In high-cost areas, the FHA national loan limit “ceiling” will increase to $636,150 from $625,500. FHA will also increase its “floor” to $275,665 from $271,050. Additionally, the maximum claim amount for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $636,150. This amount is 150 percent of the national conforming limit of $424,100.
The short answer is yes, eventually. But this hike was SO telegraphed, we think rates will rise very nominally if at all from this hike. Of course some will seek to hike rates and take advantage of the media attention. As always trust your financial provider and do your research.
Here is a video on CNBC about the Fed Rate Hike yesterday and its impact on mortgage rates.
There is no better teacher than experience. In the mortgage world, knowledge is very much power. We learn from our mistakes. It’s important to be as prepared and educated as possible to avoid any unpleasantness related to delayed closings or worse last minute loan denials. Yes it really happens.
When preparing for any refinance or purchase loan you must gather ALL you documents related to employment, income, assets, and even credit report items. Here’s why it matters. When underwriting your loan we will review really anything related to Capacity, Credit, Collateral, Character
One of the biggest flubs we can make when applying for a purchase mortgage or even a refinance mortgage are related to assets, and even more specifically moving assets. Money used for closing a purchase with a mortgage needs to be sourced, seasoned, and verified. That usually means all bank statements for the last 60 days with documentation of all deposits not clearly defined. If a deposit is not from a verified source, like an employer, we have to document those deposits with receipts, copies of checks, bank letters, showing the source of those monies.
Be SPECIFIC with your Loan Officer in regards to your income. If you are hourly but state you earned salary $89,000 be sure to spell out what you really make in base salary, overtime and other compensation. Just because you earned overtime, this year, doesn’t necessarily mean you can use that income to qualify. There needs to be a consistent. Are you talking losses on your taxes, then we need to see them and documents any small businesses, or tax losses in addition to income claimed. Did you have a GAP in employment? Make sure to be clear with your start dates and termination dates for all employers.
Whether refinancing or purchasing the property is every bit as important as the items above and below. Is the property in good repair, is there Carbon Monoxide detectors installed, is the water heather double braced, are the smoke detectors installed. If the property is a condominium? Is the project involved in a lawsuit? Are there a large number of units that are rented? If the property is a single family, there shouldn’t be any broken windows, second floor doors that are missing decks or stairs? Is there mold ANYWHERE? There should never be exposed wiring drywall not finished. There should always be flooring in the home. And utilities should always be on. Basically no health or safety issues present. The appraisers and inspectors on purchase loans, will also note these items.
4. Credit Reports
In addition to credit score, we actually read credit reports too. If you have disputed any item on your credit report, we will most likely have to remove the dispute. large balances on credit cards tend to drop scores dramatically. Make sure to maintain a small to moderate amount of credit use. Having at lest 75% of your revolving credit available is a pretty good target. Any lates or negative credit items need to be addressed and explained. Bankruptcies and Foreclosures require a substantial amount of documentation too, so be prepared. And NEVER EVER apply for additional credit during the mortgage application process. Don’t go buying the new fridge or stove just yet. And that new car may have to wait until you are done with your home loan process. And yes, we see you applied with someone else too. So please be ready to tell me why you don’t trust your Loan Officer. (OK that one is personal, and usually not a big deal to shop with one or two lenders)
5. The Loan Application Interview
If there is ANYTHING you think your Loan Officer needs to know that he didn’t ask you or bring up in an interview. DO SO YOURSELF. You know what’s happening, or happened, in your life better than we do. If you have a second car loan on your credit and your daughter pays for it, please note that. If there is an issue with qualifying and we don’t know that you don’t pay that car payment we could decline your loan. If you are in a lawsuit, its going to come out. Better to be clear earlier. If you are in a divorce tell your Loan Officer. Were you a veteran? You may be able to get a better VA Mortgage. Were you turned down already. It would really help to identify the problem area so we can identify a lender that doesn’t have issue with the item.
6. Be ready
It is NORMAL in today’s environment for the Loan Officer to come back for additional conditions. Sometimes it happens often as we try to meet the underwriters concerns or satisfy a condition. For example, you submit your two months bank statements to show you have your money to close. Well we need to source, season and document deposits. So if you deposited $5000 becuase you sold a car. We will most likely have to document you owned the car (car registration), sold the car (bill of sale), received money for the car (money from the buyer going into your bank). And that is for one deposit!
7. Be patient and be understanding
Things take time to review. When you send a condition to your loan officer, he will review it, forward it to the processor who will review it, and then if acceptable submit it to the underwriter for sign-off. This cane take several days. So don’t be surprised if they come back days later for a clarifying condition. In our business we run into very emotional people and when deals have problems, which is more likely in a tight credit market such as ours, things get tense. Try your best to maintain composure. A borrower that is willing to roll with the punches and work together with their loan officer has the best chance of being successful. That doesn’t mean it always works out. Sometimes after a lot of work by a lot of people time and money for reports and inspections and the deal falls apart. It’s unfortunate, but it is not the end of the world and you will probably be very knowledgeable about what needs to be fixed before you apply again. Don’t give up.
The toughest part of my job is saying, “No”.
I’ve had to say it a little more than normal, and a little later than normal on a few deals recently. And I think it is important that we as an industry take a look at the fall-out from last minute loan declines.
The scenario we have here is a FHA purchase for a married borrower. The wife’s credit score was too low to qualify so we removed her from the loan and used the husband only. However with FHA, guidelines require non-borrowing spouse’s debt to be considered for underwriting, even judgments must be considered. For FHA, judgments must be satisfied/paid off or on a payment plan at closing with three consecutive recent payments.
In my scenario, the borrower stated that had made payments on the judgments previously, but stopped after losing her job. She was asked to get a new payment plan in place bu our underwriter, and show proof of her past payments to the collection agency.
The spouse did just that and showed the new current payment plan with the first installment ready to go, and the proof of past payments. The past payments were however garnishments, albeit voluntary. The previous payments were also of a different amount.
The underwriter determined FHA would not insure the loan due to the fact the borrower failed to maintain consistent and timely payments. And did not have 3 current consecutive payments on the new payment plan and cannot pay those payments in advance. The borrower has simply not shown a willingness to repay. This is both a Credit and Character issues for underwriters.
The issue this creates is two fold. One the borrower supplied all these items over the course of a three week period. We are in escrow obviously and the back and forth between underwriter, LO and borrower to clarify the judgment issue pushes against contract contingencies.
In this case, the borrowers spouse, whose medical bills and subsequent judgment all happened before the marriage was the determining factor for the loan declination. I think FHA should reconsider the means by which it requires borrower to document and satisfy judgment payment plans. As well as examine the likelihood of the judgment impacting the purchase of a property where the borrowers spouse is not on title. The are many assumptions we can make about the risk inherent in these files. There are other factors that certainly make an underwriter decline a deal. No reserves, other poor credit items, etc. etc.
The only way for an Originator to fully prepare for any issues during contract, is to completely process the file prior to submission. That in itself is a costly endeavor but may be required to prevent last minute declines.
Are you a Realtor? Do you have an Open House this weekend? Need some pretty color flyers for your welcome table?
Hopefully, you’ve heard about all the new first time home buyer programs. FNMA raising the loan to value allowances for purchase loans to 97% and FHA loans getting closed with 500 credit scores.. Stay informed. Linked here, is our First Time Homebuyers Flyers. Gain your buyers confidence with our experience and dedication to mortgage lending and getting the best program available.
Your FHA Buyers should be aware of the 97% Conventional loan (linked here) we are now offering. A fantastic option for some FHA approved customers. Save your clients money by making sure ALL options are presented.
Have a lot of cash closings?
Have your buyers access their cash from the previous close with a new cash-out loan — the proceeds can be used for a new purchase! Give your all cash clients this flyer – There is no waiting period.
Freddie Mac has released a survey on mortgage rates. The agency’s weekly survey showed that the average rate on a 30-year, fixed-rate mortgage was 3.66 percent, down from 3.73 percent last week and 4.41 percent a year ago. But what does that really mean? Well for every $1,000 you borrow the price goes from $5.01 per thousand to $4.62 per thousand. Well, for a $450,000 loan amount you are now going to ay $2078.92 per month versus $2256.08 based on last years rates. Almost a couple hundred dollars of savings. And that is just a vanilla loan.
Rates are continuing to adjust both ways we had two price increases yesterday, and then got a little better today. The point being, to trust your loan advisor and make sure the savings make sense for you today. Many lenders focus on, “Hey, we can close this in 5 minutes!”. Obviously that is an exaggeration, but the point is sometimes, taking a time-out and playing the market may hold some advantage. Sometimes however, waiting can cost you to lose a lower rates. Don’t be greedy. Sometimes you just need to lock and enjoy the improvement in rate, rather than waiting for the floor. Even the stick picker will tell you that you can never call a bottom. Nor can you call a top. Be wise and lock em’ if you got em’
For 25 I’ve been watching new home buyers make the same mistakes over and over. If you are going to buy and use financing via a new mortgage there are several items you need to keep in mind and/or complete to ensure a smooth funding. This is not a complete list by any stretch but I can tell you this list will save you somewhere along the line.
1. Get Approved. Not Pre-Qualified. There is a huge difference. It is possible to obtain a full underwriter (human) issued approval, before you find the home of your dreams. It’s called a TBD as in To Be Determined, as in, you will determine what the address is after you get approved. Your Loan Officer should know this is an option. Getting pre approved merely denotes an application has been reviewed and maybe automated underwriting has issued an approval. Full approval helps you understand what you truly qualify for.
2. When you are shopping for, in escrow for, or getting ready to close.. DO NOT ever, UNDER any circumstance buy anything new on credit, don’t apply for that new stove or refrigerator. don’t finance carpet. If anyone runs your credit or even worse extends you credit, you may find your loan approval has been reversed. And yes, I’ve tight deals get cancelled over very small amounts of new credit.
3. Get your items to your lender as quickly as possible. Turnaround is everything in our business. And turnaround times apply to you buyers as well. When you are asked by your lender, escrow officer, processor etc., make sure you respond with the items they need as quickly as possible. You’ll be doing yourself a favor!
4. Read what is being sent to you. Read your contract carefully and review your loan paperwork in detail. The rules these days dictate that lender and brokers disclose terms much clearer and leave little room for error. This step will avoid last-minute confusion about your loan terms and leave you with a bad taste in your mouth because you didn’t keep yourself informed.
You’d think with all the technology today processing a loan would be seamless, perfect, and never without a smooth and timely outcome. Well you’d be wrong. While it is fair to say technology has really helped the overall process, it has however become a much more compliant comliant world. When we started processing loans… many many MANY moons ago. There was a few forms in triplicate filled out by hand or a handy selectric II typewriter and underwriters looked at loans on their merits.. There were no credit scores.
Well those days have changed and along with the seemingly never ending amount of compliance, rules and regulations, technology has only offset the added delays.
And let’s not forget, while we at CPR are technologically and digitally proficient, the average borrower is still living in an analog world.
It’s not uncommon to get a stack of paperwork from a client which will have to reviewed, organized, compiled, verified, and THEN converted to a digital format. In fact, even with the amount of digital signatures being completed out there, many lenders still want good ole fashioned “wet signatures” on certain documents. And final loan documents are still almost entirely wet signed and witnessed by a Notary as it has always been.
So ever with the technology today, we are still doing the same job in mostly the same way.
It’s been awhile since we touched base. But CPR is growing nationally! With the expansion we are changing our name, a bit. California Property Resources, will be CPR Processing very shortly. We are thrilled with our new clients and the opportunity to serve you and your clients needs.
So what’s new? Well we’ve got a new favorite wholesale lender we are working with. Quicken Loan Services has developed an absolutely fantastic online lending platform for mortgage brokers. They real advantage with technology is that is supposed to make things easier, faster, and cheaper. But in many cases in lending technology has been added and developed into a hinderance in getting things done. QLS is providing real value and making things better for the mortgage broker. If you haven’t checked them out we encourage you to do so.
We try to share real world scenarios with you to educate the public and the professionals alike in our industry. This week we have a buyer who qualifies all around. He works hard, gets overtime and can afford to buy. He is the perfect candidate. He has a child and lives with his girlfriend. And here is where it gets a little weird.
Most will agree that the modern family isn’t always a husband and wife and 2.3 kids anymore. In fact, more and more couples aren’t even married. But whether married or not, families have issues and arguements. and here is one case where an old wound rears its ugly head to throw a wrench in the mortgage process.
When qualifying for a mortgage we take into consideration all income, all credit report payments, and all loans and other items disclosed as liabilities, including alimony and child support.
In our case study, the buyer/borrower had a baby with a girl. Then he decided to go to college and play sports but decided not to pay his child support. The “baby momma” then filed a claim with the family court. These delinquent payments are reported on the credit report.
Since then the buyer has reunited with his “baby momma”, and it feels so good, they’ve decided to buy a home. All parties are getting along and that is great for the child and for the mother and father. However, they never update the family court and completed the proper filings releasing the father from having delinquent obligations.
Underwriters are tasked with making sure all borrower obligations and potential obligations are accounted for and documented as to why they are or are not included. Since there was no order updating the status of payments the buyer/borrower still appears to have outstanding child obligations, and delinquent at that.
It’s easy but takes borrower focus to get this rectified. If the mother and father simply go to the court and ask for new filings to update the credit bureaus and inform the underwriter of the current status of payments, if any, the mortgage process can be completed. With the borrower showing delinquent obligations and no current payments being made, the underwriter cannot properly account for the debt to income ratio and therefore not approve the loan to close.
Moral of the story, if you filing something with a city, county, state, or federal agency, make sure you update those agencies of any updates, like thefamily is together and all is good! So update those family orders and make sure you are prepared to buy.