All About Credit Scores

November 17, 2017 by · Leave a Comment 

I was going to tell you all about credit scores here but these kids did it brilliantly so……..

Mortgage Kids – Credit Score from Finance of America Mortgage on Vimeo.

Home Equity Line of Credit

March 19, 2015 by · Leave a Comment 

If you want to get an equity line of credit, you need to go to your bank or credit union and you need to know what to shop for. I give advice to my clients as part of my ongoing service and it can be a useful tool for some and it can be a bad idea for others. Banks and credit unions generally don’t offer advice, they just offer financial products. I offer advice and here is some on HELOC’s

 

 

Realtor Tips – Lender Friendly Contracts

July 24, 2014 by · Leave a Comment 

I LOVE Realtors!

Is your Mortgage Professional doing this?

October 29, 2012 by · Leave a Comment 

I recently shared a Total Cost Analysis report with a Realtor to show her the options I had given to the client she had referred to me and she absolutely loved it and was just floored by all of the information and the vast array of choices presented to her clients. She was thinking that this was a fixed rate type of loan environment and that there were not really that many choices to make and you just choose a lender and move forward and it did not make much difference who you chose. I am happy to say that this report changed all of that in her mind and she felt compelled to refer all of her clients to me from that point forward and that was when I saw the real value of how I conduct my business.

Advisor Path

The she said something that took our conversation to the next level. She asked how I had shared this valuable information. I told her I had emailed it directly to the client so that both husband and wife could look at it when they had the chance and that online the report is actually interactive and then she said “It’s too bad you could not put yourself with the report so you could explain it as well as you did with me.”  She was completely blown away when I told her I had done precisely that and I showed her the following link.

Click here to see the report I showed her.

Years ago I decided that I was going to become a mortgage professional. I had been calling myself a pro for years but I actually wanted to become a pro and take my service and my business to the next level and I started investing in education so that I could go from Loan Officer to a consultant and a trusted advisor and in my travels I picked up some great information and some really powerful tools. I had come to take it for granted and this conversation reminded me that there are not that many professionals out there and even less trusted advisers.

I know this may read like a commercial for me or the way that I do business but it is much more than that. I believe strongly in what I do and the people that I serve and it has taken my relationships to a much higher level and that is what keeps me excited and engaged in what I do and ultimately what gets me to the office every day to continue to serve my clients.

If you want this type of service, give me a call or send me an email and let me know what you are thinking of doing with real estate today.

                                                                                                                  – Hans

HARP 2.0 – Will that help me?

March 22, 2012 by · 2 Comments 

A lot of people can’t refinance because they owe more than their house is worth or they have a 2nd mortgage or Mortgage Insurance (MI) and we have solutions for many of those issues. There are several programs here now or coming but let’s start with the HARP which stands for Home Affordable Refinance Program.

What is HARP 2.0?    

Everyone is talking about HARP 2.0 and so let’s define it. First of all, since it is 2.0 that means that the program was already around and we are talking about changes so let’s show you what it looks like now and then discuss changes that are sort of in effect now and really in effect after March 19th 2012 when the new changes will be coded into the automated underwriting systems so we can actually approve these loans.

The first thing that you need to know is that this is only for people who have a mortgage already owned by Freddie Mac or Fannie Mae. People tell me all the time that their mortgage is owned by a big bank but if you have a 30 year fixed rate mortgage and it is not interest only, it is probably owned by Freddie or Fannie and I will show you how to find out a little later. Currently you can refinance your home even up to 125% Loan To Value (LTV) and there are different rules and pricing at different levels (95%, 105% etc.). Currently it is a little more difficult if you have a 2nd mortgage or MI. This is what HARP 2.0 is looking to fix.

The first part is easy, they have removed the LTV issue altogether. There will definitely be approvals where we do not need an appraisal but there will also be instances where appraisals will be required but in all instances, any LTV can be approved. Next, it is getting easier to keep a 2nd mortgage or HELOC in place while refinancing the first mortgage and we will be able to accommodate many loans with MI. There is another enhancement that limits the fees on these loans and the qualifying ratios will most likely be relaxed. My suggestion is to look online and see if your loan fits and if it does, gest started with your favorite lender. Start by going to  www.FreddieMac.com/mymortgage/ and/or www.FannieMae.com/loanlookup/  to see. Loan applications can be taken in mid February 2012 but may not be able to be fully approved until March 19th if you need the new rules. This program makes sense because they already own these loans and so giving people lower payments makes them more stable so everyone wins.

What if I don’t have a Freddie or Fannie Loan?

On the flip side, you can see why if Fannie or Freddie does not own your loan currently they may not be too excited to take on a new loan of $250,000 on a home that is worth only $200,000 but there may be hope for these people as well. There is talk of using FHA to help these folks even if they do not have a current FHA loan. I think this will probably come true but I do not know how long it will take or what the rules will look like so stay tuned.

Anything special if I have an FHA or VA or USDA loan?

One more note is that if you currently have an FHA, USDA or VA loan, you can get a streamline loan without an appraisal and with relaxed qualifying guidelines. We do not use debt ratios at all and we weigh heavily on whether the house payment has been made on time in the last 12 months. This program has been around for the entire 22 years I have been in business so the model is strong.

Please send me your real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.

Hans Bruhner is a branch manager for First Priority Financial. Hans is licensed by the CA DRE # 01085398 and NMLS #243484 and First priority is licensed by the CA DRE # 00652852 and NMLS #3257. If you have a question, please contact him at (707) 347-9250 or hans@hansblog.com

Seven Things Your Agent Should Know About Your Mortgage Approval

April 1, 2010 by · Leave a Comment 

While many experienced real estate agents have a general understanding of the mortgage approval process, there are a few important details that frequently get overlooked which may cause a purchase to be delayed or denied.

New regulation, updated disclosures, appraisal guidelines, mortgage rate pricing premiums, credit score, secondary approval layering, rescission deadlines, property type, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on a borrower’s home loan financing.

With today’s volatile lending environment, it’s obviously important for home buyers to get a full loan approval which clearly defines all contingencies that pertain to each unique home buyer’s scenario prior to spending any time looking at new homes with an agent.

Either way, we’ve listed a few of the top things your agent should keep in mind while showing you new properties:

Caution – Agents Beware:

Property Type –

High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.

Residence Type

Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city?  What if I’m buying a home for my children to live in, it is still considered an investment property?

These are just a few of several possible residence related questions that should be addressed by your agent and loan officer at the initial loan application.

Rates / Locks

Mortgage Rates are typically locked for a 30 day period, and one of the only ways to get a new rate is to switch mortgage lenders.  Rates also have certain adjustments for property / residence type, credit score and down payment which could have a big impact on monthly payments and therefore approvals.

A 1% increase in rate could literally mean the difference between an approval or denial.

Headline News / Employment

Underwriters watch the news as well.  Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.

Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.

Title / Property Flip –

A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period.  Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a significant profit margin.

While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.

These rules change frequently, and are specific to particular property types, so make sure your agent is aware of all the boundaries associated with your approval letter.

Homeowner’s Association Insurance

Some lenders require Condos and Town House communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.

It may also take a few weeks and cost up to $300 to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.

Appraisal Ordering Procedures

Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.

Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.

VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.

For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.

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Related Articles – Home Buying Process:

Ten Credit Do’s and Don’ts To Bear In Mind Prior To Getting Your Mortgage Loan

April 1, 2010 by · Leave a Comment 

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:

  1. First-Time Home Buyer receives an approval
  2. Thinks everything is OK
  3. Makes a credit impacting decision (new car, furniture, run up credit card balance)
  4. 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 Don’ts:

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

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 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.

DON’T pay off 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.

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Related Credit / Identity Articles:

Do I Need To Sell My Home Before I Can Qualify For A New Mortgage On Another Property?

April 1, 2010 by · Leave a Comment 

Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer?  Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

So, Do I Have To Sell?

Yes. No. Maybe. It depends.

Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!

Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This scenario presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.

So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.

Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.

Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.

Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.

For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.

Keep in mind, this reserve requirement is incremental to your down payment on the new property.

What If I Can’t Qualify Based On Both Mortgage Payments?

This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.

If you are in this situation, then you will have to sell your current home before buying a new one.

If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.

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As you can tell, purchasing one home while living in another can be a very complicated transaction.  Please feel free to contact us anytime so we can review your specific situation and suggest the proper action plan.

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Related Articles – Mortgage Approval Process:

What Do Appraisers Look For When Determining A Property’s Value?

March 29, 2010 by · Leave a Comment 

Most people are surprised to learn what appraisers actually look at when determining the value of a real estate property.

A common misconception homeowners generally have is that the value of their home is determined after the appraiser has completed their physical property inspection.

However, the appraiser actually already has a good idea of the property’s value by the time they have scheduled an appointment to stop by the property.

The good news is that you don’t have to worry so much about pushing back an appointment a few days just to “clean things up” in order to help influence the value of your property.

While a clean house will certainly make it easier for the appraiser to notice improvements, the only time you should be concerned about “clutter” is if it is damaging to the dwelling.

The Key Components Addressed In An Appraisal

The Site:

Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…

Design:

Quality of construction, finish work, fixed appliances and any defining features

Condition:

Age, deterioration, renovations, upgrades, added features

Health & Safety:

Structural integrity, code compliance

Size:

Above grade and below grade improvements

Neighborhood:

Is the property conforming to the neighborhood?

Functional Utility:

Is the property functional as built – style and use?

Parking:

Garages, Carports, Shops, etc..

Other:

Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.

When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.

Be sure to have all carbon monoxide and smoke detectors in working condition.

Since the appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.

If you’re interested in what specifically appraisers are looking for, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.

Related Update on HVCC:

Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.

This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.

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Related Appraisal Articles:

Where Does My Earnest Money Go?

March 28, 2010 by · Leave a Comment 

Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

A basic and very obvious question that most First-Time home Buyers ask once their purchase contract gets accepted.

According to Wikipedia:

Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.

When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.

An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.

For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.

In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

  1. Earnest Money is submitted to an escrow company with the accepted purchase contract
  2. At the close of escrow, the EMD is credited towards the down payment and / or closing costs
  3. If there are no closing costs or down payment, the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

  • Selling Real Estate Agent – A conflict of interest
  • Sellers – Too risky
  • Buying Agent – They shouldn’t have your money in their account

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Related Articles – Closing Process / Costs

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Hans Bruhner and Finance of America Mortgage LLC are both licensed by the California Department of Business Oversight under the CRMLA