Mortgage Loans – You Gotta Show ‘em What You Got

I don’t know everything, but because I have logged probably thousands of hours working with underwriters I can safely say I know more about their requirements to approve a home mortgage loan than the average borrower. And it is pretty rare that a borrower decides they should challenge that expertise.

But I found it very interesting when a recent client decided to roll the dice based on his level of expertise when trying to buy a property — for which he needed financing!
And here’s my case in point: I was putting together a loan application for this client who was an entrepreneur. From the giddy-up, a client who doesn’t receive an annual W2 needs to provide real honest detail about their income and the source of any funds they bring to the transaction.

This gentleman, however, was adamant that the source of his $150,000 down payment was basically nobody’s business. Furthermore, the documentation that he finally did present didn’t jive with the monies he had and therefore really didn’t jive with the underwriters. They bounced it, just like I told him they would.

To cut to the chase here: we wasted a ton of time, the deal is now in jeopardy (because contracts are ticking time bombs if not diffused with the information that your friendly Tampa Bay Mortgage Broker asks for); and we are looking at a whole bunch of unhappy people: the Realtors that worked so hard to put the deal together, the seller of the property, and all the other industry professionals who only get paid if there is a closing.

At the end of the day, mortgage lenders are not trying to pry dirty little secrets to share about their clients at the company Christmas party; it is only full disclosure that shows the underwriter you have nothing to hide and are a risk worth taking – you’ve gotta go the Full Monty or the deal’s off.

VA Loans – Worth More Than You Think

One of our recent posts was about the first time homebuyer tax credit for the military. However, “post-posting” I found it was news to many people! It is an important word to spread so if you know anyone who qualifies it is a great home buying opportunity.
Which brings me to my next point; the advantages built into VA loans are way more robust than people may be aware. Ours is an industry fraught with misinformation; the worst case scenario is when a home buyer potentially misses out on getting the maximum benefit to which they are entitled.

For example, VA loans have a seller concession limit of 4% of the sale price. Here is a list of what that 4% can include:

• Buyer’s funding fee
• Prepaid Taxes and Insurance
• Gifts (televisions, microwaves)
• Interest Rate Buy-down (Payment of Discount Points)
• Payoff of Credit Balances or Judgments on behalf of the buyer to help them qualify (How great is that?)

HOWEVER….not included in the 4% limitation are:

• The payment of usual and customary closing costs (these are wide open for interpretation)
• Normal discount  points (that aren’t for the purpose of buying down the interest rate)

So here’s a breakdown:

• Home price $200,000
• Sellers can pay $8000: (4%) worth of stuff from the first list AND
• Sellers can pay an additional $4000 worth of stuff from the second list
• Bottom line: $12,000 in costs that can be assumed by the seller, or 6% of the purchase price

That’s a lot of stuff! Give us a call if you require any additional information and please pass this along…there are tremendous advantages for the eligible.

Interest Rates and Their Destiny

March 31^st is upon us and the Federal Reserve Bank is poised to pick up their marbles and go home. They’ve spent those 1.25 trillion dollars on all those U.S. mortgage-backed securities and now they’re getting out of the game. But who’s picking up the slack?

Amidst the cacophony of speculation, are other investors magically going to appear out of the mist and begin buying these mortgage-backed securities?

If not, what is the fate of interest rates – where are they going to go? We’ve heard increase projections between 6 to 7 and even 8%! But frankly, we’ve got as much chance of predicting what will happen at the end of next week or the end of next month or year as we do picking winning Lotto numbers.

According to the January 20, 2010 quarterly TARP report to Congress, “The Government has done more than simply support the mortgage market, in many ways it has become the mortgage market.”

At the end of the day, government intervention once again played a huge role in staving off disaster, but by dipping that big toe in the pond they stand to create an awful lot of ripples when they take that big toe out.

Mortgage Professionals and Home Buying in Tampa Bay

While I’ve never been a huge fan of government intervention, two of the smartest things they’ve ever done as far as the housing market is concerned was to have the Fed purchase mortgage-backed securities to keep the interest rates down (this will come to a screeching halt by the end of the first quarter by the way), and to extend and expand the homebuyer tax credit. (As far as the tax credit goes, everyone should know by now that your home purchase contract needs to be fully executed by April 30^th and closed by June 30^th to take advantage.)

Other than these two dates looming large, we are mired in the minutiae of mortgages. The more things change…the more things change.

As of January 1^st, we were saddled with new HUD guidelines and a slew of shiny new forms and disclosures with mandatory waiting periods while continuing to make allowances for the common learning curves and their impact on the contractual date sensitivities.

These changes are really bringing industry professionals together (like it or not) to rely on one another to keep things rolling and to keep one another afloat to achieve the goal for the client. Navigating the maze of new laws is hard enough, but when each lender has their OWN interpretation of the new laws, it can make for some crazy fire drills during the week of the closing to ensure that the customer is not impacted.

But you do tend to see what people are really made of when things get tough; and these have been trying times for everyone from appraisers to underwriters to mortgage brokers to Realtors. The good news is we at TriCounty Mortgage have put in place proactive measures to address these issues and keep everyone singing from the same hymnal.

At the end of the day, let’s just hope that the right government intercessions will continue to contribute positive opportunities and that industry professionals will focus on getting to closing with minimal impact on our customers. It’s the only way to survive a housing tsunami.

Mortgage Loans and Seller Paid Contributions

Here we go again! In the mortgage industry, mortgage brokers have seen as many interpretations of rules as there are actual rules that govern the home mortgage business.
Seller paid contributions (money that can be allocated toward buyers’ expenses of everything from closing costs to pre-paids to escrows and are paid out of the sellers’ funds), may or may not soon be downgraded from the current 6% of the home purchase price to 3% of the home purchase price. Currently, we have no concrete information on an effective date for that change.
However, (mortgage brokers have had to use that word a lot lately!), since January 1^st we’ve already seen hiccups in lender interpretations of how to treat owners’ title insurance and tax stamps on the deed in the context of seller paid contributions.
In many regions of the country, these title insurance and tax stamps expenditures were traditionally funded from the seller’s side of the HUD.  But now, if a deal includes a 6% seller contribution, then the owner charges must be represented on the HUD. But some lenders are interpreting the tax stamps on the deed as a charge to the home buyer.
The impact on the home buyer is the discovery that he or she needs to come up with this extra cash at the point in the transaction when buyers are not at their most liquid. This surprise can really cause a hardship and is the kind of stress that can be avoided.
At the end of the day, best practices dictate that in a seller-paid scenario, the home buyer should confirm with their lender whether it is the seller or the buyer that pays for the title and the tax stamps. Avoiding a pre-closing surprise of a buyer paid contribution is priceless.

How Not to Get a Deal Done

In my experience, people throw others under the proverbial bus for one of two reasons:

• They themselves don’t know what they’re doing so they blame someone else
• They don’t understand the intricacies of a situation so they look for an easy scapegoat to give a client an answer and make themselves look golden

Either behavior has no room in today’s mortgage loan and home buying business. Now more than ever before, everyone involved in a real estate transaction from the buyer to the seller to the Realtors to the Title Company to the lender to the mortgage broker have to roll as one because otherwise the deal with go south as sure as I’m sitting here.

Timing and disclosure are everything in the wonderful land of Oz with its new HUD; a sense of urgency must prevail above all. If you wait for a house to fall from the sky before you wake up and work the deal, your clients ain’t going nowhere. It is just not the climate for emails in lieu of direct phone calls and for not picking up the phone after 5PM when a deal is in progress and deadlines are looming.

And whether every industry professional wants to admit it or not, there comes a time when for example, the act of trying to balance the HUD sheet can make one’s head hurt. That’s because there’s a new HUD in town and new rules and it makes for learning curves that can complicate getting the parties to the closing table, so people have to help one another out to literally fill in the blanks and get the job done right for the client. At the end of the day, it is the client that matters most, not ego and attitude.

Every one of us is doing everything we can under extraordinary circumstances. There are a thousand things that can happen:

• Sometimes the lender’s software is not setup to handle the recognition of certain fees under the new disclosure rules
• Sometimes something needed by 4:30 on a Thursday arrives at 4:28 allowing for no margin of error
• Sometimes a fee that the mortgage broker is willing to absorb winds up showing as a borrower’s cost when it should not

When stuff like this happens the team behind the buyer just has to get it to work, it is not necessary to draw attention to the man behind the curtain who is spinning all the wheels racing against time.

The buyer doesn’t need to see all the machinations; the buyer has enough on his or her mind. The buyer just wants to buy their home, we are responsible for facilitating the process. Isn’t that what we tell them at the onset, that we are here to make things work smoothly on their behalf? When did it become about us and placing blame the other guy?

We are professionals; we just have to fix things and not point un-informed fingers at anyone. We stick together and we’ll get it done. At the end of the day, save the drama for your mamma.

Welcome to TriCounty Mortgage

Mortgage Loans – How to Get the Best Rates

Risk based pricing on mortgage loans; basically, that’s the name of the game. Stated income is out and asset verification is in. The interest rate you receive on your home loan is determined by the mortgage lender’s estimate of the probability that you as a borrower will default on the loan.

If it is determined that you are less likely to fail to pay, then you are rewarded with a lower interest rate. As I’ve said before, you can ask a bank about current mortgage rates or search for mortgage rates on the Internet, but nothing replaces the true picture painted by your history and your holdings in the hands of a mortgage professional. And any mortgage interest rate that sounds too good to be true definitely is, unless it is quoted with all the personal factors taken into consideration.

The top five things that impact your mortgage interest rates:

1. Credit Score
2. Loan to Value
3. Loan Size in terms of dollars
4. Property type being purchased (Condo, Single Family, Townhome)
5. Closing Date

The number one thing to be cautious about are the ubiquitous unsolicited rate offers seen in the paper and heard on the radio. The odds are that you as the borrower will not get that advertised rate. Even if it is offered as low as 4.00% followed by a slew of exclamation points, you’ll probably have as much chance of getting that rate as you do scoring the 100” HDTV for $10 in the after-Thanksgiving blow-out sale! One person is going to win; it is just not going to be you.

At the end of the day, numbers don’t lie. Your numbers tell the story. Just bear in mind that there are compensating factors that can counterbalance some unfavorable aspects of your history. And when you review the overall equation it can sometimes tally up in your favor.

Condo Financing Strikes Again

The world of condo mortgages is a battlefield, you have to be locked and loaded and on your guard. As a mortgage broker I have become crazy vigilant about preparing for the unexpected.

As most of you know, credit overlays are additional layers that a lender can impose on top of existing underwriting restrictions or government ordered guidelines. To each his own and financial institutions should do everything in their power to secure their interest. But to change a down payment requirement from 25% to 30% three days before a scheduled closing is a real kick in the condo.

We got the process change notification on a Thursday after 6PM stating that if all approvals weren’t completed by that Monday (a national holiday by the way) the new down payment requirement would go into effect.

The only thing we were waiting for was the financials and some insurance docs from the condo association; otherwise we were good to go until we were given only one business day to shake the association down for the paperwork that still had to go through several hands on a Friday before a three day weekend.

I wasn’t going to let that last minute hurdle kill this deal for my client, we managed to make it happen; we just had to go through a whole lotta hurt to get there.

At the end of the day you may not be able to distinguish between having a root canal and financing a second home condo. Perhaps mortgage brokers should be licensed to administer anesthesia to numb the pain until we get to the rinse and spit part of the transaction.