People seem to get confused by maximum loan amount allowances, down payment requirements, and the interest rates surrounding them. I thought it would be helpful to have a breakdown. I am going to show loan limits for owner occupied loans, for Conventional, FHA and VA loans:

CONVENTIONAL LOANS:
Conforming Loans are up to $417,000 for 1 unit homes (single family homes, condos, townhouses), 5% is the minimum down payment. These loans are eligible for the lowest rates. However, condos have higher rates by approximately .25%. And multifamily properties also have higher rates by approximately .25%, and higher down payment requirements of 20% to 25% down.

Conforming-Jumbo Loans (also called Conforming "High Balance" and Super Conforming) are from $417,001 up to $625,500 for 1 unit homes (single family homes, condos, townhouses), 10% is the minimum down payment. These loans have rates approximately .25% to .375% higher than Conforming loans. And condos have higher rates by approximately .25% on these as well. And multifamily properties also have higher rates by approximately .25%, and higher down payment requirements of 20% to 25% down.

Jumbo loans (also called Non-Conforming) are from $625,501 and up, for 1 unit homes (single family homes, condos, townhouses), 20% is the minimum down payment. These loans have rates approximately .5% to .75% higher than Conforming loans. And condos and multifamily properties may or may not have higher rates depending on the lender.

FHA LOANS:
Minimum down payment is 3.5%.
FHA Loan Limits vary by county, you can go to their site to determine the loan limit in your area. The easiest way to use this site is to:

Sort responses by state
Type in your state
Type in your county
The rest you can leave blank, this will yield the best results.

VA LOANS:
The down payment can be 0%.
VA Loan Limits vary by county, you can go to their site to determine the loan limit in your area. The easiest way to use their site is to download the list and find your area.

I hope this helps make things a little more clear as to how much money you can get!

I sometimes hear how a buyer thinks they can save 3% by cutting out the buyer agent when buying a home, then representing themselves, and end up saving 3% by dealing directly with the listing agent. And I think I will do my own surgery, represent myself in court and put a new roof on my house on my own. Sure you will represent yourself in a real estate transaction, why not? It is easy and it takes almost no time at all. I hope you see the sarcasm in those last statements. There are many things wrong with thinking you can represent yourself when buying a home.

First, you don't have time to do it. I can barely get people to return my calls, do a complete loan application, and send in the requested loan documentation first time around. And I get why. They are busy, they have jobs and families and demands on their time. So realize it takes an enormous amount of hours to represent yourself on your own when buying a house, and most people do not have the time to do it.

Second, there is a lack of knowledge and resources. How will you find a sales contract, write up this complicated instrument, make offers and counter offers , know real estate contract law, negotiate the entire offer, find a local home inspector, choose and interact with the lenders and title companies, etc? It takes many resources to do all this on your own that most people lack.

Third, the listing agent will think, "oh boy, another buyer who thinks they will do all the work of a buyer's agent and that it will save them 3%, which means I'll end up doing all the work of the buyer's agent for free, no thanks." And this means that many times a listing agent won't even consider your offer with out you having representation. Or a few times I have seen a listing agent say, "I will reduce the commission from 6% to 4.5%, and I'll take 3% as the listing agent, and for 1.5% I'll do for you all that your buyer agent would have done. Well there, its all fixed isn't it? You just saved 1.5% and Brian Martucci is wrong, there are savings in going directly to the listing agent! Yes, there are some savings, and then, you have just set yourself up for failure, because you have the agent who is representing the seller now helping you, and there first duty is to represent the seller who is paying them! So how are you supposed to get fair representation in this "dual agency" situation? You won't. Human nature says you more fairly represent whomever is paying you! So for 1.5% savings you want to give up your rights to proper representation, making sure you have someone fighting for your interests, the best price, and a smooth transaction. How is this smart? You may even pay 1-5% too much for the property by not having all the local knowledge that your own buyer agent would offer, offsetting the gain on the slight savings on the realtor commission!

But, for the listing agent who is foolish enough to allow someone to represent themselves on their own, who will get a copy of the sale contract? Where will you source it from? No, you cannot get a current, accurate sales contract from Office Depot or "just find it online."

And if you do find one that you think is valid, who will fill it out? A lawyer? And will they do it for free? And does a standard lawyer even know current real estate law?

Will you fill it out on your own? Are you sure the sales contract you find will include all the necessary contingencies, to protect you as a buyer? If it does have all the necessary contingencies do you know how to negotiate and fill each one out?

Will you miss something?

Who will recommend the best local lenders, title companies, home inspections, contractors, etc?

Who will monitor the deal?

A few times I was asked to, as a lender, take over as the buyer's realtor, for free, and do all the things that the buyer wanted to "save 3% on." I heard, "Brian, we know you know all this stuff, can you help?" Is this fair to me? Why don't I get to charge a commission? Do I have time to be both realtor and lender? But I do not offer to help in this sort of situation. Although I know real estate contracts, have seen contracts negotiated for 26 years, and know a real estate transaction backwards and forwards; I am not licensed, don't know the work as well as a realtor would, and can't imagine I would do the same job as a qualified realtor. And I am not sure its even legal!

So the bottom line is buyers cannot represent themselves in a real estate transaction, they don't have the time, likely won't save any money, and may end up causing a legal problem or costing themselves money in the end. Don't begrudge professionals their paycheck for doing their work, as they would not begrudge you yours.

I wrote a blog here in the summer of 2010 that talked about getting an FHA loan on a property that has been flipped. A flipped property is one that an investor buys and fixes up with the purpose of immediate resale. The Federal Housing Administration (FHA) has had a 90 day flip rule in place for quite a while to prevent the purchase and quick resale of a home within 90 days. They have doubts about the value added by investors over such a short period of time, and take pains to analyze the value on flipped properties. This past year this rule was lifted and it allowed immediate purchase and resale of a property, but only in the case of a property being foreclosed on and resold by a bank. So if you are buying a short sale or foreclosure, you can buy it and get an FHA loan on it immediately after the seller fixes it up with no waiting period or extra analysis.

But maybe you are not using an FHA loan, maybe you want to use a Conventional loan backed by Fannie Mae and Freddie Mac. Fannie Mae & Freddie Mac will require a full appraisal if the previous sale was a foreclosure or short sale, and the appraised value and the improvements need to support the appreciation in value, but there will be no time limitation policy against lending on this type of flipped home by the Fannie Mae & Freddie Mac agencies. However, although Fannie Mae and Freddie Mac have no 90 day flip rule for Conventional loans, many lenders will have their own restrictions on properties that have been bought and sold within 90-180 days. Lenders may allow on a Conventional loan, like on an FHA loan, for the immediate purchase and resale of foreclosed homes and short sales. But on properties that are not a foreclosure or short sale, that may be a problem. For example, I was told one lender did indeed have a 90 day limitation on flipped properties on their Conventional loans, and another lender specifically does not allow the resale of property within 6 months of the most recent transfer of ownership. So ask questions of your lender even if you are going with a Conventional loan.

And for you Veterans out there who may want to buy a flipped property, VA has not issued a specific policy on short sales, or a 90 day flip rule. It appears you can buy flipped properties under any circumstances with a VA loan.

In summary, for buyers of a flipped home, if the home has recently changed ownership in the last 3 to 6 months, it is important to know what the circumstances were. If the property was foreclosed on and being sold by the bank it is likely OK to get any loan. If the property was bought by an investor and resold right away for a higher price, then you will likely have to go through some extra steps and even a waiting period until you can buy the home.

I always hear how people miss the good old days. I am not sure I do. I prefer progress. But lately, the mortgage industry has been regressing, and I would say that we have not been making progress; we have actually been going backwards. It seems the mortgage process has swung from too easy, to too strict, and now to downright ludicrous. There is nothing that Fannie Mae wants undocumented that is related to a mortgage borrower's finances, and I mean that literally. So I understand when someone says to me the following, "It wasn't this hard 4 years ago when we last did this!" Of course they are inferring that only four years ago it was easier to get a mortgage, so why is it so much harder now only 4 years later.

But guess what has happened in the last 4 years? There has even been an enormous amount of change in the last 4 months, let alone the last 4 years! We have seen in the last 4 years numerous major institutions that either failed, were acquired under duress, or were subject to government takeover. These included:
-Lehman Brothers
-Merrill Lynch
-Fannie Mae
-Freddie Mac
-Washington Mutual
-Wachovia
-AIG
-Bear Sterns
-Fannie Mae and Freddie Mac were taken over by the Feds in bankruptcy receivership.
-MetLife pulled out of the mortgage business abruptly.

So when a client wonders why it is so much harder now than it was only a few years ago, I wonder what they are wondering about. It is harder now than 3 months ago! And the amount of new mortgage rules that have come on the books in the last 3 weeks alone would make your hair stand on end. The amount of foreclosures, short sales and late payments have been staggering for the industry, and are now getting back down nearer to normal levels. When an industry loosens their standards as much as the mortgage industry did, and the losses increase to apocalyptic proportions, you have to clamp down. So if you are a qualified mortgage consumer in 2012, now you know why things are so hard. You are paying for the sins of those that have gone before you.

So forget the good old days, those are long gone, and won't be back for a very, very long time; if ever in our lifetime. It is time to accept that a mortgage borrower is going to have to document every financial bit of data no matter how small that exists in their lives and there is no escaping it.

Yes, we are all in databases, likely hundreds of them. Every single time we call an organization, buy something or ask a vendor a question, we go in a database. Companies and salespeople do not set up costly structures, go through licensing and training, and spend money on products and services, in the hopes that you will call, and call again, and remember to call in the future. Quite frankly, humans do not remember, we forget. We cannot remember all our favorite service providers and products. We need to be reminded. This is why Facebook exists, it is a convenient database of our friends, and reminds us of birthdays, to check in with friends far and wide, it automatically shows us news on friends lives, and forces us to stay in touch with more people than we ever could without it. Sales is no different. Salespeople organize clients and potential clients in a database. Why does this matter to you?

If we had good memories and were more organized, sales would be a completely different experience in my opinion. Consumers call salespeople for information, and may or may not get back to them to buy the product or service discussed. So salespeople and companies will make sure to keep as much of your information in a database as possible. That way they can follow up and try and earn some revenue from all of the expenses they have incurred to get you to call in the first place. If consumers always followed back up with service providers, they would not get called, spammed and advertised nearly as much as we all do now.

So now we know when you speak to a salesperson you are likely going into a database. But this is a good thing if they use the data for good instead of evil. What do I mean? My database does the below:

1. I use my database to tell people when they can refinance and save money after doing a purchase loan for them.

2. I use my database to tell people when they can drop their PMI in the future after closing their loan.

3. My client database is secure. My password is 24 characters made up of numbers, symbols; lower case letters and upper case letters. I also use encryption technology, Secure Socket Layer (SSL) protocol, firewalls, and password protect sensitive documents that I may email you. Do others do all this? A mortgage firm I used to work for that kept a database for all of their loan officers (except for me, I used my own) used the word 'password' as their password to secure their database of tens of thousands of clients and their sensitive data. And they routinely sent documents with clients social security numbers via email with no password protection. I kid you not.

4. I use "Safe Unsubscribe" to allow people to opt out of marketing e-mailers.

5. I retain important documents for you. I have had clients ask me for a copy of their appraisal or settlement sheet years after a loan, for tax purposes, and I always have what they need.

6. I delete all personal documents after settlement, such as tax returns, bank statements, etc.

As spammy as this database stuff may sound, it happens. Period. People are putting you in databases all the time. So at least make sure you deal with someone that treats your data securely, uses it to help you, and gives you opt outs. After all a mortgage lender will have social security numbers, bank account numbers, credit card account numbers, and other sensitive data. Ask your next lender how they protect your data in their database, how they intend to use it in the future, and if they allow you to opt out. I'd be surprised if they even know the answers.

Hi, it is Brian Martucci doing a video blog from the beach. I am in Manhattan Beach, California. Take a look. Beautiful, is it not? So, today I want to do a video blog about occupancy fraud. By occupancy fraud I mean somebody that says that they're going to live in a property as their primary residence when they really have no intention to live in the property as their primary residence. They really are going to rent it as a rental property.

Why do people do this and say that they're going to live there when they are not? They do it because you will get a lower interest rate buying something as your primary residence as opposed to a rental property. So there's a financial incentive, but the problem is you really can’t get one over on the underwriter in relation to anything these days.

For occupancy fraud there's three reasons why you won't get one by the underwriter. Number one is called a buy down in value. When an underwriter sees someone who currently lives in, for example, a $650,000 house and they are attempting to say that they're going to live in a $400,000 condo or even a $400,000 house. The underwriter is not going to buy that they're going to buy down in value. Why would somebody go from a four bedroom home for $700,000 to a two bedroom single family worth $400,000 in a neighborhood that’s not as nice? It doesn’t happen. It doesn’t make sense and the underwriter would not buy it.

The second reason is related to geography. If an underwriter sees somebody who works in a certain area and has a current primary residence in a certain area and then says that they're going to buy a rental property that maybe is an hour and a half away, it just doesn’t make sense geographically, even if the property value is on par and the underwriter doesn’t see a buy down in value, they're not going to buy it for geographic reasons.

The third reason is related to driver’s license. Now underwriters require a copy of your driver’s license and if they don’t think it makes sense based on the driver’s license, and this kind of ties into the geography. If you see a driver’s license for somebody and they live in Frederick, Maryland for example, which is at least an hour north of Washington DC, and then they’re attempting to say that they’re going to buy a property in downtown Washington DC or maybe in Alexandria, Virginia south of Washington DC and it might be an hour and a half from their current primary residence. And let’s say they work in Frederick. How can you work in Frederick and currently live in Frederick and then say you're going to buy in Alexandria, Virginia, which could be an hour and a half away easily with traffic, and show a driver’s license with Frederick, Maryland. The underwriter might ask you to change your driver’s license. Are you willing to go to that extreme and change your driver’s license to Alexandria, Virginia to the new address to show the underwriter that you’ve really relocated and supposedly moved into this place so far away from your job?

Underwriters obviously are looking at loans much harder these days and occupancy fraud is one of the biggest things they look out for and it may sound like an odd topic to blog about, certainly a video blog, but you’d be surprised how much it happens which is why I’m talking about it because it’s one of the top things that underwriters look for, is somebody trying to beat the system and get a lower interest rate than they deserve when they really have every intention of renting a property out.

So that was the blog for today. Occupancy fraud. And I’ll be coming back to you soon with an exciting video blog from another exciting location soon. Thanks for watching.

Tough day? Need some help getting through the day? What is your stress reliever of choice? Just kidding. But I had an experience recently I'd like to share, so people understand why underwriters are so rigid in requiring what Fannie Mae mandates, and they require it to be submitted prior to closing, with no excuses. This is important because there are times where an underwriter requires some documentation that sometimes cannot be provided immediately by the client. And the client inevitably asks why can't I send it in after closing, I need to go to closing Monday, but I will send it in Tuesday when I get the document from my safe deposit box when I have time to get to the bank.

I will gladly pay you Tuesday for a hamburger today, said Wimpy to Popeye. Sure you will.

After 26 years in this business, I have never seen an underwriter yield on a document requirement, and allow it to be submitted after settlement. There was one document request on a loan of mine that closed recently, it was an updated bank statement that we needed. The client said he would not have it until a few days after settlement. The underwriter said we would have to delay settlement and wait for the statement to arrive. The client yelled, complained, screamed, cajoled, threatened, and yelled some more. The underwriter is human, so she yielded, and said it was a fairly innocuous document that should contain no surprises, so she said she would allow us to go to settlement, and provide the document right after closing.

Three days after closing I called the client to remind him to send in the needed bank statement so we could sell the loan to Fannie Mae and meet their requirements, and he said, "What is my incentive to do so?" In other words, he had his loan, he was done providing us with anything, and I could go jump off a bridge. Unreal.

So now you know why underwriters and banks do not yield, and require ALL documents to get in BEFORE settlement. We ultimately got what we needed, after two weeks, lots of pleading, and a $200 gift certificate to a local restaurant for the client. You see, without that document, the loan would have been unsaleable to Fannie Mae, resulting in a large loss to the company. Does it really take bribery to get people to do what they promised. This is one small sample of lots of stories to help explain why underwriting is so rigid. Up next…occupancy fraud, and why underwriters question if you are really going to move into a property as your primary residence.

I have cited a thorough and expensive research study several times recently in other blog posts. One message I have not relayed that comes from the data in that study is how poorly the big banks are at execution when it comes to doing mortgages in a timely and efficient manner. I will cut and past comments directly from the study that quotes numerous Realtors, and I will let their comments speak for themselves. Consumers deal with mortgage transactions once every 3-7 years, but Realtors deal with loans every day, and their opinion is the most valid, unbiased and relevant. I have heard a lot of reasons as to why a homebuyer thinks its best to get a mortgage from a big bank, all of them are wrong headed. I hear the following:

“I am going to get my new mortgage from the lender that has my current mortgage, they know my payment history and said they’ll make it easier on me.”

“I am going to get my new mortgage from the same bank I bank with, they’ll take care of me because I am a current client.”

“My bank is big and reputable, I am sure they will do a good job with my mortgage application.”

But it never works out as the consumer plans. I’ll post some comments from the study, from Realtors who deal with this daily, so hopefully the mortgage consuming public will get a dose of reality. After reading the below, I hope you will think differently about applying to a large bank for a mortgage:

“The bigger the bank the worse the service. Small and local is the model that works today.”

“Large Banks such as BofA, Wells, Chase and GMAC provide the worst service and do not close on time. Loans get stuck in underwriting with no accountability.”

“Over regulation has been the major problem with most lenders. Large national lenders simply have organizational issues they seem completely unwilling to address. The consumer is truly last on the list.”

“Major banks loan originators are now order takers that do not fully follow the status of a loan. Its an assembly line that does not work.”

“I seem to have better outcomes without using the major banks. Smaller lenders work best.”

“I avoid the larger banks as there is no personal customer service.”

“Major problems when buyers used national lenders. Generally good experience when buyers used local lenders.”

“Large bank underwriting doesn't care about the customer or transaction. They are looking to cover their butts and go home by 5pm.”

“I never use big lenders, too slow, not well trained, not many years of experience. I need fantastic service, big banks don’t provide it.”

“I will not set up a search or take a buyer out looking until they have a pre-qualification letter in hand from a reputable, local, small lender. I do my best to advise them not to use any of the big lenders.”

“No one in this area will accept a pre approval letter from Bank of America, Wells Fargo, Chase or CitiMortgage. All of the big boys are not interested in completing loans. They are only interested in number of loan apps processed, and whether turned down or accepted. Also the big banks do not have local underwriters, so they really don't care about making these loans, or making them on time.”

“It's unfortunate that the federal government has virtually destroyed the independent mortgage business over the last few years.”

“Local, well-known, independent loan originators are favored in this area because they do what they say they're going to do and close loans. I ONLY use one lender and just hate it when buyers try to "shop" for loans by going to banks. It never works and there is always a problem, which the bank never cares about.”

“I always suggest a local lender. Larger lenders tend to disregard any client that doesn't fit an exact, specific criteria.”

“Bank regulations are very strict and sometimes we do not find out a loan is not going to work until the last minute and the seller is already in the process of moving. Call centers don't feel the need to be helpful because they still get their paycheck whether the loan closes or not. They are not emotionally involved.”

“Every time I deal with the large companies… BofA, Wells Fargo Etc, there are problems. I never refer these type of lenders to my clients.”

“I've done business previously with big banks, and I now avoid them like the plague.”

“The loan officer I recommend almost always performs. If there is a way to close it, he can do it. I have tried Suntrust, Wells, Wachovia, B of A, almost all the big bank loan officers. They failed where my local lender has succeeded.”

“I seem to do better with small, local mortgage providers, as opposed to the big banks such as Bank of America, Chase, Wells Fargo, etc, as they have centralized centers, typically located in another state and the file goes thru so many different hands. They don't keep the agent informed. It not only has to do with the lender's procedures, but also very much the individual loan officer themselves, and the big banks have inexperienced, low quality loan officers.”

“One buyer used a major bank for his loan (contrary to my suggestion). It was a nightmare from beginning to end. The buyer was constantly having to send in paperwork that they said they did not have but we could prove was sent. Even the day of closing the lender was not available for a question at the closing table. I had specifically requested and was given the assurance that the lender would be available at that hour. Infuriating for all involved. The buyer will never recommend that bank to anyone and I will not either.”

“Loan was to be funded by BofA and all conditions (except final loan approval & funding) had been met. At last minute BofA added a whole new ridiculous list of conditions but no one there had any idea what the requirements were or why they existed. No explanations from the branch manager made any sense and buyer, sellers, agents, and escrow were angry and frustrated to the point of threatening to pull the loan package and take it to another lender. Unbelievably terrible customer service!!! I have had much better service from one specific mortgage lender in town and will avoid doing business with BofA to avoid another situation like this.”

“Large lenders such as Chase, Comerica, Bank of America etc. REPEATEDLY ask for the same information. The loan officers also delay ordering appraisals, then the appraisal comes in low and we are 40-50 days in to the deal. It is a huge waste of everyones time.”

“Large banks such as Bank of America and Wells Fargo, have problems closing on time because of ridiculous demands from underwriting at the eleventh hour of the transactions; asking for documentation that should have been obtained a week before, etc.”

“Majority of problems stem from BIG Box Banks who overlay additional requirements on top of Fannie Mae & Freddie Mac's, & do not originate, process, underwrite, or prepare closing docs in one location.”

“Bank of America and Wells Fargo are consistently 45+ days late in closing! I advise my sellers not to accept offers with their pre app letters.”

“I do have issues with larger companies when offers come in on my properties such as Wells Fargo and Chase – high turnover rate and a lot of these loan originators do not know what they are doing.”

“There is zero chance I would trust a bank with a client of mine when I can just as easily have them work with a local lender I already know. Do the math. 1 Client = 4-5% of my income. The biggest problem in my daily life is teaching my clients why they should dump the moronic lender they met on the internet who gave them a pre-approval letter like it came out of a gum ball machine.”

“It is very hard to get a loan with Bank of America these days. They don't want to loan money. Also we have to educate buyers about their pre-approval letters, because they fall apart right before closing.”

“I've had dealings with four pre-approved buyers with Bank of America in the last year. Not one was able to ultimately close with BofA because they pulled the approval in all four cases, just days before closing. Three of those four were able to close with another local lender with no problems.”
“Bank of America should die a slow, expensive and painful death along with Citibank.”

I could fill 100 pages with these comments. I am not sure what it will take to get the consuming public to wake up and realize that getting a mortgage directly from a big bank is not going to turn out well. Stick with a local, accountable, referred direct lender for the best results.

I have blogged about appraisal problems many times in the past. I am not going to repeat those posts. Maybe the data below will carry more weight than my opinion, because it is fresh out of a thorough and expensive study that I have cited on this blog recently. I will cut and past comments directly from the study that quotes Realtors, and I will let their comments speak for themselves. As a mortgage consumer, the below should be plenty to tell you where you need to go for a mortgage. Mortgage brokers, large banks, online lenders and credit unions, many of whom the consumer thinks is working in their best interest are actually setup to fail the consumer by design. Just because you bank at a big bank or a credit union does not mean they are setup to provide you the best service. I worked at a big bank before, and unless you had millions of dollars in that bank, you got no special treatment. And even with millions of dollars, the ‘special treatment’ was marginal. The extensive report was done by a research, marketing and communications firm based in Washington, DC. The firm has more than 30 years in the field of research with deep experience in the fields of financial services, housing and technology. Here are the comments that were culled from thousands of Realtors who have been through tens of thousands of transactions, read and learn:

• APPRAISALS COMING IN FAR BELOW COMPARABLE SALES.

• APPRAISERS ARE FROM OTHER STATES.

• Appraisals take too long to complete with knit picking reinspection requirements which are designed to get the appraiser added income.

• Out of area appraisers with little to no knowledge of local market impacting appraisals and home prices.

• Almost all appraisers were sent to appraise properties in an area they were not familiar with and therefore many come in with lower appraisals than the area could support.

• We have local mortgage lenders who do what they say they will do, but if our clients insist on using one of the big banks because they think their banks will work well with them because they bank there, then we have had problems getting the banks to close anywhere near the proposed closing dates–often more than a month or 2 months later.

• Supposed consumer protection has turned into consumer being hit with higher rates and fees. Inexperienced appraisers that do not know the neighborhood or market are also a result of "consumer protection". In order to prove the appraiser wrong, many times the buyer is forced to pay for a 2nd appraisal or an appraisal review.

• Two major problems the past 12 months. Appraisals are between 5% and 25% below the agreed to sale price. WHY, since appraisers, buyers and sales are looking at the same inventory? An appraiser told me the banks are pressuring for lowball appraisals.

• Last nanosecond underwriting requirements that have
little to do with reality and everything to do with the new appraisal requirements. They are a complete joke when they result, as they frequently do, in the work going to the low bidder when that appraiser has little or no knowledge of the sub-market they are appraising.

• ZERO appraiser accountability and review. Lenders won't do anything about an obviously bad appraisal.

• The way appraisals are done is contributing to the devaluation of homes and communities. This problem could be fixed.

• Appraisers are not familiar with the area they are appraising.

• Out of area appraisers hired who have never seen any of the comps and aren't familiar with town, amenities, neighborhood differences, etc.

I will blog about big banks soon, using the same extensive report I am citing from for this blog. Big banks seem to do a lot of loans, but don’t provide a lot of service! Clients assume big = good, or big = safe, or that big = reputable, but in the mortgage world that is simply not so. Read the next blog to find out why.

It has been a while since I wrote about pre-approvals. It seems I need to write about this more often. Lenders hand out pre-approvals like candy, with little analysis, little required documentation, and then homebuyers go out into the marketplace making representations they cannot meet. And then they lose money. How? Read on.

I want to relay a story via an email from a new client, who was someone I almost worked with in the past:

“My husband and I are prospective first-time buyers and would like information about appropriate mortgages and what we qualify for. We are interested in finding out what we need to do to strengthen our application. You and I last spoke during a traumatic real estate experience for us in 2003 where the lender we chose to work with admitted messing up our pre-approval (writing it based on w-2 employment and not self-employment, and we had been self-employed for 1 year at that time) and sending us out in the market with grossly exaggerated amounts which the underwriter ultimately refused. This forced us to cancel our contract the day before settlement and we lost our deposit and other fees. We are only now looking at trying again, 9 years later. So we're quite gun-shy and moving very slowly through this process. Please let us know what you need from us next.”

I imagine I asked too many questions in 2003, and the lender they chose to work with asked very few questions, obviously. And they chose to work with the lender that seemed easier to work with. And they lost money. If they had finished up the pre-approval application with me, I would have told them they needed a minimum of two full years of self employment, and were not eligible for a loan at all with only one year of self employment. The other lender must have simply asked them “how much their annual income was each year,” without digging any further and asking if it was salaried income, self employment, and if there is any overtime, commission or bonus income built in. Poor form.

The process is much harder now, but was no picnic in 2003, and has never been easy, ever. So if you get a lender who asks few questions, which seems to happen often, it is not a legitimate pre-approval. The formal approval process takes anywhere from 30-40 days, so to get a preliminary opinion (a pre-approval) simply cannot happen in a day, let alone an hour.

Unless you are salaried with no overtime and bonuses, and no changes in your bank account larger than $1,000 in the last few months, and no new credit recently, and no gift money, and have perfect credit; then you need to go through an extensive pre-approval. It seems every pre-approval I see these days has a curve ball, that needs a lot of time and some amount of paperwork to work out. So please realize that the only pre-approval that counts is one that is not easy to get.