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. Unless you plan to pay in cash, you need to secure a mortgage loan. 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 the rest of this entry »
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 the rest of this entry »
Is it a good idea to borrow against your 401(k) to get the down payment to buy a home? If your employer allows you to borrow from your 401(k) plan, and most do, you can take the lesser of 50% of your vested balance or $50,000. The typical repayment Read the rest of this entry »
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 the rest of this entry »
Often times when a buyer and seller are negotiating over the sale of a home, the buyer indicates they would like to have certain personal property from the home. There are times when 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.
However, there is a problem with this. The problem with including personal items like furniture, rugs, chandeliers, a pool table, and these sorts of personal items is that once they are written into the contract they inherently have value. Yet, the document being used to buy and sell real estate is a real estate contract, also used to contractually bind parties in a real estate transaction; it is not supposed to be a pool table contract! Read the rest of this entry »
It used to be that when I was qualifying a mortgage borrower and they told me that their student loans were deferred, I could normally count on not using that debt against them in their debt ratios. However, as we all know underwriting guidelines are stricter these days, and now many times deferred student loans still have to be counted against mortgage borrowers’ debt ratios, even when no payments are being made and they are in deferred status. You have to Read the rest of this entry »
What in the whole wide universe is a Change of Circumstance form? It sounds like the most bureaucratic, idiotic, useless, pointless, and needless document ever. Wise reader, it is. As part of recent RESPA law changes, we now have to issue a mortgage borrower a Change of Circumstance form any time we move a muscle, any time we cross the room, any time we use the restroom, we must alert the mortgage consumer as to all comings and goings and changes in circumstance! It is critical! It is a must! It is the law! I am of course being sarcastic, but for the love of all things logical, pure, and good, Read the rest of this entry »
Unreimbursed Business Expenses (UBE) is one of the newest issues to trip people up on mortgage applications. Fannie Mae and Freddie Mac have really cracked down on enforcing that lenders deduct any UBE from a mortgage borrower’s income. UBE are expenses that an employee pays that their employer does not pay and also does not reimburse them for. So if you tell me you earn $100,000 a year, Read the rest of this entry »
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. So when you start a loan process and the loan officer tells you can easily close a loan Read the rest of this entry »
I often have people ask me if they can lend their son or daughter money instead of giving it as a down payment gift. Or some want to lend the money and then forgive the loan over time to avoid the gift tax. It seems many want to help their family but avoid taxes while they do it.
First, from an underwriting and mortgage guideline standpoint, this is not an option. Read the rest of this entry »