After hearing from the real estate industry that many homebuyers who signed contracts earlier this year in the hopes of receiving the homebuyer tax credits are having trouble closing their transactions, the Senate today voted to extend the deadline for closing until the end of September, according to the South Florida Sun Sentinel.
To qualify for the $8,000 first-time or the $6,500 repeat buyer tax credits, buyers must have signed a contract by the end of April 2010, and originally had to close by the end of June. But the National Association of Realtors reported that 180,000 buyers are in danger of failing to close by that deadline.
The provision that would extend the tax credit will be added to a bill that would extend unemployment benefits, the Sun Sentinel reported, and the entire bill will have to be voted on by both the House and the Senate.
The tax credit has been somewhat controversial, with Zillow’s own Chief Economist Stan Humphries asserting that it didn’t “save our bacon,” but instead stole demand from later this summer.
Contact The Mortgage Mark with any questions at mark@themortgagemark.com or http://www.themortgagemark.com/
Wednesday, June 16, 2010
Wednesday, June 9, 2010
Short sale in the last 7 years could mean “you’re out!”
“How long after a short sale can we qualify again?” It is a question often asked and until now the answer, with the exception of lender enhancements to Fannie Mae and Freddie Mac guidelines, has been much unchanged.
With the release of FNMA’s DU 8.1 comes some huge game changers.
“DU will be updated to incorporate the policy changes specified in Announcement SEL-2010-05, Underwriting Borrowers with a Prior Preforeclosure Sale or Deed-in-Lieu of Foreclosure, regarding prior deed-in-lieu of foreclosure actions. If a deed-in-lieu of foreclosure is reported within two years of the credit report date, the loan casefile will receive a Refer with Caution/IV recommendation.”
Translated into common language that means regardless of the amount of down-payment, debt-to-income ratio or credit scores the loan application will not receive the all cherished “Approve/Eligible” from the Fannie Mae automated Desktop Underwriter. Instead these files will all be subjected to manual underwriting and will result in longer underwriting times and closer examination.
For buyers looking to purchase who have normally qualified for FHA home loans after as little as two years the news is much less pleasing. For loans with down payments less than 10% DU will issue the dreaded Ineligible where any applicant has had a short-sale or deed-in-lieu of foreclosure within the last seven, yes 7, years. This effectively removes millions of buyers from the market for another 7 years. Your government hard at work.
Keep in mind these changes are to Fannie Mae’s underwriting engine and guidelines not to FHA or other sources. However with FNMA being the largest purchaser of mortgage securities today it greatly impacts the home sales market.
For home buyers with 10% down but less than 20% down the waiting period will be four years:
DU Version 8.1 will also include the following requirements that will apply to borrowers with prior deed-in-lieu of foreclosure actions that occurred two or more years, but within 7 years from the credit report date.
Loan casefiles submitted to DU with an LTV or CLTV greater than 80 percent where a borrower on the loan casefile has a deed-in-lieu of foreclosure action that was completed two or more years, but within four years from the credit report date will receive an Ineligible recommendation, and therefore ineligible to be submitted for loan approval and purchase.
Loan casefiles submitted to DU with an LTV or CLTV greater than 90 percent where a borrower on the loan casefile has a deed-in-lieu of foreclosure action that was completed four or more years, but within seven years from the credit report date will receive an Ineligible recommendation, and therefore ineligible to be submitted for loan approval and purchase.
This version of DU is implemented on June 19, 2010 and will affect all loans which need DU approval on or after that date. Generally the remainder of the market follows the lead of Fannie Mae in the event their loans may eventually be sold to Fannie.
Contact the Mortgage Mark or Visit http://www.themortgagemark.com/
With the release of FNMA’s DU 8.1 comes some huge game changers.
“DU will be updated to incorporate the policy changes specified in Announcement SEL-2010-05, Underwriting Borrowers with a Prior Preforeclosure Sale or Deed-in-Lieu of Foreclosure, regarding prior deed-in-lieu of foreclosure actions. If a deed-in-lieu of foreclosure is reported within two years of the credit report date, the loan casefile will receive a Refer with Caution/IV recommendation.”
Translated into common language that means regardless of the amount of down-payment, debt-to-income ratio or credit scores the loan application will not receive the all cherished “Approve/Eligible” from the Fannie Mae automated Desktop Underwriter. Instead these files will all be subjected to manual underwriting and will result in longer underwriting times and closer examination.
For buyers looking to purchase who have normally qualified for FHA home loans after as little as two years the news is much less pleasing. For loans with down payments less than 10% DU will issue the dreaded Ineligible where any applicant has had a short-sale or deed-in-lieu of foreclosure within the last seven, yes 7, years. This effectively removes millions of buyers from the market for another 7 years. Your government hard at work.
Keep in mind these changes are to Fannie Mae’s underwriting engine and guidelines not to FHA or other sources. However with FNMA being the largest purchaser of mortgage securities today it greatly impacts the home sales market.
For home buyers with 10% down but less than 20% down the waiting period will be four years:
DU Version 8.1 will also include the following requirements that will apply to borrowers with prior deed-in-lieu of foreclosure actions that occurred two or more years, but within 7 years from the credit report date.
Loan casefiles submitted to DU with an LTV or CLTV greater than 80 percent where a borrower on the loan casefile has a deed-in-lieu of foreclosure action that was completed two or more years, but within four years from the credit report date will receive an Ineligible recommendation, and therefore ineligible to be submitted for loan approval and purchase.
Loan casefiles submitted to DU with an LTV or CLTV greater than 90 percent where a borrower on the loan casefile has a deed-in-lieu of foreclosure action that was completed four or more years, but within seven years from the credit report date will receive an Ineligible recommendation, and therefore ineligible to be submitted for loan approval and purchase.
This version of DU is implemented on June 19, 2010 and will affect all loans which need DU approval on or after that date. Generally the remainder of the market follows the lead of Fannie Mae in the event their loans may eventually be sold to Fannie.
Contact the Mortgage Mark or Visit http://www.themortgagemark.com/
Tuesday, June 8, 2010
Chris Pronger's other jerk moves
Tuesday, June 1, 2010
Chris Pronger's other jerk moves
And then I told Carcillo:
"No, the moustache looks awesome".While the Chicago Blackhawks have staked out a 2-0 lead in the Stanley Cup Finals, all anyone seems to want to talk about today is Chris Pronger. The Flyers' defenceman has been accused of poor sportsmanship after shooting a towel at Chicago's Ben Eager and twice stealing the puck after the final buzzer.
Sadly, this sort of behaviour isn't new for Pronger. In fact, throughout his career he's become notorious for a series of incidents in which his actions were inappropriate, unprofessional, and just downright mean.
Here are some of the most memorable:
•Was suspended during the Stanley Cup Finals after delivering a vicious elbow to the head of Ottawa's Dean McAmmond, outraging fans around the world who were really hoping he'd get Chris Neil instead.
•At 1993 entry draft, rudely stole the spotlight from #1 overall pick Alexandre Daigle by turning out to be like a hundred times better than him.
•Once got bored during the Vancouver Olympics opening ceremonies, wandered to the backstage area, and cross-checked the guy in charge of making sure all the cauldrons were working in the throat.
•Has been known to slack off and go up to two full years without single-handedly dragging a team to the Stanley Cup finals.
•Caused a long delay during a 1998 game when he claimed to suffer a brief cardiac arrest after being hit with a slapshot directly above the heart, as if he has one.
•Demanded a trade out of Edmonton in 2006, selfishly placing the desires of his wife and children above those of a company that had employed him for almost an entire year.
•His hilariously sarcastic press conference performance after game one turned out to be a word-for-word recitation of Bill Hicks' Arizona Bay album.
•Was once suspended eight games for stomping in Ryan Kesler's leg with his skate, which was kind of odd, since it was August and Kesler was napping on a beach at the time.
•When presented with a seven-year contract offer from the Flyers last year, immediately signed it instead of politely saying "Um, maybe you should go back and re-read the CBA".
•Knows full well that Flyers could have swept the Bruins, but convinced teammates to spot them a 3-0 series lead "just to mess with them".
•Once borrowed Riley Cote's copy of Schopenhauer's On the Fourfold Root of the Principle of Sufficient Reason; returned it the next morning all dog-eared.
•Post-loss ritual: cruise interstate looking for families stranded on the side of the highway with flat tire; pull over; slash other three tires; drive away.
•During NBC telecasts of Flyers games, constantly leans over to Pierre McGuire and says "I don't think they can hear you, maybe try speaking louder."
•After every playoff game this year, calls up John Stevens and leaves him a detailed message about how much fun it was.
•You know when you have to get up early the next day but you can't sleep because some idiot's car alarm is going off all night long right below your window? Yeah, that's him.
•Walks around the league like he's better than everyone, when in reality he's only better than 97% of them.
•Immediately demands a trade every time he finds out that Joffrey Lupul has finished unpacking.
•Lead the Anaheim Ducks to a Stanley Cup after being acquired in a deal with the Oilers, which apparently gave GM Brian Burke the idea that trading two first round picks for a star player is a good idea.
•Is often rude and uncooperative with members of the media, even those he is currently sleeping with.
Chris Pronger's other jerk moves
And then I told Carcillo:
"No, the moustache looks awesome".While the Chicago Blackhawks have staked out a 2-0 lead in the Stanley Cup Finals, all anyone seems to want to talk about today is Chris Pronger. The Flyers' defenceman has been accused of poor sportsmanship after shooting a towel at Chicago's Ben Eager and twice stealing the puck after the final buzzer.
Sadly, this sort of behaviour isn't new for Pronger. In fact, throughout his career he's become notorious for a series of incidents in which his actions were inappropriate, unprofessional, and just downright mean.
Here are some of the most memorable:
•Was suspended during the Stanley Cup Finals after delivering a vicious elbow to the head of Ottawa's Dean McAmmond, outraging fans around the world who were really hoping he'd get Chris Neil instead.
•At 1993 entry draft, rudely stole the spotlight from #1 overall pick Alexandre Daigle by turning out to be like a hundred times better than him.
•Once got bored during the Vancouver Olympics opening ceremonies, wandered to the backstage area, and cross-checked the guy in charge of making sure all the cauldrons were working in the throat.
•Has been known to slack off and go up to two full years without single-handedly dragging a team to the Stanley Cup finals.
•Caused a long delay during a 1998 game when he claimed to suffer a brief cardiac arrest after being hit with a slapshot directly above the heart, as if he has one.
•Demanded a trade out of Edmonton in 2006, selfishly placing the desires of his wife and children above those of a company that had employed him for almost an entire year.
•His hilariously sarcastic press conference performance after game one turned out to be a word-for-word recitation of Bill Hicks' Arizona Bay album.
•Was once suspended eight games for stomping in Ryan Kesler's leg with his skate, which was kind of odd, since it was August and Kesler was napping on a beach at the time.
•When presented with a seven-year contract offer from the Flyers last year, immediately signed it instead of politely saying "Um, maybe you should go back and re-read the CBA".
•Knows full well that Flyers could have swept the Bruins, but convinced teammates to spot them a 3-0 series lead "just to mess with them".
•Once borrowed Riley Cote's copy of Schopenhauer's On the Fourfold Root of the Principle of Sufficient Reason; returned it the next morning all dog-eared.
•Post-loss ritual: cruise interstate looking for families stranded on the side of the highway with flat tire; pull over; slash other three tires; drive away.
•During NBC telecasts of Flyers games, constantly leans over to Pierre McGuire and says "I don't think they can hear you, maybe try speaking louder."
•After every playoff game this year, calls up John Stevens and leaves him a detailed message about how much fun it was.
•You know when you have to get up early the next day but you can't sleep because some idiot's car alarm is going off all night long right below your window? Yeah, that's him.
•Walks around the league like he's better than everyone, when in reality he's only better than 97% of them.
•Immediately demands a trade every time he finds out that Joffrey Lupul has finished unpacking.
•Lead the Anaheim Ducks to a Stanley Cup after being acquired in a deal with the Oilers, which apparently gave GM Brian Burke the idea that trading two first round picks for a star player is a good idea.
•Is often rude and uncooperative with members of the media, even those he is currently sleeping with.
Sunday, May 23, 2010
How to Lower your Credit Scores
How to Lower you Credit Scores
Instead of going through the strenuous process of raising your credit score we should cut to the chase and talk about how to destroy a perfectly good credit score. After all it is easy to make scores tank but it takes work, practice and good habits to build and maintain a good credit history.
In the event you are unsure of what a good credit score is suffice it to say anything above a 740 would be considered a good score by any bank or lender for most loan purposes. Scores in the range of 680 to 740 would be considered at least fair by most banks and lenders. So for the sake of our story you get to start out with a 755 credit score … just like Henry Aaron you get a 755.
Getting to a 755 takes good habits. It requires good borrowing habits, good payment habits and good spending habits. Once you achieve a 755 you will get plenty of opportunities to destroy your credit. In fact some lenders and credit card companies will be very blatant in their willingness to help you abuse your credit score. They are so glad you spent the 5 to 10 years to build your scores, maintain your payments and exhibit good spending control they will now allow you to squander your efforts pretty much just by signing a piece of paper and mailing it back or even just by phoning them and giving them a code from your offer.
To best destroy your credit without even going through the effort of applying for new credit you should simply be late on your credit cards, car payment or mortgage payment. In fact being only 31 days late with your mortgage payment should knock you down a couple of dozen points or more. If your credit is deep, meaning you have a great payment and spending history on several accounts, you will not be able to do too much damage with just one late mortgage payment. In that event you should go on to the next step.
Since you failed to do much damage to your score by being late with a mortgage payment I recommend strongly you do your best to be at least 30 days late with 2 payments. But don’t be late 2 months in a row. Skip a month and then be late with 1 other payment at least 30 days. That should do it for a few months.
Now wasn’t that easy? Chances are you dropped your scores at least 100 points in just 4 months. You may, depending on the depth of your credit history, manage to lower your scores as much as 150 points or more! Congratulations!
Hopefully you are able to recognize a spoof when you see one. The examples are fictional but the results are very true. Never be late, never over spend (keep your credit cards at the limit), be careful about what type of new credit you apply for and when, and always be conscious of your credit scores. Regardless of what Suze Orman says when it comes to borrowing, you are your credit score.
Contact The Mortgage Mark with any questions!
www.themortgagemark.com mwilkins@capitalfmc.com
Friday, May 14, 2010
Protect your information when applying for a mortgage.
Your private information is never more vulnerable than when you are applying for a mortgage. It is inevitable that you will have to provide someone with the keys to your entire life. This includes paystubs, W-2’s, bank accounts, stocks, bonds and of course your social security number. It is also very possible that you are giving this information to a complete stranger. So how do you know who you can trust? Here are some things to consider:
1. Check to see if your loan officer is licensed to originate mortgage loans in your state. You can start by checking the NMLS (National Mortgage Licensing System ) consumer access site @ http://www.nmlsconsumeraccess.com/ . In order to be listed on the NMLS , a loan officer must undergo a full background and credit check. If your loan officer is listed here, they have passed the background check. Not all states are currently listed on the NMLS, so confirm that your state is currently a participating state before alarm bells go off if your loan officer is not listed. Here is a list of current states on the NMLS.If your state is not listed, do a search for your states mortgage originator license requirements. It is also not unreasonable to request that your loan officer provide you with a copy of their license. Something else to note, loan officers for federally chartered banks are not bound by the NMLS licensing requirements.
2. Whenever possible, go directly to your loan officer to submit your financial documents at their office. Take a look around the office. Are all state licenses displayed in plain view? Do you see loan files spread all over the place? Are sensitive income documents in plain view? These are red flags! All loan documents should be kept under lock and key at all times, unless they are being reviewed. A responsible loan officer will have a desk that is clear of sensitive information.
I believe that the mortgage industry is primarily made up of upstanding professionals. Through regulations like the NMLS, it is getting better every day. Still it is necessary that you perform diligence to protect your identity and your assets.
1. Check to see if your loan officer is licensed to originate mortgage loans in your state. You can start by checking the NMLS (National Mortgage Licensing System ) consumer access site @ http://www.nmlsconsumeraccess.com/ . In order to be listed on the NMLS , a loan officer must undergo a full background and credit check. If your loan officer is listed here, they have passed the background check. Not all states are currently listed on the NMLS, so confirm that your state is currently a participating state before alarm bells go off if your loan officer is not listed. Here is a list of current states on the NMLS.If your state is not listed, do a search for your states mortgage originator license requirements. It is also not unreasonable to request that your loan officer provide you with a copy of their license. Something else to note, loan officers for federally chartered banks are not bound by the NMLS licensing requirements.
2. Whenever possible, go directly to your loan officer to submit your financial documents at their office. Take a look around the office. Are all state licenses displayed in plain view? Do you see loan files spread all over the place? Are sensitive income documents in plain view? These are red flags! All loan documents should be kept under lock and key at all times, unless they are being reviewed. A responsible loan officer will have a desk that is clear of sensitive information.
I believe that the mortgage industry is primarily made up of upstanding professionals. Through regulations like the NMLS, it is getting better every day. Still it is necessary that you perform diligence to protect your identity and your assets.
Thursday, May 13, 2010
Calculating a mortgage payment “in your head”
Any real estate agent who has been in the business more than a few minutes and has shown a home or two has been asked the question, “how much would the payments be?” Chances are the agent does not have their mortgage calculator in their hands to input the mortgage rate, loan amount and other important factors. However, they do have their brain available and can easily estimate a mortgage payment for any home.
Real estate agents are not expected to be mortgage professionals but customers shopping for a new home do expect them to be able to answer the monthly payment question. There is a very simple way of calculating a mortgage payment based on any rate and it can easily be done without a calculator or even pen and paper.
Calculating the interest would be quite straight forward. The trick is always getting the principal added back in to the payment. So, in disregard to accuracy to the penny (or even the dollar for that matter) you can use some historic data to calculate the mortgage payment.
First you need to know the sales price. This should be simple for anyone. Then you need to know the down payment amount. Subtract the down payment from the sales price and you have a good idea of the loan amount provided it is not a loan that allows mortgage insurance or other costs to be financed into the loan. Next you need the interest rate. It would be almost impossible for the agent to know the actual interest rate of the client so use a fair average of where rates are for the day - the agent and shopper both likely know this number.
For most homes in America priced around $150,000 to $300,000 the property taxes and home owner’s insurance will equal about 1% of the loan amount per year. Using this very rough and loose average to add 1% to the interest rate for the day. Still a pretty easy calculation but what about that principal?
You are in luck because you are not being asked to provide an amortization schedule but only a payment. For a 30 year amortization the first year’s principal is about 1.2% of the loan amount. Add 1.2 to your total of the interest rate plus the 1% for taxes and insurance. Want to see an example?
Loan amount $120,000
Interest rate 5.5%
Taxes and insurance 1%
Principal 1.2%
5.5 + 1 = 6.5 + 1.2 = 7.7
Now comes the fun part. Break the loan amount down into 1s and 0s. Like 100,000 and 10,000 twice. It is much easier to calculate mortgage payments when you are multiplying by one!
100,000 x 7.7 = 770
10,000 x 7.7 = 77 (70 x 2 = 140) (7 x 2 = 14) (140 + 14 = 154)
770 + 154 = 924
A good estimate of the monthly payment for a $120,000 loan at 5.5% interest amortized over 30 years is $924 per month PITI. Obviously if you are an agent you want to disclaim many times that you cannot be held to this and only the mortgage professional can provide an accurate payment based on many different criteria
Contact The Mortgage Mark With any questions!!
http://www.themortgagemark.com/
mwilkins@capitalfmc.com
Real estate agents are not expected to be mortgage professionals but customers shopping for a new home do expect them to be able to answer the monthly payment question. There is a very simple way of calculating a mortgage payment based on any rate and it can easily be done without a calculator or even pen and paper.
Calculating the interest would be quite straight forward. The trick is always getting the principal added back in to the payment. So, in disregard to accuracy to the penny (or even the dollar for that matter) you can use some historic data to calculate the mortgage payment.
First you need to know the sales price. This should be simple for anyone. Then you need to know the down payment amount. Subtract the down payment from the sales price and you have a good idea of the loan amount provided it is not a loan that allows mortgage insurance or other costs to be financed into the loan. Next you need the interest rate. It would be almost impossible for the agent to know the actual interest rate of the client so use a fair average of where rates are for the day - the agent and shopper both likely know this number.
For most homes in America priced around $150,000 to $300,000 the property taxes and home owner’s insurance will equal about 1% of the loan amount per year. Using this very rough and loose average to add 1% to the interest rate for the day. Still a pretty easy calculation but what about that principal?
You are in luck because you are not being asked to provide an amortization schedule but only a payment. For a 30 year amortization the first year’s principal is about 1.2% of the loan amount. Add 1.2 to your total of the interest rate plus the 1% for taxes and insurance. Want to see an example?
Loan amount $120,000
Interest rate 5.5%
Taxes and insurance 1%
Principal 1.2%
5.5 + 1 = 6.5 + 1.2 = 7.7
Now comes the fun part. Break the loan amount down into 1s and 0s. Like 100,000 and 10,000 twice. It is much easier to calculate mortgage payments when you are multiplying by one!
100,000 x 7.7 = 770
10,000 x 7.7 = 77 (70 x 2 = 140) (7 x 2 = 14) (140 + 14 = 154)
770 + 154 = 924
A good estimate of the monthly payment for a $120,000 loan at 5.5% interest amortized over 30 years is $924 per month PITI. Obviously if you are an agent you want to disclaim many times that you cannot be held to this and only the mortgage professional can provide an accurate payment based on many different criteria
Contact The Mortgage Mark With any questions!!
http://www.themortgagemark.com/
mwilkins@capitalfmc.com
Monday, May 3, 2010
Mortgage qualification - the big three
The mortgage process, especially for those who are denied or delayed, is an enigma to most. Understanding a few basics, three in fact, can help open the windows and let some light on the mysterious inner-workings of mortgage lenders. Getting denied or being quoted a higher rate than you heard advertised need not be a huge question mark.
Every conventional lender, those who lend according to Fannie Mae and Freddie Mac guidelines, builds their lending criteria equal to or more stringent than the guidelines offered by those to mortgage holding giants - unless they are selling to Ginnie Mae or another mega investor. In those guidelines are some very simple first steps so important to the lending process they can be the cause for the vast majority of denials or increase costs of credit.
Whether you are applying for money to purchase a home or to refinance one you currently own these three points are crucial to your success in obtaining a good mortgage.
Number One: Employment and Income
Chances are if you skip around from job to job, especially in different industries, and you have large gaps of time between them you will be considered too high risk at least for a prime loan. Even if you have steady employment history if your income is not verifiable to the amount you need for a good debt ratio you can also be denied or incur the cost of risk in the form of a higher interest rate.
Self-employed borrowers generally need to demonstrate two full years of self-employment as evidenced by a business or professional license or other acceptable documentation. The tax returns of self-employed borrowers are usually required and the adjusted gross income, less any allowable deduction add-backs, are the accepted form of verification of income. So if you “write everything off” you may be shooting yourself in both feet when it comes to qualifying for a bank loan.
Number Two: Payment History and Credit Scores
You have probably seen the adds of mortgage companies saying “bad credit okay”. Hold on to your assets if you go to them and don’t give them an unreasonable application fee because the industry that sets the qualifications disagrees with them. This means if they are able to get you financed you’re going to pay the price one way or another. It is always better to maintain a good payment history and resulting credit scores.
Missing payments and being late on payments are two different things but neither are good. Being late on a payment is being 30 days or more late in paying. In other words if your payment is due on May1 and you make the payment on May 29 you are not considered late for credit reporting purposes. However is you do not make that payment until June 2 then you are late and that counts as one 30 day late or “one times thirty”.
Payments made late, even one times thirty, can wreak havoc on your credit scores and obviously it gives you a bad mark on your payment history. When the loan officer asks if you have been late on any payments in the last 24 months and you say no she is going to find out if you are telling the truth as soon as the credit bureau starts spitting out your last 10 years or so of payment history.
Number Three: Property Type and Purpose
Condos, log cabins and single family detached homes all present varying levels of risk to the bank. Risk is determined by historicity of repayment by similar borrowers on similar properties over the decades. Likewise a single family detached home in which the borrower is going to live is different from a single family detached home on the beach where the borrower may want to live but only spends a few weekends per year.
Commercial properties and residential properties are two completely different items in the eyes of the lender. In fact you cannot use a commercial loan on non-commercial properties and you cannot use a residential loan on non-residential properties. Each carries its own level of risk and therefore qualifications and costs of credit.
Differences Matter
Hopefully you know what your credit score is. If not you should. You should also know if your credit report contains any derogatory information such as collections, charge-offs or late payments. If you find real errors on your report you may challenge the reporting bureaus to have the lender provide proof of the reasoning they submitted for derogatory comments.
You know your income and you should know whether or not you can truly afford a home. One of the big pushes on loan officers today is to make certain they believe you are fiscally responsible enough to own a home even if you earn enough income and seem “fun to chat with”.
For any questions contact mwilkins@capitalfmc.com or http://www.themortgagemark.com/
Every conventional lender, those who lend according to Fannie Mae and Freddie Mac guidelines, builds their lending criteria equal to or more stringent than the guidelines offered by those to mortgage holding giants - unless they are selling to Ginnie Mae or another mega investor. In those guidelines are some very simple first steps so important to the lending process they can be the cause for the vast majority of denials or increase costs of credit.
Whether you are applying for money to purchase a home or to refinance one you currently own these three points are crucial to your success in obtaining a good mortgage.
Number One: Employment and Income
Chances are if you skip around from job to job, especially in different industries, and you have large gaps of time between them you will be considered too high risk at least for a prime loan. Even if you have steady employment history if your income is not verifiable to the amount you need for a good debt ratio you can also be denied or incur the cost of risk in the form of a higher interest rate.
Self-employed borrowers generally need to demonstrate two full years of self-employment as evidenced by a business or professional license or other acceptable documentation. The tax returns of self-employed borrowers are usually required and the adjusted gross income, less any allowable deduction add-backs, are the accepted form of verification of income. So if you “write everything off” you may be shooting yourself in both feet when it comes to qualifying for a bank loan.
Number Two: Payment History and Credit Scores
You have probably seen the adds of mortgage companies saying “bad credit okay”. Hold on to your assets if you go to them and don’t give them an unreasonable application fee because the industry that sets the qualifications disagrees with them. This means if they are able to get you financed you’re going to pay the price one way or another. It is always better to maintain a good payment history and resulting credit scores.
Missing payments and being late on payments are two different things but neither are good. Being late on a payment is being 30 days or more late in paying. In other words if your payment is due on May1 and you make the payment on May 29 you are not considered late for credit reporting purposes. However is you do not make that payment until June 2 then you are late and that counts as one 30 day late or “one times thirty”.
Payments made late, even one times thirty, can wreak havoc on your credit scores and obviously it gives you a bad mark on your payment history. When the loan officer asks if you have been late on any payments in the last 24 months and you say no she is going to find out if you are telling the truth as soon as the credit bureau starts spitting out your last 10 years or so of payment history.
Number Three: Property Type and Purpose
Condos, log cabins and single family detached homes all present varying levels of risk to the bank. Risk is determined by historicity of repayment by similar borrowers on similar properties over the decades. Likewise a single family detached home in which the borrower is going to live is different from a single family detached home on the beach where the borrower may want to live but only spends a few weekends per year.
Commercial properties and residential properties are two completely different items in the eyes of the lender. In fact you cannot use a commercial loan on non-commercial properties and you cannot use a residential loan on non-residential properties. Each carries its own level of risk and therefore qualifications and costs of credit.
Differences Matter
Hopefully you know what your credit score is. If not you should. You should also know if your credit report contains any derogatory information such as collections, charge-offs or late payments. If you find real errors on your report you may challenge the reporting bureaus to have the lender provide proof of the reasoning they submitted for derogatory comments.
You know your income and you should know whether or not you can truly afford a home. One of the big pushes on loan officers today is to make certain they believe you are fiscally responsible enough to own a home even if you earn enough income and seem “fun to chat with”.
For any questions contact mwilkins@capitalfmc.com or http://www.themortgagemark.com/
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