professional, the commission isn't worth your life. If a potential buyer won't do what they need to do to prepare to go inside of someone's home - don't risk it -the red flags should be flapping at the top of the pole. Due diligence is a good rule for personal safety and the safety of your clients as well.

                                                                                                 farmprogress.com

  As a rule I don't view the world as a dangerous place, but there is no sense allowing oneself to become a sitting duck.

12thompson.com