The IRS 4506 is an IRS form used to request a copy of your tax transcripts from the IRS. Mortgage lenders now require a borrower to sign a 4506 to get a loan. It is an anti-fraud measure and data gathering step. And it can cause problems… Read More
Condo financing can be tricky, but with small 2 to 4 unit condos it has gotten easier. In some urban markets a multifamily home is converted to condominiums. For example, a duplex is turned into two condominium units. Or a triplex is turned into three condominium units. Or a fourplex is turned into four condominium units.
There is required condominium project review that needs to be done on most condominiums. But that is waived on condos that don’t consist of more than four units. Read More
Is choosing a mortgage lender important? People spend a lot of time looking for the perfect home. There are the countless hours spent poring over real estate listings, the weekend trips to open houses, and the days of driving with your realtor from showing to showing. However, choosing a mortgage lender or broker is often treated as an afterthought. Many buyers simply go with their own bank or a broker/lender recommended by their realtor. They do so without researching competitive rates and looking for lenders who will also educate them.
This is a critical mistake. Read More
Buying a home is the most important and expensive decision that most of us will undertake. It is surprising to me how many people are not prepared to buy a home. A potential homebuyer should do extensive amounts of research and give a lot of thought to what they want to buy. When they feel they are ready then they can get pre-approved for a mortgage. Below are some of the warning signs that you might not yet be ready to buy a home and you may need to do some more research. Read More
FHA Loans vs Conventional loans is an important discussion. Since you can no longer drop the MIP on an FHA loan, I wanted to show a comparison between a 3.5% down payment FHA loan and a 5% down payment Conventional loan. I think it may encourage some buyers to save up a bit more to get 5% down for a Conventional loan. Read More
Mortgage volume ebbs and flows like a tsunami. Sometimes it comes rushing in and business gets heavy and underwriting turn times swell to 2 weeks from 3 days! And then the tide of business eerily rolls back out to sea, and underwriting turn times get normal again.
Each mortgage process has an anatomy. Anatomy is the bodily structure of an organism. Loan transactions can almost be considered an organism. They certainly take on a life of their own and they have multiple humans assisting and sticking their hands into the transaction along the way. Since there are so many moving parts I think it’s important to dissect this anatomy. We should understand how it all works and understand how to make it work efficiently.
First, its important to realize all the players involved in each transaction. The below list is not even 100% complete: Read More
There are some banks deemed too big to fail. Those are the ones that have been the recipient of much taxpayer benevolence. Whether you agree with that or not my contention is that big banks and most big institutions are simply too big to work with. Most large entities do not work well. Once you scale something up to a certain size it seems impossible to make it function well. Read More
Well and septic inspections may indeed be required to get mortgage approval. But it depends on the type of mortgage you are seeking.
A conventional mortgage through Fannie Mae or Freddie Mac typically do not require well and septic inspections. I say “typically” not required because there may be an instance where they are required.
Fannie Mae requires the lender to disclose any information regarding environmental hazards. A lender is required to get the necessary inspections if the appraiser, real estate broker, property seller, property purchaser, or any other party to the mortgage transaction informs the lender that an environmental hazard exists in or on the property, or in the vicinity of the property. Fannie Mae also requires the lender to disclose such information to the borrower and comply with any state or local environmental laws regarding disclosure.
So if you’re buying a home that is on a well and/or septic systems and it comes to the attention of the lender through the appraiser or any other party, inspections will be needed on those systems to get the loan approved. If there is no visible issue and nobody reports a problem, which is typical, then no well and/or septic inspection would be required.
For more details on this issue as it relates to Conventional loans, click here B4-1.4-08, Environmental Hazards Appraisal Requirements.
However, with FHA and VA loans, a well and septic inspection is always required, regardless of the visible condition of these systems. If an inspection doesn’t pass the local guidelines and requirements, remediation will be needed until the systems pass. And an FHA or VA mortgage loan will not be able to close until the inspections pass.
With an FHA loan, the FHA Appraiser must check for issues or malfunction if the property has a septic system. If there are visible deficiencies, the FHA appraiser must require repair or further inspection. And the FHA guidelines also require the lender to get a septic system inspection. Hence, it is important to note regardless of what the FHA appraiser finds, the lender is going to require an inspection of the septic system. The same holds if the home has a well water system.
For further FHA guidelines click on this link, and start reading at the bottom of page 170 from “Requirements for Well Water Testing” for all the details. You will see other interesting details such as:
For further VA guidelines click on this link and look for page 12–20 and start reading from “15. Water Supply and Sanitary Facilities”.
You will see information on things such as:
Feel free to contact me for any further questions on well and septic systems as it pertains to getting a mortgage, or any other questions in general related to conventional loans, FHA loans, and VA loans.
When you’re ready to buy a new home, one of the first things you have to do is take steps to get your financing in place. Mortgage approval is based in part on an automated underwriting process. It is beneficial to get a pre-approval letter from a mortgage lender before you even make an offer. Having your loan pre-approved can show a seller you are a serious buyer with adequate funds. You can also reduce the risk of the contract falling through.
Lenders typically use one of two underwriting processes for mortgage loans: automated and manual. Understanding the basics of how these types of loan approval work can give you confidence when applying for your mortgage. Read More
Some clients get a bit frustrated that minimum monthly credit card payments are counted against them in their debt ratios. They feel if they pay off their credit card bills every month no payment should be counted against them. First, the underwriter can’t assume that the client pays them off every month. Second, if you are spending about $3,000 every month on your credit cards for example, assume you usually pay that amount off every month. And the minimum monthly payments are $150 a month, but you pay off the balance each time. It seems pretty fair if you are spending $3,000 a month to only count $150 a month against you in your debt ratios.
TRANSCRIPT (this was taken from a cartoon video I did, featuring monsters):
This is an explanation of how scary Fannie Mae and Freddie Mac (now government owned it is important to note) have become. And how it affects the consumer. Anyone who has gotten a loan in the last 3 years knows how difficult it is. Guess why. Think its the banks? Nope. The underwriters? Nope. It’s the Halloween style nightmare Read More
I have seen a last minute termite inspection issue cropping up lately that should be discussed. Many times I will see that the sales contract will not call for a termite inspection. In this market of limited inventory one way the buyers are competing is by waiving contingencies. One of those ideas is to waive the termite inspection contingency. Sometimes when waiving this contingency Read More
This blog assumes you’re at the final steps of the mortgage process. You’ve completed your loan documentation, received your appraisal and title insurance, your loan is approved, and you have scheduled your movers. Now you’re ready for it to be over. But there is more to consider. Settlement day, a.k.a. closing day, can bring surprises and unexpected stress. Spend some time on these final closing details with a couple of tips that I give my clients on how to be prepared for the big day. Read More
In some real estate markets the market is strong enough that sellers will not accept an offer contingent on the sale of the potential buyers current home. The close-in DC Metro area is one of these markets.
Buying a home Non-Contingent on the sale of your current home is hard. I often get asked to get a potential buyer pre-approved to buy a new home, without the mortgage being contingent on the sale of the current home that they own. While this is possible, it is difficult.
First, you have to have the cash for the down payment and closing costs for the new home without the benefit of the sale of the current home. Then you would have to be able to qualify to carry the debt of both mortgages at the same time. Read More
Can paying off a debt help qualify you for a mortgage? When you qualify for a mortgage loan it may not be for the amount you want. Outstanding debts can affect how much you are able to borrow. In some instances you may be able to pay off the debt in order to qualify for a larger loan.
If you reduce the number of installment payments to 10 or fewer, the loan may not be included in your debt-to-income ratios. What if the debt has a large monthly payment? Then an underwriter may consider it a risk in your debt-to-income ratio. Read More
Cash reserves are monies that you need to show a mortgage lender that you have leftover after settlement for emergency and for cash cushion. This convinces the lender you have some reserves after settlement in case of any issues when transitioning into a new mortgage loan. Obviously underwriting guidelines can change based on loan type and Read More
Cash Reserves Requirements for Jumbo loans can be complicated. Jumbo loans, also called Non-Conforming loans, are loans that do not conform to the Conforming loan limits. Conforming loan limits can be found by clicking here. If you have a loan amount that is higher than the Conforming loan limits, then you have a Jumbo loan. Jumbo loans require that a mortgage borrower has cash reserves. The Jumbo loan cash reserves requirement is different from Conforming loans, in that Conforming loans many times do not require cash reserves at all.
Cash reserves is a certain amount that a lender may require that the borrower has left over after they pay their down payment and closing costs at closing, in reserve.
Different lenders have different requirements for cash reserves for their Jumbo loans. There are requirements for the amount of cash reserves, and there are requirements for the types of cash reserves.
6 months of the PITI (principal, interest, taxes, and insurance) are required in general.
Need 4 months PITI if you are retaining your current primary residence
4 months PITI for each rental property you own
And 4 months PITI for a second home/vacation home that you own
Cash reserves are based on all recurring housing expenses for the subject property and in some cases for other property owned by the borrower. Cash reserves are also cumulative, so if you are buying a new home and have a rental property, per the above, you may need 10 months of cash reserves. Housing expenses, also known as principal, interest, taxes, insurance, and assessments (PITIA), include but are not limited to:
I have seen lenders go back and forth over the years on allowing retirement accounts, such as 401(k), 403(b), IRA, and TSP; to be used as cash reserves.
When a mortgage lender is considering retirement accounts as cash reserves, they are not suggesting that you must liquidate or borrow against the retirement account to generate cash. Lenders are only considering the balance of the retirement account without having to liquidate any of it or borrow against any of it.
Retirement accounts are not very liquid, and hence they shouldn’t be considered cash, which is why at some points in time I’ve seen lenders not allow retirement accounts to count towards cash reserves requirements.
But currently, as of the date of this blog, we have many lenders we work with that allow retirement accounts to be used as cash reserves. This is an important development because it now allows borrowers to only need to have their down payment and closing costs liquid, but not the cash reserves.
Mortgage guidelines can change frequently, please schedule a call or email me with questions on your specific situation.
Both Fannie Mae and Freddie Mac changed their seasoning requirements for cash-out refinances. They are now requiring 12 months seasoning for cash-out refinances when paying off an existing mortgage. What does this mean? Read More
What in the whole wide universe is a Change of Circumstance form? It sounds like the most bureaucratic and needless document ever. As part of recent RESPA law changes we now have to issue a mortgage borrower a Change of Circumstance form any time we make a change. Read More
I have heard so many people ask why we wait until the last minute to ask them for certain documents for a loan approval. I have a few answers. Mostly it is because many times the mortgage borrower has waited until the last minute to give it to us! Fannie Mae requires certain documents, that get underwritten, that many times yield more paperwork needed. And do you know what happens when you submit last-minute document requests? You get last-minute answers. And there is nothing more frustrating than Read More
I sometimes have clients ask me how they can reduce the amount of cash they need to pay towards the purchase of a new home. Recently a client who was making an offer on a house that had an asking price of $650,000 wanted to make an offer of only $600,000 figuring that since they were putting 20% down, they’d save $10,000 by paying 20% down on $50,000 less in price. However, the house is worth what it is worth. And a buyer’s cash on hand has no bearing on where the house should be valued. Read More
Condominium litigation can be a problem when getting a mortgage. What if a condominium has litigation against it and you want to buy it? To get a loan approved there are certain things a mortgage lender has to document or the loan may be denied.
A mortgage lender has to prove that the litigation has no impact on the safety and structural soundness of the condo.
And the insurance carrier that insures the condominium building is involved. They have to have agreed to provide the defense, and the amount of the litigation must be covered by the HOA’s insurance.
There are other reasons why litigation against a condominium may not be an issue. These may be:
Financing a condominium can be tricky for other reasons. Mortgage guidelines have the ability to change at any time. Always talk to a well-reviewed mortgage loan officer. Make sure you understand the current guidelines and how they might apply to you.
Contingent liabilities are potential liabilities. For example, if a parent guarantees a child’s car loan, the parent has a contingent liability. If the child makes the car payments and pays off the loan, the parent will have no liability. If the child does not make the payments, the parent will have a liability. The same scenario would hold when one party co-signs a mortgage for another party. Having a liability like this show up on your credit report can count against you when qualifying for a mortgage. This is the case even if the Read More
A Credit Score Simulator can help with “What If” scenarios to determine what you could potentially do to raise your credit score. It can also show you what could negatively impact your credit score. It is important to see how your credit choices might affect your credit score because your credit score will impact the underwriting of your loan, your interest rate quote, and even the cost of your mortgage insurance.
Some of the various things a Credit Score Simulator can measure to see how they will impact your credit score are: Read More
Freddie Mac made a change recently. It allows the exclusion of a monthly debt payment from the debt ratio calculation for self-employed mortgage borrowers. The debt can be excluded when the monthly payment is paid by the mortgage borrower’s business. Read More
I was on vacation recently in London. On a tour, I heard an interesting story about how the term underwriter came to be. The term has to do with the insurance company, Lloyd’s of London, and dates back to 1688! We all know about mortgage underwriters and how it’s their job to underwrite the risk of the loan. Then they either approve or deny each loan application.
The tour leader told us that Lloyd’s started as Lloyd’s Coffee House. It was opened by Edward Lloyd around 1688 in London. This establishment was a popular place for sailors, merchants, and ship owners, and Lloyd catered to them with reliable shipping news. The shipping industry community frequented the place to discuss deals among themselves, including insurance.
The word “underwriter” is said to have come from the practice of having each risk-taker write their name under the total amount of risk that they were willing to accept at a specified premium for each event. These individuals would literally write their names under the text describing the event for which Lloyd’s was assuming some risk. Hence, the term “written under” or underwriting.
To contact me to discuss your underwriting questions, mortgage rates, or other mortgage questions, click here to schedule a call or you can email me directly.
I have discussed this topic before, but it bears mention again. Homebuyers almost always wait until the last second to get pre-approved. Why? If you know you are interested in buying a home, and if you are in fact actively looking, why wait? Homebuyers seem to think the pre-approval process is instantaneous. It is not. It is not even quick and it certainly is not easy.
A client told me that he was due to be a father any day now and was having a baby girl. He told me that he hoped she turned out to be a good credit risk and could be able to get a mortgage as an adult. It made me laugh that he made this joke about the boring mortgage industry, and it made me realize how ludicrous the mortgage rules have become. Read More
It is very common for realtors to ask a homebuyer who their mortgage loan officer is and where they are located. There is a belief that a lender, and for that matter all the service providers to a real estate transaction, needs to be very local.
Realtors assign some magical powers to a mortgage loan officer who is Read More
Sometimes clients think loan officers are robots, almost unimportant. And that all we represent is a set of terms we quote, and they treat the mortgage transaction like a commodity. But getting a mortgage is enormously complicated with lots of moving parts. And the type of loan officer you are working with is critical. This includes personality traits like work ethic, integrity, organizational skills, the speed at which they work, and much more. Read More
Do not shoot the messenger. It is a fun cliche, is it not? However, it is more than a cliche. It is truth. Why do so many of us act like three year old children when given news we do not like? The mortgage industry is currently full of messengers and full of hard news to deliver. The news is usually fairly innocuous. But people do not take it that way. Below are some examples where the response I hear from people leaves me puzzled. Read More
Most humans I know wait to do things. And wait as long as they can. Even for a mortgage, they wait and take their time in submitting the needed documents. I procrastinated as a child when it came to cleaning up my room. I did it in college when it came to studying for an exam. And I do it as an adult when it comes to going to see the dentist. The only things that I do not procrastinate on are things that are really important, like getting pre-approved for a mortgage. Now that is important! That should be done right away. Read More
I think one thing that causes a lot of problems in life is our perception of time. We all seem to think we have plenty of time to do things. But what we are really doing is justifying our procrastination. We think we have plenty of time to get around to working on our tax filing, the yard work, paying bills, departing to meet friends for dinner, or sending in the paperwork for our loan application. Do we? No. Then what happens? Read More
There has been a lot of talk about e-closings recently. E-closings allow someone to close on a mortgage remotely from the comfort of their own home or office, without physically going to a title company office. However, knowing the details is important. You need to determine if this is an option that is available to you, and if it is a good idea for you.
As of the writing of this blog, e-closings are not available in all 50 states. You need to determine if your state has passed legislation to allow them. Then you need to find a mortgage lender and a title company that have the knowledge and technology needed to participate in e-closings.
You may also hear an e-closing referred to as a digital closing, electronic closing, remote closing, and other variations.
Lenders are sometimes asked by a mortgage borrower to allow an escrow account to be created for some items to be completed. Repairs cannot be addressed by putting money in escrow. Repairs are usually required to be completed prior to closing. However, lenders may allow an escrow account to be created for items unable to be completed due to weather. Weather related delays are most common in new construction homes.
In my 3.5 decades in the mortgage business, I don’t recall a lender I have worked for ever allowing repair escrows. That is because they are typically messy, and many times end up not being resolved in a timely fashion. There are contractor problems and other situations where the cost exceeds the escrow account reserve. Weather related escrows are a different story, but repair related escrows may be impossible to get approved by a lender. Read More
There is an underwriting guideline that could be viewed as a thorn in the side of mortgage consumers, as well as mortgage employees. It is a guideline that states we have to document where all non-payroll deposits come from. Imagine having to explain and document every little deposit whether it was a repayment from a friend on a personal loan, a family member giving you a small amount of money to help pay for movers, an insurance refund check from a canceled auto policy, etc.
Maybe some of you have experienced this. It is paperwork torture to have to explain and paper trail all non-payroll deposits. The good news is that you no longer have to document small deposits.
However, any deposit that is greater than 50% of a borrower’s monthly income must be explained and documented.
I got a loan for myself once, and my own underwriter said I had to document a recent $248 deposit, and I had no idea what it was from. After doing some research, I realized it was a refund from a canceled auto policy. I had to write a letter about this, and produce a copy of the letter and check that my insurer sent me to document. This was an unreal amount of paperwork and hassle to me. All for something that was truly inconsequential to the creditworthiness of the loan.
I understand in general why there is a need to document large deposits. It is to ensure that a mortgage borrower has not borrowed money from an unacceptable source for their down payment. But the small deposits were really not necessary. I for one am thankful that some common sense seems to be coming back to the industry’s guidelines.
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. Community property laws require divorcing couples to split assets acquired during a marriage equally. Marital property includes earnings, all property bought with those earnings, and all debts accrued during the marriage. Read More
Getting mortgages with child support and alimony is difficult. I have people ask me what the requirements are to count alimony or child support income towards qualifying for a mortgage.
First we need a copy of a divorce decree. Or the separation agreement if the divorce is not final. That explains all the terms of any alimony and child support. And any other financial arrangements that may have a positive or negative impact on your mortgage application. Read More
Think about solar panels and mortgages when applying for your loan. The popularity of electric cars and solar panels is increasing. It’s important to point out that having solar panels on your house may impact your ability to get a mortgage. Many times, buying solar panels will be financed. And that is when they have an impact on your ability to purchase or refinance a mortgage. Read More
What is a home of choice contingency in a real estate contract? A home of choice contingency is a contingency that protects a seller from having to sell their current home if they haven’t found their next home. This way a seller can sell their home and just in case they can’t find a new home they like and be protected. They can declare the contract to sell their current home void if they can’t find a place to buy, and call off the deal.
A home of choice contingency may read something like the below:
“This Contract is contingent until 45 Days after the Date of Ratification to allow the Seller to obtain a ratified contract to purchase another home, and then another 30 days for seller to obtain financing for their new home. This contingency will remain in effect unless the Seller delivers Notice, prior to the Deadline of this contingency, to the Purchaser that this Contract is void.”
Buyers may lock themselves into this deal for a long while without knowing if the seller will find a new home to buy. The seller may not actually sell their current home. Will buyers hesitate to engage in a contract like this? In a market with such limited inventory it seems there are buyers willing to take that risk.
As a buyer, if you don’t like this type of contingency that favors the seller you have an option. You could offer the seller a rent back period of up to 60 days. This is where the buyer and seller would go to settlement on the seller’s house and the buyer would become the new owner. But the buyer lets the seller live in the house and rent it from them for up to 60 days. This gives the seller time to look for a new home. Of course the seller may reject this. The seller mat want the most safety of not having to sell their current house, which comes from a home of choice contingency.
As with anything in real estate sales, it is all negotiable!
To contact me to discuss your local housing market, mortgage rates, or other mortgage questions, click here to schedule a call or you can email me directly.
How are debts paid by others handled on a mortgage application? Sometimes when someone applies for a mortgage with me, they mention they have a debt paid by a parent. They may have a school loan that a parent pays. Or people may tell me they co-signed for someone else’s mortgage, but they do not make the payments. Read More
Property taxes are a part of the cost of owning a home. When you buy a home you not only have the cost of the monthly mortgage payment. You also need to consider property taxes, homeowners insurance, any HOA dues, maintenance, and utilities.
Many people wrongly assume property taxes are a fixed cost. They believe whatever amount is billed when you first buy the house, is what the amount will be for the life of owning the home. However, property taxes can change quickly after buying a home. Most counties assess property value annually, and adjust the amount due annually. Read More
How do tax losses affect mortgage qualifying? The answer depends on what type of loan you are getting. Read More
Today’s real estate market can be competitive for everyone. That’s why it’s important to understand the ins and outs of the home buying process before you hit the market. Let’s talk about what getting a mortgage pre-approval letter. It’s a good idea for anyone heading into the market for a new home. Read More
When you buy a new home, you need a mortgage to purchase it. And before you get a mortgage, you need to determine how much mortgage you qualify for. Different sources may qualify you for different mortgage amounts. And how much you qualify for does not necessarily equate to how much you can afford.
How much you can afford is based on your personal budget. When a mortgage lender tells you how much you can qualify for, that is the highest mortgage amount they’ll approve you for. But this may not be the mortgage size you end up closing on. Read More
How much mortgage can I afford? People are always searching for information on how much mortgage they can afford. Some people want to buy a new home. Others a second home/vacation home or a rental property.
Car loans and mortgages, do they affect one another? When a mortgage lender analyzes your finances to qualify you for a mortgage, they’re looking at all of your debt along with the new proposed mortgage payment. The other debts that they consider outside of your new mortgage payment are debts like minimum credit card payments, car loans, student loans, and any losses from other rental property. They do not look at debts like utility bill payments, car insurance or cell phone bills. Read More
Everyone wants to close loans quicker these days. And I mean everyone. But when it comes time to do their part to move quickly people are not as excited to help out. The problem is that most of the other parties to the loan don’t realize that they are party to the loan. What I mean is that the loan does not occur in a vacuum. We as the lender are not the only party to the process. We need help from Read More
Do you know how to make an offer on a house? It’s simple, right? There are many things to consider when you are making an offer on a house. When it comes to making an offer there are some key things that can make a difference! Below are some important topics related specifically to the mortgage when you’re getting ready to write up an offer on a home. Read More
I had a self-employed borrower call me recently asking for a quote on an interest rate. She said she had been pre-qualified by someone else and just needed an interest rate quote. I asked her to fill out my pre-qualification form anyway and she agreed. It’s a good thing she did. I discovered an obstacle to her loan approval. She was never going to get her loan approved in her current situation, and she was wasting her time making an offer.
Because she was only self-employed for six months! The mortgage guidelines say that you have to be self-employed for two years before you can qualify for a mortgage. Six months of self-employment will not work. Twenty four months minimum is the rule. There may be some scenarios where an exception can be made, but that is considered under certain restrictions.
It is astonishing that some lenders do not ask sufficient questions to make sure that a buyer is accurately representing their qualifications in a contractual real estate situation. As a result, mortgage borrowers are going to have do the research to make sure that what they are being told is correct.
To contact me to discuss your scenario, mortgage rates, or other mortgage questions, click here to schedule a call or you can email me directly.
Many people are very focused on interest rates these days and are wondering where they are headed next and how it may affect their mortgage payment. Interest rates have been historically low for a very long time. And people are starting to fear that they may increase and have an outsized impact on the cost of purchasing a home.
You can see a chart of the long-term history of interest-rates by clicking here. This chart shows that we are definitely near the bottom of where interest-rates have been over a long period of time. On the other hand, if interest-rates start to go up does it have as much of an impact as people think? Read More
A common refrain I hear from mortgage borrowers is that interest rates are going down when they are not. I had a client insist recently that he knew rates were going down. He expected a better interest rate than what he was already locked into. But I saw that rates were exactly the same as when we had first started his transaction. After researching this some more I found that Read More
There are increases coming to mortgage interest rates due to several rule changes. One change is a proposed increase in the guarantee fees. This is also called the g-fees. This fee will increase 10 basis points, which is equal to 1/10th%. There are also increases coming to what I call add-ons. Add-ons are fees charged by Fannie Mae and Freddie Mac. Add-ons vary depending on credit score and down payment of each mortgage borrower. Read More
There was an article recently on TechCrunch.com that was titled “This Could Be The Mortgage Industry’s iPhone Moment”. It proclaimed “Quicken Loans sees Rocket Mortgage as the turning point in home financing”. And, “It’s home financing’s iPhone” and “The process takes less than 10 minutes.” Hmmm, we’ll see about that. Read More
I wrote an article in February 2013 discussing the low inventory environment. I was wondering where the sellers were and predicting that inventory would eventually start to rise, which would put a lid or even some downward pressure on real estate prices. To read that article click here. So where are prices and inventory headed now, a few quarters later? Read More
I think it is important to remind everyone that the mortgage business, at the end of the day, is a sales business. And loan officers are salespeople. We are trained as salespeople. We are incentivized as salespeople. Within the corporate hierarchy we are known solely as salespeople. But the consumer seems to forget that they are dealing with salespeople. Read More
Jumbo mortgage loans are usually confusing to the average mortgage consumer. No one seems to know what defines a Jumbo mortgage loan. And no one realizes that there can be different underwriting guidelines for Jumbo mortgage loans than for non-Jumbo (also called Conforming) mortgage loans. Read More
Many ARM loans are based on the LIBOR index (London Interbank Offered Rate), which currently stands at 0.58%. If you Google “LIBOR interest rate adjustment chart” you can find your own results to see how LIBOR has adjusted over time. Or go to a chart of historical LIBOR rates by clicking here. Read More
The below is what a mortgage borrower should know about the steps in a mortgage process and what is expected of them when applying for a mortgage. The turn times and ability of the mortgage lender to execute these steps below will vary according to lender capacity and client deadlines.
We all want things to go faster. We wanted communication to go faster, so a phone was invented. Then email and the internet were invented. We wanted cooking to go faster, and someone invented the microwave. We wanted travel to go faster, and the car was invented. And then the plane. What is next?! In all my years in the mortgage business, it seems we still can’t make the mortgage transaction go a lot faster. Why can’t we get a mortgage done in a few days, or a week? Read More
There are rules related to the maximum number of financed properties you can have. These are for investment property buyers. There are some mortgage agencies, like Fannie Mae, that will not do a loan for an investment property buyer that already has what they consider to be excessive financed properties.
What if you are buying a new primary residence? Then there is no limit to the number of financed properties that you already have.
However, if you are buying a second home/vacation home or rental property there are rules. You cannot have more than 10 financed properties already. Read More
It is important to know how much a seller can contribute to a buyer’s closing costs. There are maximum seller financing contributions. This also applies to any other interested party, such as a realtor, builder, or lender. Many people get confused as to what is allowed. Some realtors write up a sales contract with dollar amounts that are not allowed per mortgage guidelines. This will cause problems with the loan. Below are the current maximum seller financing contributions allowed: Read More
Forbearance – you should only do it if you absolutely have to. Some people are taking a forbearance on their mortgage as a way to take a break on their mortgage payment when they really do not need to.
Forbearance does not mean you can skip mortgage payments and never pay them back. You have to repay any missed or reduced payments in the future. So, if you’re able to keep up with your payments, keep making them.
It will also impede your ability to refinance. Having a forbearance on your credit report means you cannot get a new mortgage. You have to bring the loan current to do so. Read More
Forbearance, only do it if you absolutely have to. Some people are taking a Forbearance on their mortgage as a way to take a break on their mortgage payment when they really do not need to.
But forbearance does not mean you can skip mortgage payments and never pay them back. You have to repay any missed or reduced payments in the future. So, if you’re able to keep up with your payments, keep making them.
Taking a forbearance will also impede your ability to refinance. Having a forbearance on your credit report means you cannot get a new mortgage. You would have to bring the loan current. Read More
You would think locking-in an interest rate for your mortgage is a very simple process. What is there to think about? You are given your choices, and you pick one and lock-in. Right? Not much to it?! It’s amazing what the average consumer doesn’t know, and what they should be thinking about. Read below to learn about what will be important for your next mortgage application and interest rate lock-in. Read More
Here at Capital Bank Home Loans we have a new dynamic loan application that we use, to help ease the mortgage paperwork. Being dynamic means that it can potentially verify your assets and income during the application process, allowing you to avoid having to upload any documents. And of course we all love to avoid mortgage paperwork!
There is a lot to think about when negotiating a sales contract. I recently wrote several blogs about the pros and cons of waiving contingencies to make a more aggressive offer in a sellers market. But there are also other ways to make a more aggressive offer that I would like to discuss. Some other ways you can get an offer accepted in a competitive environment are based on Read More
As many of you have heard, there are some new regulations that have gone into effect for mortgages as of January 10, 2014. There are two basic components of the regulation, one is the ability to repay and the other is the qualified mortgage. While they seem complicated and onerous, the reality is that not much will change in the way most mortgage lenders do business.
There’s no outsmarting or escaping the mortgage guidelines upheld by underwriters, no matter how much income or assets the buyer has. The purpose of the underwriting process is to check the loan applicant’s credit, financial capacity, and the collateral. The underwriter’s main purpose is to make sure everything in the application meets the loan’s guidelines that you are applying for. Whether that be from Fannie Mae, Freddie Mac, FHA or VA. Read More
When a buyer and seller are negotiating over the sale of a home sometimes the buyer indicates they would like to have certain personal property from the home. The seller is OK with that either due to not wanting those items, or wanting the buyer to have them to help facilitate the sale.
When you’re beginning the home-buying process, figuring out what you need to get your mortgage loan can seem complicated. You may even be tempted to find your dream home first before you apply for a mortgage. However, going through the pre-qualification and pre-approval processes at the start of your search can make the entire experience go more smoothly.
Before you meet with a lender or mortgage broker, you should have a good understanding of how the loan process works. This guide covers the basics of loan application, qualification, and approval. Read More
I recently had a refinance client who got their home appraised for $1,000,000. You would think this would be good news, except that the client was expecting $1.2MM. Uh oh, I guess we didn’t get good news. However, the more important question is, did we get accurate news? In other words, was the appraisal valuation accurate and were the comparable sales used in the appraisal appropriate? This is where the debate started. Read More
I have clients who are buying a rental property or who are buying a primary residence and already own rental property. And they think they need to provide a copy of a current lease for the rental property as part of the loan application. But, that is not always the case. Read More
There were some big changes that came from Fannie Mae mid-December 2015 that signaled a further loosening in the mortgage guidelines. Some of the bigger changes are: Read More
Are you self-employed during Covid? Need a mortgage? There are newly revised mortgage guidelines for self-employed people due to the Covid-19 pandemic. There are temporary requirements for assessing income derived from self-employment. The additional due diligence is due to the disruption from the pandemic. Mortgage lenders now need to consider if and how a business has been impacted and the likelihood of income continuance.
There is additional income documentation required. You may need an audited Profit & Loss statement with supporting documentation for the Profit & Loss statement. The continuity and stability of income is what will be considered. Read More
I constantly get questions about whether or not someone who is self-employed needs a minimum of two years of tax returns, or if they can get away with one year of them, when qualifying for a mortgage. I thought I would answer this question and put it to rest. Please realize guidelines can change in the future. As of the date of this blog, the hyperlinks below are guidelines related to the history that self-employed people need, and the number of years of tax returns they need to document their income. Read More
Let’s go mortgage shopping! Who doesn’t want something cheaper? But who doesn’t want it faster, better and delivered on time as well? It is life’s constant struggle. We work very hard for our money and want to be judicious in spending it. People want the $5 hamburger for $4. Some people want the $35,000 car for $32,000. We want the $500,000 house for $485,000, and if the same house were priced at $485,000 we’d arbitrarily want it for $470,000. We always want a deal! But are we just creating our own problems? And should we be shopping for the best price or the best value? There is a big difference between price and value when it comes to mortgage shopping. Read More
When a homebuyer makes an offer on a home they may need a pre-qualification letter to include with the offer. Most realtors will ask the lender who has pre-qualified their client to write a pre-qualification letter to match the exact sales price of the offer. But a few realtors will ask for the pre-qualification letter to be written for the maximum amount the buyer is qualified. Read More
Have you ever noticed that many of the mistakes you make in life are made in haste? I look back on all the things I’d like to do over. Most of them were because I was moving too quickly or thinking too fast. Usually because I’m in far too big a hurry to get to the next 1,000 things on my to do list. If I would just slow down I bet I’d make a lot less mistakes in life. The same wisdom can be applied to mistakes made in the mortgage process. Read More
I had a client I was working with recently who had a realtor I didn’t know. This realtor wanted me to write a pre-qualification letter for an offer they wanted to make on a house. They wanted me to write up a pre-qualification letter for a mortgage amount I did not think the buyer could qualify for. The realtor just wanted to get the property under contract and tie it up to see if we could work it out somehow after the fact. They just wanted to take a shot at getting the realtor commission. Think this is a rare event? Read More
Actually, the refinance boom is indeed over. However, there are a fair amount of people that still need to refinance. For example, I know of many people who have excellent interest rates on a 15-Year fixed rate mortgage. They thought they would be in their home forever and wanted to get the mortgage paid off over a shorter term. But now have suffered a job setback or some other sort of financial blow, and need to revert to a 30-Year mortgage to reduce the monthly payment.
Let’s assume the following:
• A homeowner owns a home with a $300,000 loan that was refinanced at the bottom of the market in late 2012 or early 2013. And it has a 3.00% 15-Year fixed rate.
• He currently owes $284,000.
• This principal and interest payment is $2,071 not including taxes and insurance.
If this homeowner refinanced the current principal to a 30-Year fixed rate today at 4.625%, the principal and interest payment would be $1,460. This would save over $600 a month! I’d hate to see someone lose a 15-Year mortgage, which enabled them to get their mortgage paid off quickly. However, if economic problems have struck someone and they need monetary relief, refinancing to a 30-Year fixed rate mortgage might be the answer.
Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. For example, I know of many people who have decided to move sooner than they imagined. I hear of consumers who thought that they would live in their homes for the long haul, but then due to circumstances that were a surprise to them, they have now decided to leave in the next few years. Read More
Actually, the refinance boom is indeed over. However, there are a fair amount of people that still need to refinance. There are a stunning amount of home equity lines (HELOCs) outstanding and most people will need to refinance those. Most HELOCs were set up so that the first ten years of the loan only require interest only payments and no principal is due. Then, in year 11, the principal would start to amortize. And it amortizes over 20 years, not 30. This is a problem because Read More
I was the 269th top producer in the country in 2012 for mortgage loan officers, ranked by Scotsman Guide Media. My mom always told me not to worry about coming in first place and just to do my best. In all seriousness I think one of the measures of a successful mortgage loan officer is how much business they do. Read More
A lender pulls three credit reports to issue a mortgage? Yes, potentially. One when you get pre-qualified. Then another at loan application, if loan application and settlement happens 120 days or more after pre-qualification. And then the third check is just before settlement! Yes, now Fannie Mae, Freddie Mac, FHA, and all the rule makers require lenders to check for credit activity just a day or two prior to settlement. Read More
To rent or to buy is an old question with varied answers. The answer depends on your ability to come up with a down payment, your ability to commit to a specific area, your creditworthiness, and much more. Those are questions for each individual to answer. But there is interesting math related to how much rent costs, that should be reviewed in helping you determine your answer. Read More
It may seem odd that someone in the mortgage business wants to discuss how to help consumers find the best mortgage lenders. People search for mortgage providers every day without the benefit of professional help. So, I figured why not help people whether they find their way to me or someone else? Below I’ve listed the most important mortgage questions that you need to ask before you apply for a mortgage loan. Read More
There are times that I have used a mortgage borrower’s retirement account balance/s as income. I have done this even if the borrower is not currently taking required withdrawals from the account/s! But how can an asset be used as income? It can, and the guidelines allow it. However, there are rules.
All the Freddie Mac rules related to this can be seen by clicking here.
For retirement accounts that are already being used to take distributions as income, the Fannie Mae rules to document that as acceptable income are found here. Look under the area marked “Retirement, Government Annuity, and Pension Income.” The main points are:
If you are getting near retirement age or you are already retirement age, consider using your retirement accounts as income to help you qualify for a mortgage, even if you are not currently taking withdrawals from the account.
To contact me to discuss any income qualifying or other mortgage questions, click here to schedule a call or you can email me directly.
Prior to 2020, veterans could borrow more than the Veteran’s Administration (VA) Loan Limits capped amount, but had to have a down payment of 25% of the difference between the maximum loan limit and the sales price. As of January 1, 2020, the VA has started to allow $0 down loans that exceed the county loan limits.
So now, if a veteran wants to buy a home for $1,000,000 with no money down, they can. $2,000,000? Sure thing. $3,000,000? No problem! However, there are rules and guidelines that come with this new change. Read More
A VA cash-out refinance can be used for many reasons. There are a few important things to know about cash-out refinancing to 100% loan-to-value (LTV) when using your VA eligibility.
On a VA cash-out refinance to a 100% LTV the 100% must include the VA funding fee. Read More
The United States Department of Veterans Affairs requires that the closing costs on a VA refinance be recouped in 36 months or less. If the recoupment period is over 36 months the loan will be rejected.
In other words, the refinance closing costs divided by the monthly savings has to be 36 or less.
For example, if the closing costs on a VA refinance are $3,000. And the monthly savings on the refinance are $400 a month. The recoupment period is 7.5 months because $3,000 divided by $400 a month in savings = 7.5. This is well within 36 months. Read More
Variable income types: If you have variable income that changes and fluctuates, the rules of assessing your income to qualify for a mortgage are different than if you had a fixed salary. Read More
When buying a condo, you may find yourself in a competitive bidding situation. And your realtor may ask you about waiving some or all the contingencies in your contract. These contingencies are usually things like a home inspection contingency, appraisal contingency, and financing contingency. But waiving contract contingencies on a condo can be risky. Read More
I sometimes get asked about waiving one or all contingencies in a real estate contract. This helps make for a more aggressive offer in a competitive sellers’ market. The main contingencies in most real estate contracts are the appraisal contingency, the financing contingency, the termite inspection contingency, and the home inspection contingency. I am not a proponent or an opponent of any of these strategies. I simply want to discuss the pros and cons of each since it is a question I do get. Let me take these one at a time. Read More
I sometimes get asked about waiving one or all contingencies in a real estate contract. This helps make for a more aggressive offer in a competitive sellers market. The main contingencies in most real estate contracts are the appraisal contingency, the financing contingency, the termite inspection contingency, and the home inspection contingency. I am not a proponent or an opponent of any of these strategies. I simply want to discuss the pros and cons of each since it is a question I do get. In this blog I’d like to discuss waiving the Termite Inspection contingency. Read More
New home purchasers can get caught up in a wire fraud scam in a mortgage transaction by cyber criminals if they aren’t careful! This type of fraud is happening more often. Some borrowers are fortunate enough to have a bank that recognizes that money is being sent to a suspicious account and the wire gets stopped. Otherwise, the mortgage borrower can lose their entire down payment on the house. Read More
The new Loan Estimate (LE) was introduced in October 2015 as a federal standard form. It includes the interest rate, monthly payments, and total closing costs for a mortgage loan application. The lender is required to send you a Loan Estimate within 3 business days after applying for a mortgage. Even though this form attempts to help the consumer understand the loan payment breakdown and the costs, it can still be very confusing. The language on the form is murky and some of its terminology needs to be explained. Read More
Hello. Today I wanted to talk about some guideline changes called TRID. Which stands for, TILA RESPA Integrated Disclosures. The feds have mandated these changes and they’ve really slowed down the loan transaction. So mortgage consumers have to be careful about the deadlines that they write into a sales contract.
When you’re making an offer to a seller, there’s three things that you’re going to target for dates in the contract. One is, the appraisal contingency release date. The second one is the financing contingency release date. And the third one is the closing date. So it used to be before the TRID changes that took place October, 2015 that I would try and get people to write offers using the following dates: 14, 21, and 30. Meaning, 14 days to release the appraisal contingency, then seven more or 21 total to release the financing contingency, and then thirty days to close.
See my previous, recent TRID blog here.
Well now TRID has mandated a couple of things. One, the lender has got to get the final numbers to the consumer three full days prior to settlement. The closing disclosure is the form formerly called the HUD1 Settlement Statement. Now it’s called the Closing Disclosure, the CD. We have to get the CD out three days prior to closing. That’s something that honestly used to happen the day before closing. Or the morning of closing. To have a closing happen in 30 days, which is blazing fast, we’ve really needed almost all of that 30 days. Well now, to ask us to do that three days prior to closing, that tacks time onto the transaction. Also, we’re not allowed to order the appraisal until the consumer has been disclosed to as evidenced by receipt of their signed disclosures.
So day one is loan application. We’ll probably get the loan disclosures out to the consumer day two. They may need a day or so to review the disclosures and return them, that’s day three. Then we order the appraisal. So now, we’re taking to day three to order the appraisal. Which is something I used to be able to do on day one. And we need to get the closing disclosure to the consumer three days prior to the settlement date. That’s a bunch of extra time. We really need more time now.
Now…there’s a conflict between realtors and lenders. The realtors still want do things in 30 days. It’s possible, but the faster that you offer a seller to go to settlement, the more pressure that you’re putting on yourself and the transaction. The mortgage borrowers are tightly integrated with the process. So you’ve got to do the loan application quickly. And you have to sign the disclosures quickly. Then you’ve got to get in all of your supporting documents quickly.
I mean, same day, drop everything. Get it done. And a lot of times people just don’t have that time. Which is understandable. We have jobs and lives and family and commitment and travel. So just be really careful. Talk to your lender before you write any of these dates into a contract and commit yourself. There will be quite an uproar if you miss these dates. These are contractual obligations that you must make and a lot of consideration has to be taken into account. What’s your own schedule? What’s the lenders timelines like? And what can everybody together ensure that they can deliver on in the contract? Make sure you talk to all parties involved, and get it right. Thanks.
To contact me to discuss your mortgage scenario, mortgage rates, or other mortgage questions, click here to schedule a call or you can email me directly.
What Can My Website, Getloans.com Do? Click the images above to see some examples.
So you’re applying for a mortgage and you get conditional loan approval? What is that? The loan approval conditions, what do those mean? Read More
I always wondered how much value could be attributed to home staging. For me, I figured I could see past someone’s furniture, taste in decoration, or inability to keep a clean house. The potential in a home seems easy to see to me. Looking at square footage, bedroom and bathroom count, lot size and view are all the most important to me. I have never needed the benefit of having a home decorated a certain way for me to see its potential. Read More
TRANSCRIPT (fantasy discussion between Astronaut Neil Armstrong and Albert Esintein):
Hello Neil Armstrong. I have had a difficult time getting a mortgage. It is so complicated. I cannot understand it. Can you?
Albert Einstein, I cannot understand it either. Or your accent. But you were one of the fathers of the atomic age. One of the greatest scientists of all time. And came up with the theory of relativity! Are you being serious that you cannot understand the mortgage process?
I’d rather formulate the photon theory of light mechanics than go through the mortgage process. I don’t trust mortgage people. I would rather listen to politicians filibuster each other than go thru a mortgage process.
You clearly have not talked to Brian Martucci. He will help you get a loan and make it clear, easy, and transparent. Go to his website, www.getloans.com.
What will I do there silly astronaut man? Read More
When is an approval really an approval? When is an approval only a conditional approval? Below are the different levels of “loan approval” you can get for a mortgage:
Pre-qualification is done before you make an offer on a home. It is only a loan officer analysis, and supporting financial documents are not required. Only a review of the applicant’s income and debts are done. Standard methods of determining housing and debt ratios are used. This can help indicate the maximum loan amount for which an applicant would qualify. But it is subject to the satisfactory appraisal, further verifications of income, employment and credit history. This is the lowest form of analysis you can have done.
I sometimes have a client tell me they are getting their down payment to buy a new home from some interesting sources. I have had client sell an antique guitar collection on eBay, sell a car, get cash from a suitcase under their bed, and sell an art collection, among many more interesting stories. However, homebuyers need to be aware of what is allowed and what is not allowed. Some sources of down payment are not allowed. Read More
What is owner’s title insurance? There are two types of title insurance policies that you will need to consider when getting a new mortgage. The lender will require you to purchase Lender’s Title Insurance, which protects the lender from future title issues. Yet, that doesn’t cover the homeowner. There is also Owner’s Title Insurance to consider, which is optional for the consumer to get. Read More
Always get your mortgage pre-approved! Homeownership is a major component of the American dream. It provides you with your own piece of property to put down roots and live your life. You might think the process starts when you first go out hunting for houses or condominiums. But it often begins long before the initial meeting with a realtor when you contact a lender for pre-approval. Here are a few reasons why the seller and listing agent might want you to get pre-approved. Read More
Getting a mortgage when self employed can be tricky. If you own a business and have a loan for it, and you are planning on buying a home, you might be wondering if the business loan will affect getting a mortgage. A business loan can impact your credit score. And if you are the sole proprietor of the business and take out the business loan in your name instead of the business’ name, that may cause issues.
Should you work with an individual Loan Officer or a Loan Officer team? This discussion will stir up some controversy. I will likely get some angry comments as well as some supportive comments. Keep it classy, and let’s discuss! Read More
I have seen a few buyers be in a pinch for one reason or another, and not have immediate access to their checkbook. As a result, when writing an earnest money deposit as part of a real estate contract, they use any source they can find. They may use a friend or a parent. They figure they’ll pay them back later. However, that can create a problem or at the very least more paperwork. Read More
There is a lot of discussion around how fast you can close a loan. Especially in some of the hot urban markets like Washington DC, Boston, San Francisco, Los Angeles, and New York. They want to close on a mortgage in 21 days. A three-week close is difficult for various reasons. It may be possible in a very slow market. Is it really needed? Read More
