Mortgage Miracles Happen

December 17, 2010

Underwriting is easing on FHA & VA loans to help more borrowers, see the changes in guidelines.

GIFTS, GRANTS, COMMUNITY SECONDS AND LOANS FROM FAMILY MEMBERS

• FHA purchase transactions in which the borrower’s funds for down payment, closing costs, prepaid expenses and/or discount points are provided by a gift, grant, community second or loan from a family member or

• FHA purchase or refinance transactions in which, for qualification purposes, the borrower receives a gift to pay down or payoff installment debt.
o Credit Score 580 – 639:

 Reserves are not required.
o Borrowers without credit scores and borrowers who do not meet minimum trade line requirements published in the “Credit History” section of FHA Product
 Gifts, etc. are now permitted.

PROPERTY FLIPPING – Effective Immediately; (This is GOOD for investors & getting the number of distressed properties off of the market).

For FHA and VA purchases, the seller seasoning requirement has been decreased from 90 days to 30 days.

• Flagstar continues to require a second appraisal for properties sold within 90 days of seller acquisition if the new purchase price exceeds the seller’s acquisition cost by 20% or more.

When determining the 20% increase in sales price, property improvements made subsequent to seller acquisition may not be included in the acquisition cost.

To Be Determined (TBD) Property Addresses for Underwriting of FHA & VA Loans
We are now underwriting loans for borrowers who have not yet selected a property. To ensure loan approval, it is imperative that loan packages contain all pertinent disclosures, credit, income, and asset documentation.

BORROWERS WITHOUT CREDIT SCORES

The following overlays replace our current guidance for FHA borrowers without credit scores:

• The borrower must now have a 12-month rental history. This requirement is reduced from the current 24-month requirement.

• Borrowers who live with family or otherwise live rent-free remain ineligible for FHA financing.

• The borrower must have at least two additional pieces of non-traditional credit, and each trade  line must have a 12-month history.• Borrower may not have had a previous bankruptcy or foreclosure.

• Maximum ratios 31/43.

• Gifts, grants, community seconds and/or loans from family members are now permitted for all or part of the borrower’s funds to close, subject to FHA requirements.

REPAIR ESCROW HOLDBACKS FOR REO PROPERTIES
Repair escrows are now permitted for FHA purchases of bank-owned properties when exterior repairs cannot be completed due to weather conditions.

• Approval of the repair escrow is granted on a case-by-case basis and will not be permitted for structural items or items that affect the health and safety of the occupants.

December 8, 2010

Self-Employed? What to Expect When Applying for a Mortgage Refinance Loan

Based on the past mortgage boom and subsequent bust, self-employed borrowers have been impacted greatly. The ’stated loan’ of yesterday has gone the way of the buggy whip. The fraudsters butchered that particular mortgage loan by turning them into liar loans. The whole idea of stating some one’s income was a sign of how out of control the real estate and mortgage industries had become. Proving your gross income and determining your debt to income ratio, is the baseline of the pre-approval process for a mortgage refinance.
When it comes to your mortgage refinance, self-employed borrowers are going to be challenged more than ever with the tightening of guidelines and anti-fraud measures now in place.

What self-employed borrowers should expect when applying for a mortgage refinance:

-Full tax return disclosure, business and personal for at least 2 years

-Adjusted gross income will be the effective gross income

-All business expenses must be reasonable and with-in industry standards

-Schedule E and other expenses must be fully disclosed and accurate

-Prepare to provide all incorporation documentation and identification of all owners/partners

-Married partners may need marriage licenses

-Lenders will perform INCO check, to verify the tax returns that are due, have been submitted with IRS or extensions have been filed

-All bank accounts must be disclosed, it is best to have sufficient funds and cash flow in your personal accounts

-If funds from business accounts are utilized, be prepared for detailed explanations, underwriters are not fond of business funds used for personal use.

-Documentation will need to be provided how business account withdrawals will not negatively impact business operations and cash flow

-Prepare to explain deposits into your accounts and unusually large deposits, especially if you have a relatively new business or very tight debt to income ratios

-You will need a two-year self-employment history

-Expect scrutiny on handwritten documentation and checks

-Direct deposits, wire transactions are preferred when analyzing bank accounts

-Be prepared to explain one time, large expenses that are not reoccurring

-Depreciation on tax returns can be returned to the asset side of your income statement

-The newer your business the more scrutiny you will receive, 20 years of self-employment speaks for itself

-The more organized and detailed your documentation, the better.

-All gift money needs total documentation from origin to destination, bank statements reflecting every aspect of the gift money transaction (for FHA and VA loans)

-Be prepared to document and explain how you pay yourself

-Addresses must match up with business licenses, taxes, drivers licenses, etc…. Different and mismatched addresses across the file will cause problems

Longevity, organization and proper documentation are paramount for self-employed borrowers. Newer businesses will receive more intense analysis for obvious risk reasons. If paperwork is disorganized and sloppy, take the time to get organized, it will help the business in every way.

If the accounting for the business is air tight, expect a relatively simple approval process. If the accounting is sloppy and dis-organized, look for heavy scrutiny and a lot of questions and explanations.

If the business is not organized, you need to get that way, the business will benefit and prosper in many ways.

December 7, 2010

Mortgage Rates Wait for No One

CNBC and Bankrate.com just reported that home loan rates are at their all time lows. Yes, all time lows! This is great news for anyone who has yet to refinance to take advantage of the lowest rates ever recorded, or to purchase that new home or investment property more affordably than ever before.
Both 30 year and 15 year fixed rates clipped down to their lowest levels. All this is incredible as just months ago, many experts had anticipated that rates would be well above 5% this summer and on their way to 6% by year end.

Last month, NBC reported that nearly 50% of all people with a 30 year fixed rate had rates higher than 5.75% – do you know where your interest rate is at currently? It’s worth a look.

Plus – in most parts of the country, home values as reported by both the National Association of Realtors and the S&P Case-Shiller indices are higher than last year. If you were unable to refinance last year, the combination of your current home value and historic low interest rates may provide you a greater opportunity to save money than ever before.

Finally, even if your home has lost value from when your loan was originated, you may still be able to refinance. There are some special programs available that might allow you to refinance without private mortgage insurance, even if your loan will now exceed 80% of the present value.

Don’t miss the chance to saving money. Even if you have already taken advantage of the historic rates that have been offered, don’t miss this chance to help your family and friends.

Time waits for no one…and when rates rise, they will rise quickly!  Case in point, take a look back at the month of November.  They have jumped .25% in one week and another .25% this past week to make it a .5% higher rate than what the month of Octobers rates were.

If you or someone you know has not refinanced, get off the fence, save yourself or have them save a bundle of money and get going.  You have to get your loan package put togehter and prepare in advance rather than sit back and not take the initiative to do anything.

Those that take action will save a lot of money over the years.  Are you going to be one that does or are you going to pay the price by sitting back and not being proactive about your finances during the time that you can set yourself and your family up for the long term to have more wealth than you originally expected when you had bought your home.

December 6, 2010

Mortgage Myths Dispelled

The mortgage industry continues to change, almost daily. I wanted to dispel some common myths about mortgages in our current lending environment.


1. I have to have perfect credit to get a mortgage.

FALSE-You can qualify for a mortgage with a middle credit score a low as a 620.

2. I need to have a large down payment.

FALSE-For an FHA mortgage only 3.5% of the purchase price is required as a down payment. The down payment can even be a gift from a relative, close friend, employer, etc. In fact, you can buy a HUD Home with as little as $100 down! (A HUD home is one that HUD has foreclosed on and is trying to sell)

3. I have to be able to verify consistent income.

TRUE-The days of Stated Income, No Income, and No Ratio are gone. Income must be fully verifiable.

4. I must be employed.

FALSE-Those that are retired, on Social Security, Permanent Disability, or any other verifiable income are typically able to get mortgages as long as we can show the continuance of future income for at least three years.

5. The $8000 first time home buyer credit has expired?

TRUE and FALSE-Yes, 4/30/10 was the last day for most people to be under contract to buy a home and qualify; however, you have until 4/30/11 and still be eligible to get the credit if you were in the military, Foreign Service, and intelligence corp who served at least three months of qualified overseas duty in 2009.

7. I am currently in a Chapter 13 Bankruptcy so I cannot get a mortgage.

FALSE-You can typically get a mortgage during your Chapter 13 repayment as long as you have made at least 12 months payments on time and you have permission from the court.

8. I filed a Chapter 7 Bankruptcy three years ago so I cannot get a mortgage.

FALSE-You would be eligible for a mortgage two years after your bankruptcy has been discharged.

9. I can qualify for a mortgage if at least three years has passed since I had a foreclosure.

TRUE

10. I cannot qualify on my own, but my Mother can be a co-signor.

TRUE-Your Mom can be a co-signor so long as her credit is satisfactory and her debt to income ratios are good. She would have to qualify via the same process of you.

Please let me know if you have any questions. I hope this post helps answers some myths and gives you hope for home ownership!

December 3, 2010

Before You get a Mortgage: Ten Credit Do’s and Don’ts

How can a fully approved loan get denied for funding after the borrower has signed loan docs?
Simple, the underwriter pulls an updated credit report to verify that there hasn’t been any new activity since original approval was issued, and the new findings kill the loan.

This generally won’t happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days.

Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.

It’s An Ugly Cycle:

First-Time Home Buyer receives an approval

Thinks everything is OK

Makes a credit impacting decision (new car, furniture, run up credit card balance)

Funder pulls new credit report and denies the loan

In the hopes of stemming the senseless slaughter of perfectly acceptable approvals, we’ve developed a “Ten credit do’s and don’ts” list to help ensure a smoother loan process.

These tips don’t encompass everything a borrower can do prior to and after the Pre-Approval process, however they’re a good representation of the things most likely to help and hurt an approval.

Ten Credit Do’s and Dont's:

DO continue making your mortgage or rent payments:

Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation.

Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents.

It’s always better to be safe than sorry.

DO stay current on all accounts:

Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc).

Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.

DON’T make a major purchase (car, boat, big-screen TV, etc…):

This one gets borrowers in trouble more than any other item.

A simple tip: wait until the loan is closed before buying that new car, boat, or TV.

DON’T buy any furniture:

This is similar to the previous, but deserves it’s own category as it gets many borrowers in trouble (especially First-Time Home Buyers).

Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.

DON’T open a new credit card:

Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc).

Both of these can have a negative impact on your score, and could result in a denial if things are already tight.

DON’T close any credit card accounts!!  DO NOT DO THIS!:

The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).

DON’T open a new cell phone or satelite or dish tv or similar type of account:

Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.

DON’T consolidate your debt onto 1 or 2 cards:

We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.

Collections:  Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.

The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score.

Consult your loan professional prior to paying off any accounts.

DON’T take out a new loan:

This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan.

Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.


Follow these Do’s and Don’ts for a smoother mortgage approval and funding process.

Just remember the simple tip: wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.

December 2, 2010

Refinance Now and pay the pre-payment penalty or wait til the pre-pay expires then refinance?

So a dliemma has been presented by a borrower that has a pre-payment penalty and is wanting to lower the payments, but has less than one year for the pre-payment penalty to expire.

If a borrower has a pre-payment penalty and is considering to not refinace because of a pre-payment penalty, then you need to do the math and compare the long term savings by getting the lowest possible rate while rates are low rather than waiting til the timer period expires for a pre-payment penalty to expire. The bigger risk is that rates will increase and by waiting you will in turn pay more in interest over the term of the loan rather than biting the bullet and paying the pre-payment penalty now. By analyzing the numbers with the help of Excel, which is my best friend in determining the benefit and seeing the true numbers, you will then see the wisdom in what to do for your personal financial matters.
Here's the link to the excel spreadsheets that I've made available to help make the decision by taking a step back and analyzing the numbers.  Once you plug in the numbers and review the figures, you can then know if you should proceed to move forward or not to refinance at the current time.

http://wedohomeloansforyou.com/index.php?page=calculators-payment-comparison
Make sure you not only use this spreadsheet yourself, but also share it with your family and friends so they can help make the decision that they can better their finances for the long term.

Window of Opportunity May Be Closing – Sooner Than You Think

I wanted to reach out to you before it's too late. Many people have heard that home loan rates reached record lows in October, 30 year rates were in the super low 4's, 15 year rates were bewteen 3.375 & 3.625%, all depending on the LTV and the borrowers credit score.  Due to the frenzy and buzz of the low rates, I've been busier the past few months with emails and phone calls from clients wanting to take action compared to the rest of the year prior to this fall who wanted to take advantage of this wonderful lending envirnment.

But – and this is an important but – it is more important than ever to act now.

Over the last week, rates have started rising again due to a combination of good economic news and the Fed's latest Treasury Security purchasing plan. In fact, over the last week rates have risen 0.5% from where rates were in October! That's right – 0.5%!  For two days they dropped back down .25% to make it a .25% rise and yesterday rates increased again .25% to go back up to the .5% higher than October.

While some people say good things come to those who wait, others say to strike while the iron is hot and make hay while the sun is shinging. In this case, the "iron is still hot" and the sun is shinging with rates still under 5% at exceptionally low levels, but it's starting to turn, and quickly. And we will quite likely never see home loan rates this low again.

It will only take a minute – give me a quick call so we can look at your situation. Doesn't cost anything to check it out, and the choice of moving forward will be up to you. But don't miss this closing window of opportunity to save significantly on your monthly budget. What better gift to give yourself...and just in time for the holidays!

Case in point, a family that has a $220,000 mortgage that is currently paying 5.875% on a 30 year and their new loan is 4.375% for a 20 year mortgage, they will save approximately $90,000 in interest and they payments are going to stay about the same or within $10 to $20 of the year mortgage.

That's a savings that you cannot wait till next summer or some time in the future and expect to get the savings over time.  Why?  Two reasons.  One, the markets move and are not going to wait on anyone to be ready.  If rates creep up to over 5%, they may not go down to the super low 4's for years.  Two, Time is on your side or not on your side, pending on acting or not acting.

I look forward to hearing and working from you!  If you happen to be reading this article and you will not benefit from refinancing at all, surely you know a few people in your sphere of influence that can benefit from restructuring their mortgage and finances.