The Mortgage Experts

Tax Refunds as Assets

2012-01-25T08:20:00.000-07:00

It's almost tax refund time. Many people ask us if tax refunds can be used to pay for a mortgage down payment or closing costs.

The answer is YES! All a borrower needs to do to document the tax refund is to provide a copy of the refund check and a bank statement showing that the refund has been deposited into their account. If the refund was automatically deposited into their account, they won't have a copy of the check, but the notation on their bank statement will show that it is a tax refund. In the case of automatic deposits, the only documentation necessary is the bank statement.

The money does NOT have to be "seasoned", meaning it has been in their account for 60 days. As soon as the refund has been deposited, it can be used to pay the down payment or closing costs.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Real Estate Agents - Expand Your Sphere of Influence

2012-01-19T08:12:00.000-07:00

By popular demand, one of the greatest ways to expand your sphere of influence is BACK!

If you're a Denver area real estate agent and you have a question about mortgages or credit reports, send us the question. If we choose your question, we'll answer it in our next email newsletter, AND we'll deliver a $25 Starbucks card to you as a way of saying "Thank You" for helping to expand the knowledge base of our local real estate industry.

We'll also include your name and contact information in our newsletter, which goes to more than 6,000 local people. We'll also post your question and contact information on our blogs, giving you outrageous exposure to thousands of people interested in real estate - buyers, sellers, and people who work in the industry.

Here's what you get, just for asking a question about mortgages:

$25 Starbucks card - delivered to you personally.
Your name and contact information sent directly to 6,000 Colorado Front Range people.
Your question and contact information on our mortgage blog. We had 20,446 people visit our blog in 2011 - that's an average of 56 visits per day!
Your question and contact information on our blog at Active Rain, a real estate blog with more than 210,000 members.The correct answer!
A chance to help expand the local real estate knowledge base.

All you have to do is email us your question. We take care of everything else.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Debt-to-Income Ratio (DTI) - What Counts Against You?

2012-01-19T08:02:00.000-07:00

The debt-to-income ratio (DTI) is the ratio of your debts divided by your income, and is one of the main things that determines how large a mortgage you can qualify for. But do all of your debts count against you?

The answer is no, not all debts count against you when determining the size of the mortgage you can get. Here is a list of some of the things that do NOT count against you when a lender calculates your DTI:

car insurance
electricity
water
gas
sewer
phone - land line
phone - cell
Internet
cablecollection accounts
health insurance

In basic terms, every debt that appears on a credit report (except collection accounts) needs to be included in the DTI, and everything that does not appear on the credit report does not need to be included.

Call us with any questions.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:

www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

No W-2? No Problem

2012-01-06T10:19:00.000-07:00

We get many calls this time of year from borrowers who are worried that they can't get a mortgage because their lender told them that they need their W-2 for 2011 and they haven't received it yet from their employer.

Employers have until the end of January to give W-2s to their employees and underwriters know that, so instead of a W-2, underwriters will accept the final pay stub for 2011, provided it shows the year-to-date income. The year-to-date income on the final pay stub will be the total income for the year, which is the same number that the underwriter takes from the W-2.

So don't worry if you have not received your W-2 yet. You can still get a mortgage without it.

Call us with any questions.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
http://www.mtgsupportservices.com/

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Holiday Credit Tip

2011-12-13T16:57:00.000-07:00

It's important to remember that credit needs to be pulled twice for most mortgage transactions these days: once when the loan is pre-approved, and again right before the closing. If any new credit inquiries show up on the second credit report, then they have to be explained before the loan can close.

Many people apply for new credit cards at this time of year because of all the holiday shopping. Those credit inquiries will show up on a credit report.

If you have a question regarding new credit accounts and how that will affect your ability to close a loan, make sure you consult with your lender before opening any new accounts.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

FHA Loan Limits Go Up

2011-12-08T09:35:00.000-07:00

FHA loan limits have gone back up! Here are the new limits:

For the Denver-Metro counties, the new loan limit is $406,250.

For Boulder County, the new loan limit is $460,000.

These limits are for 1-unit properties. The amounts are higher for 2, 3, and 4 unit properties.

These new amounts are in effect until the end of 2012.

As always, there is no income limitation on FHA loans and you do NOT have to be a first-time home buyer to get an FHA loan.

Call us with any questions.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Fannie Mae Loan Limits for 2012

2011-11-29T18:20:00.000-07:00

Fannie Mae and Freddie Mac have announced that the loan limits for Colorado will remain the same in 2012. Here are the limits for the Metro Denver counties:

• One unit = $417,000
• Two units = $533,850
• Three units = $645,300
• Four units = $801,950

If the loan amount is at or below the limits listed above, then the loan amount conforms to the Fannie Mae and Freddie Mac guidelines, and the interest rate will be cheaper than it would be for a jumbo loan (a loan amount greater than the limits listed above).

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Financing for 5-10 Properties

2011-11-15T07:35:00.000-07:00

If someone is buying a second home or an investment property, Fannie Mae allows financing for up to 10 properties to the same borrower, and so do we!

Here are the restrictions:

Minimum credit score is 720
For second homes and 1-unit investment property purchase transactions, the down payment is 25%
For second home and 1-unit investment property refinance transactions, the maximum loan-to-value (LTV) ratio is 70%
For 2-4 unit investment property purchase transactions, the down payment is 30%
For 2-4 unit investment property refinance transactions, the maximum LTV is 70% with no cash-out, and 65% with cash-out
And remember, if the subject property is a primary residence, there is no limit to the number of financed properties you may have.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Waiting Periods after a Bankruptcy, Foreclosure, or Short Sale

2011-11-04T08:00:00.000-06:00

Ever wondered how long you have to wait after a bankruptcy, foreclosure, or short sale before being able to qualify for a new mortgage? Check out the table below for all the answers.

Click on the table to enlarge it.

NOTE: For all loans, the borrower must have “re-established credit” after the bankruptcy, foreclosure, or short sale. That means no late payments of any kind for 12 months.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Bankers Vs. Brokers - What are the Differences?

2011-10-30T10:07:00.002-06:00

Ever wonder what the difference is between a mortgage banker and a mortgage broker? Today's winning question by Steve Jacobson of Metro Brokers addresses that issue. Steve receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Steve's contact info follows:

Steve Jacobson CRS
Steve Jacobson Group - Metro Brokers
303-898-9000
steve.sjgroup@gmail.com

Steve's question is: What are the differences between Mortgage Brokers and Mortgage Bankers. Should one be considered better than the other?

Here's the answer: The main difference between bankers and brokers is in the way they fund the loans they sell. Mortgage bankers fund the loans themselves - the money comes from their own credit line. Mortgage brokers, on the other hand, do not fund the loans themselves. Instead, they arrange for the money to be sent to the closing, but the money comes from the bank.

There are two types of mortgage bankers: retail and wholesale. Retail mortgage bankers have employees who get paid a salary and work only for them, and they only sell their own loans.

Wholesale mortgage bankers get paid on a commission-only basis, and they sell loans from many different banks.

Because retail mortgage bankers have salaries and other overhead to pay their employees, they generally have higher interest rates than wholesale mortgage bankers. Also, lenders offer wholesale bankers lower rates in order to entice them to sell their loans. If Wells Fargo and US Bank are two of the banks that a wholesale banker represents, then both Wells Fargo and US Bank have to offer that wholesale banker a cheaper interest rate than they offer their retail customers. It is the only way they can get the wholesale banker to sell their loans.

Mortgage brokers (the people who do not fund their own loans) have interest rates somewhere between retail bankers and wholesale bankers. They are cheaper than retail bankers, but not quite as cheap as wholesale bankers. That's because the wholesale bankers assume some of the risk for underwriting the loans they sell. In exchange for assuming that risk, the lenders give wholesale mortgage bankers lower rates. Since mortgage brokers only act as middlemen, and do not assume any risk, they don't get the same low rates that wholesale bankers get.

So here are the differences:

Retail mortgage banker:

Fund loans themselves
Can only sell loans from their own bank
Have the highest interest rates

Mortgage brokers:

Do not fund loans themselves - they only arrange for the funding
Can sell loans from many different banks
Have slightly lower interest rates than retail bankers

Wholesale mortgage bankers:

Fund loans themselves
Can sell loans from many different banks
Have the lowest interest rates

None of this is to say that you should always use a wholesale mortgage banker, just because they have the lowest interest rates. There are plenty of good retail mortgage bankers, plenty of good mortgage brokers, and plenty of good wholesale mortgage bankers. You should use a lender with whom you are comfortable. Yes, low interest rates are important, but using a lender who is knowledgeable and trusting that your lender is not ripping you off (as so many lenders do) is more important.

Just FYI, we are wholesale mortgage bankers: we represent many different banks, we fund loans ourselves, and we have the lowest rates. And we are certainly knowledgeable!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

$100 Down HUD Homes are BACK!

2011-10-26T05:27:00.000-06:00

$100 down HUD homes are back!

From now until October 20, 2012, The $100 HUD home sales incentive is back in Colorado. Here's how it works:

The offer price must be the full listing price.
The down payment requirement is only $100.
The financing must be an FHA mortgage.
The maximum loan amount cannot be more than 100% of the appraised value.

FHA loans have a 1% up-front mortgage insurance premium (UFMIP), which is typically included in the loan amount. However, since the maximum loan amount cannot be more than 100% of the appraised value, it seems like there will be a problem.

Well, there's not a problem. Here's why:

If the appraised value exceeds the offer price by more than 1%, then the UFMIP can be included in the loan amount and the total loan amount will still be less than 100% of the appraised value.
If the appraised value is less than 1% greater than the offer price, the UFMIP cannot be included in the loan amount. However, the lender is allowed to pay for the UFMIP. When we do $100 down deals like this, we pay for the UFMIP.

And that's another great reason to call us for your next mortgage!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Debt-to-Income Ratios (DTI)

2011-10-18T07:56:00.000-06:00

People are always asking us about debt-to-income ratios. Here's what you need to know.

Each type of loan has a maximum allowable Debt-to-Income (DTI) ratio. However, if the loan is run through the automated underwriting software that is available from Fannie Mae, Freddie Mac, FHA, and VA, the maximum DTI ratios may be exceeded.

The DTI is calculated like this: Add all the monthly payments that show on the borrower’s credit report to the total monthly housing payment (principal, interest, taxes, insurance, mortgage insurance, and HOA fees). Then divide that number by the borrower’s gross monthly income (income before taxes).

The following table illustrates the maximum DTI ratios for both manual underwriting and automated underwriting (underwriting using the software):

Click image to enlarge

NOTES: Compensating factors are things that add strength to the borrower’s loan file. Some of the more common compensating factors include excellent credit, very high reserves (money in the bank), and a large down payment (20% or more).

Front-end ratio = total monthly housing payment (principal, interest, taxes, insurance, mortgage insurance, and HOA fees) divided by the borrower’s gross monthly income.

Back-end ratio = Add the total monthly housing payments to the total of all the monthly payments on the credit report. Divide that number by the borrower’s gross monthly income.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Down Payment Requirements

2011-10-14T12:16:00.000-06:00

Ever had a question about down payments? Check out this table - it shows all the current down payment requirements.

Click on the table to enlarge

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

VA Funding Fees Stay the Same

2011-10-11T07:48:00.000-06:00

A couple of weeks ago, we announced that VA funding fees were going down beginning October 1. However, Congress has since passed a bill that does not allow for the VA funding fees to be lowered.

So the bottom line is that VA funding fees remain unchanged. If they change in the future, we will be sure to let everyone know!

The VA funding fee is a fee that is charged to the borrower on VA loans. It is typically included in the loan amount.

If a borrower is receiving military disability payments, they are usually exempt from the funding fee completely.

Remember, VA loans are the best deal possible for vets, active military, and members of the Reserves or National Guard. There is no down payment, no mortgage insurance, and really low interest rates. VA loans are a benefit for people who have served our country. If a lender ever tries to talk someone out of a VA loan, it's probably because that lender is not approved to sell VA loans.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Why Investors Can't Make an Offer for 15 Days

2011-10-07T08:02:00.000-06:00

Why do investors have to wait 15 days before making an offer on a HomePath home? Today's winning question by Mike Bradley of Metro Brokers Eagleview Properties addresses that issue. Mike receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Mike's contact info follows:

Mike Bradley
Broker-Owner, Realtor, MBA
Metro Brokers Eagleview Properties, LLC
385 Inverness Parkway #140
Englewood, CO 80112
Phone: 303-887-4275
Email: Mike@MikesClients.com
Web: http://www.BestHomesInColorado.com

Mike's question is: When looking for bank-owned properties for investors, I often see a line in the MLS notes that says, "Available for HomePath financing...no investor offers accepted for 15 days." Why is that allowed?

Here's the answer: A HomePath home is a property that went into foreclosure and is now owned by Fannie Mae. For most of the homes they own, Fannie Mae has a special financing program called HomePath financing. No appraisal is required, no mortgage insurance is required, and the approval guidelines for condos are more relaxed than they are for non-HomePath condos.

Fannie Mae is run by the US government at the moment, and they are doing everything they can to make sure the foreclosure rate drops. Because rental properties have a much higher foreclosure rate than homes that are owned as primary residences, Fannie Mae would rather have the homes they sell be owner-occupied. To accomplish that, they will not accept offers from investors for a certain period of time after the house is listed for sale.

Although that policy may seem unfair to investors, it helps to keep the foreclosure rate a little bit lower, which is good for the entire housing industry.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

When You Should Lock the Interest Rate

2011-10-04T08:18:00.000-06:00

When should you lock the interest rate? Today's winning question by Becky Gregory of Keller Williams Realty DTC addresses that issue. Becky receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Becky's contact info follows:

Becky Gregory
Broker Associate/REALTOR®
Keller Williams Realty DTC
Phone: 303-475-2007
beckygregory@kw.com
www.realestate-denverco.com

Becky's question is: I often get questions regarding locking in a rate, especially when working with a new-build where the closing date is not set in stone when the contract is signed. It could be (and usually is) more than 30 days before the house is complete and good to close. When is the best time to lock in?

Here's the answer: Interest rates can be locked for different periods of time. Most lenders allow rates to be locked in increments of 15 days, for example, 15 days, 30 days, 45 days, and 60 days. The shorter the lock period, the cheaper it is to lock the loan. That means the loan originator gets a bigger rebate from the lender if they lock the rate for 15 days rather than 30 days, 30 days rather than 45 days, and 45 days rather than 60 days.

Also, some lenders will tell borrowers they know that rates are going to go up or down, but they are not telling the truth. No one knows when rates will go up or down. If someone knew where rates were going, they would not be selling mortgages. They would be trading bonds on Wall Street.

When a rate is locked, the person locking the rate (the loan originator) is making a commitment to the lender to deliver a closed loan to them within the rate lock period. If they don’t deliver the loan, they can be fined by the lender (sometimes thousands of dollars).

We always tell borrowers to lock the rate as soon as they know when the deal is going to close. Waiting is just gambling. Yes, the rate may go down if you wait, but it can also go up. If the rate goes up too much, some borrowers may no longer qualify for the loan, and then the deal will have to be cancelled.

In the case of new construction, the rate should be locked as soon as the builder can provide a firm completion date. If the house is not ready to occupy by the time the rate lock expires, the lock can always be extended, but that can get very expensive. The sales contract should state that the builder should pay for the lock extension if they go beyond the firm completion date. If the builder is unwilling to pay for a lock extension, then the date they gave as the firm completion date is probably not very firm at all, and the rate should not be locked until the builder can actually provide a firm completion date.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

When Can An Appraisal Be Ordered?

2011-09-27T14:46:00.000-06:00

When can the appraisal be ordered? Today's winning question by Michele Fuxan Jones of Home Real Estate addresses that issue. Michele receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Michele's contact info follows:

Michele Fuxan Jones
Jones Homes/HOME REAL ESTATE
303-995-2866
FuxanJones@realtor.com

Michele's question is: I’m noticing that appraisal deadlines are moving ever closer to the closing date. Perhaps that’s advantageous for the buyer since it gives them another “out” late in the process. But it can be particularly nerve wracking for the seller. When can an appraisal be done and still meet current guidelines?

Here's the answer: Lenders are not allowed to charge for an appraisal until after the loan application is signed, but the new regulations don't define when the appraisal can be done.

It's always best to wait until the inspection has been completed before ordering the appraisal, however, because the appraiser needs to have a copy of the final contract before completing the appraisal report. Inspection issues often result in changes to the sales contract, and if the appraisal has already been ordered before the final contract is drawn up, delays are sure to occur.

Also, some deals fall apart completely after inspection. No buyer wants to pay for an appraisal on a house they're not going to buy.

The most important thing for buyers, sellers, and their real estate agents to keep in mind is that the sales contract does not really affect the underwriting process. The sales contract is between the buyer and the seller, and does not involve the lender. Good lenders always try to get loans approved as quickly as possible, but if an agent puts an unrealistic deadline date in a contract in the hopes of speeding up the lending process, they are most likely going to have to prepare an amendment to the contract to get the date changed.

If you're ever in doubt about what dates to enter in a contract, the best thing to do is ask the lender and use the dates the lender recommends.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:

www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

VA Funding Fee Goes DOWN!

2011-09-23T10:02:00.000-06:00

VA funding fees are going DOWN! Beginning October 1, the funding fee for veterans who have less than a 5% down payment is going down from the current 2.15% of the loan amount to 1.4% of the loan amount.

For Reservists and members of the National Guard, the funding fee is going down from the current 2.4% to 1.65%.

The VA funding fee is a fee that is charged to the borrower on VA loans. It is typically included in the loan amount.

If a borrower is receiving military disability payments, they are usually exempt from the funding fee completely.

Remember, VA loans are the best deal possible for vets, active military, and members of the Reserves or National Guard. There is no down payment, no mortgage insurance, and really low interest rates. VA loans are a benefit for people who have served our country. If a lender ever tries to talk someone out of a VA loan, it's probably because that lender is not approved to sell VA loans.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

What Credit Score Gets the Lowest Interest Rates?

2011-09-14T07:29:00.000-06:00

What credit score do you need to get the best interest rates? Today's winning question by Marianna Schell of Cherry Creek Properties addresses that subject. Marianna receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Marianna's contact info follows:

Marianna Schell
Cherry Creek Properties
720-244-4282
mariannaschell@yahoo.com

Marianna's question is: As a buyer you can get the best interest rate if you have a good credit score. What is the lowest credit score necessary to get the best interest rate?

Here's the answer: For a conventional loan, a borrower needs a 740 credit score to get the lowest interest rates. For every 20 points lower than 740, Fannie Mae charges a fee, which in turn raises the interest rate (or lowers the credit the lender gives the borrower). The fee that Fannie Mae charges also depends on the size of the down payment, so it is impossible to say exactly how much the interest rate will go up, just by knowing the credit score.

For government loans (FHA and VA loans), everyone with a score above 660 gets the lowest interest rate. If the borrower’s score is between 640 and 660, they will pay a higher rate, and if the score is below a 640, they will pay the highest rate.

It’s also important to note that for conventional loans, the mortgage insurance payment gets higher as the scores go down. For FHA loans, mortgage insurance does not depend on credit scores. For VA loans, there is no mortgage insurance.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Underwriting Guidelines - All in One Place

2011-09-07T07:59:00.000-06:00

Everyone knows there are guidelines for determining whether someone gets approved for a loan, but have you ever actually seen the underwriting guidelines?

Here's a link to the Fannie Mae underwriting guidelines:
http://www.allregs.com/tpl/public/fnma_freesiteconv_tll.aspx

When the Fannie Mae Single Family page opens, click on:

2011 Selling Guide
then on Part B, Origination Through Closing
and then on Subpart B3, Underwriting Borrowers

From there, you can get to all the guidelines for income, assets, credit, etc.
Every time a lender says a borrower is pre-approved for a mortgage, they are supposed to have checked all of these guidelines. Very few lenders do it. In fact, very few lenders even know where to find the guidelines, so it is impossible for them to check.

In addition to these guidelines, a mortgage broker or banker needs to check the guidelines for the individual lender they intend to use, and then, if the loan will have mortgage insurance, they need to check the mortgage insurance underwriting guidelines.

Ever have a deal fall apart? Your lender didn't read the guidelines!

Have a question about the guidelines? Call us at 303-345-3683.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

FHA Loan Limits Are Going Down

2011-09-01T07:46:00.000-06:00

The maximum loan amount for FHA loans is going DOWN beginning October 1, 2011. Here are the current limits and the new limits for the Denver area:

Metro Counties
Current limit (until the September 30, 2011) = $406,250
New limit (after October 1, 2011) = $368,000

Boulder County
Current limit (until the September 30, 2011) = $460,000
New limit (after October 1, 2011) = $402,500

Need to find the limits for a property in a different location? Here's the link to get to the web site that will give you all the loan limits in the country:
https://entp.hud.gov/idapp/html/hicostlook.cfm

Here's how to use the web site:

• From the SORTED BY menu, select County
• Select the state
• From the LIMIT TYPE menu, select FHA Forward for FHA loans
• In the LIMIT YEAR menu, make sure the correct date range is selected
• Click on SEND and you will get the loan limits

Have a question about how to find the loan limits? Call us at 303-345-3683.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

How Do You Estimate Closing Costs?

2011-08-26T06:39:00.000-06:00

How much are closing costs? 1%, 2%, 3%, 4%? Today's winning question by Cary Sanger of Your Castle Real Estate addresses that subject. Cary receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Cary's contact info follows:

Cary Sanger
Managing Broker
Your Castle Real Estate Inc.
Phone: 720-560-0111
Free Metro Denver Home Search at:
www.DenversBestHomeSearch.com

Cary's question is: Do you have a rule of thumb for closing costs based on a percentage of the purchase price if people want a general idea of what they will need in addition to their down payment?

Here's the answer: It is extremely difficult to estimate a percentage for closing costs without knowing all about the borrower and the property. Here's why.

Many of the closing costs are fixed costs, meaning they are the same regardless of how big the loan is. Some examples of fixed closing costs are:

Appraisal fee
Credit report
Underwriting fee
Tax certificate
Loan closing fee
Real estate closing fee
Title insurance fees
Recording fees

Other closing costs change depending on the size of the loan or the purchase price. Here are some examples of closing costs that change:

Origination fee (usually 1% of the loan amount)
State tax stamps

Still other closing costs depend on the individual property, the interest rate, the borrower's credit, or the closing date. Here are some examples:

Property taxes: depends on the property and the date of closing
Homeowner's insurance: depends on the property and the borrower's credit score
Pre-paid interest: depends on the borrower's credit score (which determines the interest rate), the loan amount, and the date of closing

Now let's see how these different fees determine the closing cost percentage. Let's assume a property sells for $100,000 and the fixed costs are $2,000. The variable costs (the costs that are different in every situation) will probably be low because the taxes and insurance will be low. Let's assume the variable costs total $2,500. Total closing costs would be $4,500, which is 4.5% of the purchase price.

Now let's assume we have a property selling for $500,000. The fixed costs would be the same - $2,000. The variable costs would be higher because the loan amount, the taxes, and the insurance would be higher. They might be $8,000. The total closing costs would be $10,000, which is 2.0% of the purchase price.

Even though the closing costs are $5,500 less for the cheaper house, the percentage is much higher than it is for the expensive house - 4.5% versus 2.0%.

It's always a good idea to have your lender (preferably us) tell you how much the closing costs are. Guessing based on a "rule of thumb" will give you an incorrect number most of the time.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Are the Strict Underwriting Guidelines Coming to an End?

2011-08-19T08:13:00.000-06:00

There's no doubt that the underwriting guidelines for mortgages have gotten stricter over the past few years. Today's winning question by Phyllis Ursetta of Integrity Realty addresses that subject. Phyllis receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Phyllis's contact info follows:

Phyllis Ursetta, Broker/Owner
Integrity Realty
303-570-1344
phyllis@integritydenver.com

Phyllis's question is: "Do you see any end in sight to the strict enforcement of the underwriting guidelines, specifically, the requirement that a buyer have 20% down to buy an investment property, even though they have very high credit scores, excellent income, and plenty of money in the bank?"

Here's the answer: There probably won’t be a change to the stricter guidelines that are in place for conventional loans for quite a while, especially for investment properties. Investment properties have a significantly higher foreclosure rate than primary residences.

Fannie Mae actually only requires a 15% down payment for investment properties, but they also require mortgage insurance for any loan that is greater than 80% of the value (or sales price) of the property.

The problem is that the mortgage insurance companies refuse to insure investment properties, so the end result is that you need 20% down. If a loan has mortgage insurance and that loan goes into foreclosure, then the mortgage insurance company has to write a check to the lender. The mortgage insurance companies are losing millions of dollars right now and they have no desire to lose more, so they have all said they will not insure investment property loans. No mortgage insurance = 20% down.

Regarding the qualifications of the buyer, the days of loan decisions being made on an individual basis are long gone. It really doesn't matter if a borrower is incredibly well-qualified. As long as they are buying an investment property, they get lumped in with all the other people who want to buy investment properties. Unfortunately, many of those people do not pay their loans back, and everyone has to abide by the stricter underwriting guidelines.

Things will change when the foreclosures stop. That is going to take a long time.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Great Classes on Mortgages and Credit Reports

2011-08-15T12:47:00.000-06:00

People continue to rave about our mortgage and credit classes. We've helped hundreds of people over the past few years learn more about loans and how to qualify for them. Attend a class yourself and see why people love them!

Following is a list of our upcoming classes. All are held at the Lowry campus of Colorado Free University (near 1st and Quebec). Call CFU at 303-399-0093 to register.

How Not to Get Ripped-Off When Buying a House. Learn about loan fraud, interest rates, where the money comes from to fund your loan, why loans get sold, and everything else about mortgages. Next class is Tuesday, August 16, from 6:30 PM - 9:30 PM. This class is free, but you must register.
Get Your Home Loan Approved!: FAQ's and Secrets of Mortgage Underwriting. In this class, we'll tell you all the things that no one else will, and we'll answer ANY questions you have about getting a loan approved. It's our newest class and is already a hit. Next class is Wednesday, August 17, from 6:30 PM - 9:30 PM. This class is free, but you must register.
Understanding Your Credit Score. Everything you wanted to know about credit reports and credit scores. We'll tell you exactly what to do to get the highest credit scores and how to keep them high. Credit repair companies HATE this class because you'll never again have to waste money paying someone to "repair" your credit if you attend. Next class is Tuesday, September 13, from 6:30 PM - 9:30 PM. This class is $41 for non-members and $29 for members of Colorado Free University.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

Does the S&P Downgrade Affect Mortgage Rates?

2011-08-12T10:32:00.000-06:00

Everyone is talking about the S&P credit downgrade, and today's winning question by Lise LeBlanc of Keller Williams Executives Realty deals with that subject. Lise receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Lise's contact info follows:
Lise LeBlanc, GRI
Keller Williams Executives Realty, LLC
303-242-6460
liseleblanc@kw.com

Lise's question is: "How would you explain in simple terms to a first time home buyer the effects the downgrading of the AAA debt rating will have on their new mortgage apart from rates possibly increasing? How much time will they have before rates start going up? What can they do now?"

Here's the answer: Mortgage rates depend on how the mortgage backed securities bond market is trading. If there is a big demand for mortgage bonds, then the rates go down. If there is not a big demand for mortgage bonds, then rates go up.

The biggest purchasers of US mortgage bonds are foreign governments: China, Japan, etc. These foreign governments have lots of cash they must invest in something because they want to earn a return on their money. Mortgage bonds, because they are backed by the US government, are considered to be very safe investments. If the foreign governments did not invest in mortgage bonds, they would have to invest in something else. The alternatives at the moment are not very good, so the demand for mortgage bonds is very strong, which keeps rates low.

The economic situation in Europe is horrible right now, so no one wants to buy Euro bonds. The situation in the rest of the world is not very good, either. So despite the S&P downgrade, US Treasury bonds and US mortgage bonds are still just about the safest investment anyone can make.

It is impossible to say how long rates will stay low. Anyone who tells you that they know where rates are going is just making it up. If they really knew where rates were going, they would not be dispensing mortgage advice. Instead, they would be billionaire bond traders living the high life on Wall Street.
The important thing to keep in mind when talking about interest rates is that macro-economics (the world economy) determines where rates are going. As long as the rest of the world is worse off than the US, rates will stay low. At the moment, the US economy is as good as it gets.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

Is the Earnest Money Part of the Down Payment?

2011-08-08T17:58:00.000-06:00

We received a very big response to our email tip last week suggesting that agents explain the basics to their prospects and clients. In order to help out a bit more, here is an additional question that buyers often ask us.

Is the earnest money part of the down payment?

Here's how to answer that question. "Yes, the earnest money deposit you make when you submit an offer is part of the down payment. You pay the earnest money to show the seller that you're serious about the offer. If they accept your offer, the earnest money is subtracted from the amount your lender requires as a down payment."

Answer that question before your clients and prospects ask, and watch the trust build.

And don't forget to tell them:

It doesn't cost a buyer anything to use a real estate agent.
Any agent can sell any house. You don't have to use the agent whose name is on the sign.

Most of your competition is NOT telling their clients these things - that's why they are always asking us.

Despite what you may have read or heard, knowledge is not power. SHARING knowledge is power. Share your knowledge of the real estate business with your clients and prospects. They really don't know the answers to the basic questions we all assume they know.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

How to Find the Best Mortgage Interest Rates

2011-08-02T18:09:00.000-06:00

This week's winning question was submitted to us by Ed Coulter of Vista Homes Real Estate. Ed receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Ed's contact info follows:

Ed Coulter, GRI
Graduate of the Realtor Institute
Vista Homes Real Estate
303-726-4844
vistahomes@msn.com

Ed's question is: "What is the best web site to look at for real-time interest rates?"

Here's the answer: There really is no good site for real-time loan rates, and here's why. Rates are posted on thousands of web sites. However, there are many adjustments to the rates that are never shown to the public. These adjustments are known as "loan level pricing adjustments" and they can affect the interest rate tremendously - sometimes by as much as a few percentage points.

Here are some examples of the things that affect rates:

Rate lock period
Occupancy type (primary residence, second home, or investment property)
Amount of the loan
The borrower's credit scores
Amount of the down payment
Property type (single family residence, townhouse, or condo)
Subordinate financing (is there a second loan?)

Unless a lender asks a borrower for all of this information (and much more), they can't possibly provide an accurate quote. The web sites that list rates (real-time or not), are either lead-generating web sites that sell the borrower's contact information to multiple lenders, or bait and switch sites intended to get the borrower to call. All the large lenders, and many smaller lenders, employ these tactics to get customers.

The very best way to get an accurate rate quote is to use lenders who tell you that they cannot possibly give you an accurate rate quote without gathering the information listed above and more.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

The Two Biggest Mistakes Selling Agents Make

2011-07-27T13:10:00.000-06:00

Many buyers call us to get pre-approved for a mortgage before they begin their search for a real estate agent. Here are the two most common questions they ask us.

• How much does it cost me to hire a real estate agent?

• Do I have to use the real estate agent who is selling the house?

Of course, the answer to these questions is obvious to anyone in the real estate business, but it is incredibly important to remember that your clients are NOT in the real estate business. They really don't know the answers to these questions.

Truly successful agents constantly remind themselves that their clients and prospects usually don't know basic information. Whoever provides the most value to a prospect will get the deal. Be the person who provides the most basic information and deals will come your way.

Many years ago, I used to sell furniture. I closed an incredible number of wooden table sales by saying to the customers, "Hey, did you know this table is made out of wood?" Some of them laughed, but many of them bought from me because they said I was the first one to tell them the basic information they wanted.

So tell your prospects that it costs the buyer nothing to use a real estate agent, and that any agent can sell any house. You'll get more deals!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

This Week's Winning Mortgage Question - Pre-Approval Letters

2011-07-19T13:13:00.000-06:00

This week's winning question was submitted to us by Jani Bielenberg at Bielenberg & Associates, Metro Brokers. Jani receives a $25 gift card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Jani's contact info follows:
Jani Bielenberg, Broker Associate
Bielenberg & Associates, Metro Brokers
303-770-1977
homes@RobertandJani.com
http://www.robertandjani.com/

See below for how you can be next week's winner!

Jani's question is: "We recently received a "Pre-Qualified" lender letter for a Buyer on one of our listings. On the loan conditions deadline, we received notice that the Buyer was not approved for the loan. The reason being, the Buyer was retired and the part-time job/salary could not be used because it only had a 6 month history, even though it was in the same field of work. Everyone involved in the transaction was disappointed to say the least. How could a "Pre-Qualified" letter have been issued knowing upfront that this would very likely be an issue? No disclosure was made. What is the workaround when the Buyer's lender is not a company that you recognize?"

Here's the answer: The buyer probably had too long of a gap in employment from the time he retired until he started the part-time job. If the gap were only a month or two, then an underwriter might accept the income from the part-time job.

A good loan originator will ask enough questions when he qualifies a borrower to make sure he's not making a mistake like this. Unfortunately, many of us are not trained very well when it comes to interviewing people. If someone has retirement income and also income from a job (whether it’s part-time or full-time), the lender needs to dig a bit deeper with his questions. Once he has all the information, he should then call an underwriter if he is still not 100% sure that the borrower will be able to get a loan.

I am guessing on this, but I would say that the lender never had a clue that it would be a problem. Even though we need to be licensed and pass a test to be an originator, anyone who spends more than a few minutes studying for the test can pass the test. It is hardly a good measure of how competent someone is. It is entirely possible to be licensed as a mortgage loan originator and not know much of anything about mortgages. It looks like you got stuck with someone who is not very good at his job. The real tip-off that they are not good is that they waited until the very last minute to tell you. As lenders, we know pretty early in the game whether a loan is going to have problems or not. If it is, then it is our responsibility to alert everyone as soon as we know about the problem.

As far as the workaround when the buyer’s lender is not a company you recognize, your best bet is to call the lender who wrote the letter as soon as you receive a letter (before you accept an offer), and ask them if they ran the loan through the online underwriting software that Fannie Mae, Freddie Mac, FHA, and VA provides to lenders. Also ask them if they checked the lender’s underwriting overlays (the additional guidelines that many lenders add on top of Fannie, Freddie, FHA, and VA). And finally, ask them if they checked the mortgage insurance underwriting guidelines. If they don’t answer YES to all three of those questions without hesitation, then you are probably not dealing with a very competent lender. Using the underwriting software and manually checking the lender and mortgage insurance guidelines is the absolute minimum amount of work an originator needs to do before writing a pre-approval letter. A good lender never minds answering a listing agent’s questions, so make sure you call the lender when you receive a pre-approval letter.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

FHA Appraisal Newsletter

2011-07-15T09:03:00.002-06:00

Here's the link to the latest FHA appraisal newsletter. The "Spotlight" article is on sales concessions and verification of sales.
http://portal.hud.gov/huddoc/2011summernewslettr.pdf

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

This Week's Winning Mortgage Question

2011-07-14T08:26:00.000-06:00

This week's winning question was submitted to us by Nancy Woodson at Metro Brokers Denver Home Real Estate, Inc. Nancy receives a $25 gift card and gets her contact information sent to the 6,600 people on our contact list. Her contact info follows:

Nancy Woodson
phone: 303-697-1767
email: ncwcpa@aol.com

Nancy's question is: If a buyer has locked in the interest rate for a short sale transaction, and the deal is taking longer than expected to close, does the buyer have to pay for a rate lock extension? Are they obligated to use the original lender, or can they switch lenders to avoid the lock extension fee? Would they incur any fees if they switched lenders?

Here's the answer: Each lender has different rules for when the interest rate lock expires. Some lenders will allow the rate to be re-locked with no penalty (provided the current rate is the same or lower than the old rate). Other lenders will force the buyer to pay for a lock extension, unless the rate lock has expired for a minimum period of time (usually 30 days).

Under NO circumstances is the buyer obligated to use the original lender. A buyer is NEVER obligated to use a lender until they have signed the last piece of paper at the closing.

If the buyer decides to change lenders, they do not have to pay the lender anything except the exact costs for third-party fees incurred by the lender (appraisal, title work, etc.). If the buyer decides to change lenders and the loan fails to close through no fault of the lender, then the buyer may have to pay up to $300 to the lender for preparation work performed.

Regarding these fees, we don't know any title company that charges for loans that don't close, and no lender with any good business sense at all will charge a buyer $300 if a loan doesn't close. Appraisers expect (rightfully so) to be paid for the work they perform. It is always wise to ask the new lender if they will accept the old appraisal, saving the buyer the cost of two appraisals.

The bottom line is that a lender should do everything possible to explain to a buyer why locking an interest rate on a short sale transaction is a horrible idea until the short sale approval is obtained from the seller's lender. We do many short sale transactions and have never had a problem with rate locks because we explain that short sales take more time than everyone would like. Locking a rate when you don't know the closing date is just silly (and very bad business).

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

FHA Loans with a 620 Credit Score and 3.5% Down

2011-07-11T08:11:00.000-06:00

Most lenders require a 640 credit score these days for FHA loans. We can do FHA loans with a 620 credit score and only 3.5% down.

Don't have a 620 score? Then give us a call. We will tell you exactly what to do to raise your scores. Oh yeah - we will tell you what to do for free! All you have to do is pay for the credit report ($25 for a single borrower and $30 for a couple). Then we run your credit report through software provided by the three credit bureaus, and it tells us exactly what you need to do to raise your scores. We have been doing this for more than 3 years now, and about 50% of the people listen to us and buy a house. The other 50% don't listen to us, end up getting ripped off by a credit repair company, and keep renting.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

Real Estate Agents: Ask a Question - Get $25

2011-07-05T15:52:00.000-06:00

Real estate agents are always asking us questions. That's a good thing. Now it gets even better!

Email us a question about mortgages. If we choose your question, we'll answer it in our next email newsletter, AND we'll deliver a $25 gift card to you as a way of saying "Thank You" for helping to expand the knowledge base of our local real estate industry.

If you'd like, we'll also include your name and contact information in the newsletter, which goes to 6000 real estate agents and 600 of our past clients and current prospects.

So here's what you get, just for asking a question about mortgages:

$25 gift card - delivered to you personally.
Your name and contact information sent directly to 6000 local real estate agents and 600 of our local clients and prospects.
The correct answer!
A chance to help expand the local real estate knowledge base.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

How Long Do I Need to Have a Job to Get a Mortgage?

2011-06-27T09:41:00.000-06:00

At this time of year, with many people recently graduating from college, we are often asked, "How long do I need to have a job to get a mortgage?"

If you have just graduated from college, and your new job is related to the degree you earned, then all you need is one pay check to get a mortgage. The time you spent in school counts towards the standard 2-year employment history requirement.

If you have specific questions regarding employment length, don't assume you can or cannot get a loan. Instead, call us, The Mortgage Experts, and we'll be more than happy to answer any questions you might have.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

Proof We Are the Fastest Lenders

2011-06-22T09:30:00.000-06:00

I ran my first marathon in 1980. I ran 3 last year. I ran a number of them in between 1980 and last year. I have NEVER run fast enough to qualify for the Boston Marathon.

On the other hand, Debbie, my amazing wife and business partner, ran her first marathon in San Diego this month and DID qualify for the Boston Marathon. There were 32,000 people in the races (full marathon and half marathon) and she came in 15th in her age group for the full marathon!

Good thing I like fast women, because I'm certainly married to one!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:

www.mtgsupportservices.com

Fannie Mae is Paying Closing Costs Again, and Giving Agents a $1,200 Bonus

2011-06-22T09:25:00.000-06:00

Fannie Mae is trying to sell houses again, and they're making it easier for buyers and for real estate agents.

If you submit an offer for a Fannie Mae HomePath property and close by October 31, 2011, Fannie Mae will pay up to 3.5% of the purchase price towards the Buyer's closing costs, which should be enough to cover them all.

They will also pay the selling real estate agent a $1200 bonus.

HomePath properties are pretty good deals. Here's why:

• No appraisal is necessary
• There is only a 3% down payment
• There is no mortgage insurance

Find HomePath properties at this web site:

www.homepath.com

We have provided the financing for a number of HomePath properties. Call us with any questions you might have.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

Tighter Underwriting Guidelines from Fannie Mae

2011-06-02T11:08:00.000-06:00

Fannie Mae has just tightened their underwriting guidelines regarding the use of retirement accounts as reserves.

Borrowers are sometimes required to have reserves to get approved for a loan. Reserves are funds that the borrower has left over after paying for the down payment and closing costs. 60% of the vested amount in a retirement account can be used as reserves. That is not a change from the former guidelines.

However, the new guidelines state that if the borrower is only allowed to withdraw money from the retirement account because of employment termination, retirement, or death, then none of the money in the retirement account can be counted as reserves.

This is important to know because the underwriting software used to issue pre-approvals does NOT determine whether the money in a retirement account can be counted as reserves. If the lender pre-approving your client doesn't check to see if the reserves can be counted before using the software, the pre-approval may be invalid.

One more reason to use a great lender like us!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:

www.mtgsupportservices.com

Free Underwriting Class Tonight

2011-05-24T11:54:00.000-06:00

It's a gloomy day. Why not spend a few hours this evening learning how loans REALLY get approved?

We've got a few spots left in the underwriting class being held tonight at Colorado Free University: Get Your Home Loan Approved!: FAQ's and Secrets of Mortgage Underwriting.

Imagine if all the frustration surrounding loan approvals disappeared. No more sweating it out wondering what the lender (and the ever-so-mysterious underwriter) were doing. We'll explain exactly how a loan is underwritten. There's no reason at all that anything involved in mortgage approvals should be "secret", so we're going to tell you how it all works.

The class is free. All you have to do is register for the class at Colorado Free University. Their number is 303-399-0093.
The class is tonight, Tuesday, May 24,and will run from 6:30 PM - 9:30 PM. It will be at the Lowry campus of Colorado Free University (near 1st and Quebec).

Come and learn. You will be glad you did.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

Financing for 5-10 Properties

2011-05-24T11:51:00.000-06:00

Ever had a lender tell you there is no financing available if you own more than 4 properties? That's only true for some lenders.

Fannie Mae allows financing for up to 10 properties, and so do we!

Purchase transactions require a 720 credit score and 25% down.

Refinance transactions require a 720 credit score and 30% equity.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

Financing for Investment Properties

2011-05-24T11:48:00.000-06:00

Here's all you need to know about getting a mortgage for an investment property:

1. If you are buying a 1-unit investment property, you need 20% down. Fannie Mae underwriting guidelines say you only need 15% down. However, you also need mortgage insurance if you have less than 20% down, and no mortgage insurance company is willing to insure an investment property. You need the full 20% down to avoid the mortgage insurance.

2. If you are buying a 1-unit investment property and you put 25% down, the rate will be cheaper. The difference in the rate depends on the day you lock the interest rate, but it will always be less if you put the extra 5% down.

3. If you are buying a 2-4 unit investment property, you need 25% down.

That's it. Investment property loans are as easy to get approved as anything else. Use a good lender and it goes very smoothly.
Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

The Mortgage Loan Application - Page 2

2011-05-12T09:35:00.000-06:00

First, get a copy of the loan application by clicking here.

The Loan Application

There are 4 pages in a mortgage loan application
It is divided into 10 sections
This tip will discuss Sections IV and V (both on page 2)
NEVER complete the loan application by yourself. The lender should ALWAYS do it for you.
If your lender tells you to complete it yourself, or to complete it online, then you need to find a new lender.

Section IV

Section IV is EMPLOYMENT INFORMATION
All loan applications require 2 full years of employment history
Does NOT mean you need to have a job for two years before qualifying for a mortgage, but you do have to tell what you were doing for the past 24 months
Employed? Unemployed? In school? Need to include all of these.
NOT every job needs to be listed – only the jobs needed to qualify for the loan
However, EVERY self-employed job that lost money (as reported on your tax returns) needs to be listed

Section V

Section V is MONTHLY INCOME AND COMBINED HOUSING EXPENSE INFORMATION
Lists income, broken down into base income, overtime, bonuses, commissions, dividends/interest, net rental income, and other types of income
Each type of income is calculated differently
Lists present primary residence monthly payment
Lists the “proposed” monthly mortgage payments

Important!

You should NEVER complete the application by yourself – either manually or online
A good lender needs 15 minutes to complete the application
You should make sure the information is correct – if it is incorrect, cross it out and enter the correct information before signing
If you feel pressured by the lender, do NOT sign
GET A COPY of everything you sign!!!

Check out a video of this tip on our web site:

www.mtgsupportservices.com

Did you know that Debbie and Chris Thomas, The Mortgage Experts, have each been awarded the prestigious 2011 FIVE STAR Mortgage Professional designation by 5280 magazine? That makes us a TEN STAR team! 50,000 recent home buyers ranked both of us in the top 5% for overall customer satisfaction and mortgage knowledge. Want to be satisfied when you get a mortgage? Call The Mortgage Experts.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Property Marketability

2011-05-12T08:02:00.000-06:00

There are two distinct things that must be approved before a lender will give a borrower any money to buy a house: the borrower and the property.

Getting the borrower approved is easy. Collect the right information, run it through the underwriting software, and send everything to underwriting to make sure the borrower's information was entered into the software correctly.

Getting a property approved is a bit more complicated. First, the appraisal must show that the property is worth what the buyer is paying for it. The appraisal must also show that the property is marketable. The lender cares about marketability because they want some kind of assurance that they will be able to sell the property quickly if the borrower goes into foreclosure.

Lenders want a property to appeal to the largest possible pool of potential buyers. If a lot of people want to buy a house, it is considered "marketable".

Here's a good example of how a house might not be marketable. A dome house might be cool to look at, and it might be worth a lot of money, but not too many people want to live in one. A dome house is not very marketable, and it is extremely hard to get a loan for one.

The same goes for houses with other unusual designs, zoning restrictions, or those without adequate utilities or year-round access.

Marketability is as important as value!

Did you know that Debbie and Chris Thomas, The Mortgage Experts, have each been awarded the prestigious 2011 FIVE STAR Mortgage Professional designation by 5280 magazine? That makes us a TEN STAR team! 50,000 recent home buyers ranked both of us in the top 5% for overall customer satisfaction and mortgage knowledge. Want to be satisfied when you get a mortgage? Call The Mortgage Experts.

Check out our web site: www.mtgsupportservices.com

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

5280 Magazine Recognizes The Mortgage Experts!

2011-05-02T16:48:00.000-06:00

5280 magazine notified Debbie and Chris that they have been awarded the designation of FIVE STAR Mortgage Professional for 2011.

A survey of nearly 50,000 recent home buyers was conducted, and Debbie and Chris were each ranked in the top 5% of all mortgage professionals in Denver, based on overall satisfaction, mortgage knowledge, and the willingness of those surveyed to highly recommend them to their friends.

Does that make us a TEN STAR team? We think so!

This presents a HUGE opportunity for Colorado real estate agents. When you refer your clients to The Mortgage Experts, you are referring your clients to a team that is recognized by home buyers - YOUR client base - as being the best. When your clients are satisfied - and they certainly are when you refer them to us - they will refer more business to you. Referring clients to us means more money in YOUR pocket.

If you are in the market for a mortgage yourself, why not get your loan from the recognized Mortgage Experts?

Give us a call and join the winning team! 50,000 home buyers are extremely happy with what we do. You will be, too!
Make sure you check out our web site. It's a resource you shouldn't be missing. Here's the link:

http://www.mtgsupportservices.com

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

VA Loans Quick Reference Guide

2011-04-21T21:34:00.000-06:00

100% financing with no mortgage insurance and only a 640 credit score!

That's what VA loans offer. Need some more info? Check out our VA Quick Reference Guide by clicking here.

Also, make sure you check out our web site. It's a resource you shouldn't be missing. Here's the link:

http://www.mtgsupportservices.com

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

The Mortgage Loan Application - Page 1

2011-04-15T08:59:00.000-06:00

First, get a copy of the loan application by clicking here.

The Loan Application

There are 4 pages in a mortgage loan application
It is divided into 10 sections
This tip will discuss Sections I, II, and III (all on page 1)

NEVER complete the loan application by yourself. The lender should ALWAYS do it for you. If your lender tells you to complete it yourself, or to complete it online, then you need to find a new lender.

Section I

Section I is TYPE OF MORTGAGE AND TERMS OF LOAN
Tells you the type of loan: VA, FHA, USDA Rural, or Conventional (non-government)
Loan amount
Interest rate (even if the rate is not locked)
Number of months that the loan is amortized

360 months for 30-years, 180 months for 15-years, etc.

Amortization type: fixed rate or ARM (adjustable rate mortgage)

Section II

Section II is PROPERTY INFORMATION AND PURPOSE OF LOAN
Lists the property address
Number of units you are buying or own (refi)
Year the property was built
Purpose of the loan: purchase or refinance
Primary residence, second home, investment
Lists who will be on title (who will own the property)

Section III

Section III is BORROWER INFORMATION
Borrower’s and Co-Borrower’s name
Social Security numbers
Phone number, birth date, marital status, number of dependents
Two FULL years of residency information – every place the borrower lived in the past 24 months

Important!

You should NEVER complete the application by yourself – either manually or online
A good lender needs 15 minutes to complete the application
You should make sure the information is correct – if it is incorrect, cross it out and enter the correct information before signing
If you feel pressured by the lender, do NOT sign
GET A COPY of everything you sign!!!

Want to see a video of this tip? Here is the link:

http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Want to make sure your loan closes? Call us at 303-345-3683.

Guaranteed 3.5% Seller-Paid Closing Costs

2011-04-13T08:31:00.000-06:00

Here's some great news from Fannie Mae:

Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through June 30, 2011, if they purchase a HomePath property. The buyer does NOT have to get HomePath financing to get the closing cost assistance.

The HomePath property buyer must meet the following qualifications to be eligible:

Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible.
The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive.
The sale must close on or before June 30, 2011. No exceptions will be made to this deadline.
Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive.
Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
If a buyer's total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.

HomePath properties are properties that are owned by Fannie Mae after a foreclosure. If the buyer obtains HomePath financing, they do NOT require an appraisal, there is NO mortgage insurance, the minimum down payment is only 3% (can be from a gift), and condos have relaxed approval guidelines.

Here's the link to check out HomePath properties:

http://www.homepath.com

Need a HomePath lender? Look no further. The Mortgage Experts provide HomePath financing! Call us at 303-345-3683 for details.

All the really cool real estate agents send their clients to the video library on our web site. Here is the link:

http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Want to make sure your loan closes? Call us at 303-345-3683.

FREE Underwriting Class for Everyone

2011-04-13T08:26:00.000-06:00

How would you like to get an inside look at mortgage underwriting? Now is your chance!
We've just added a new free class to our offerings at Colorado Free University: Get Your Home Loan Approved!: FAQ's and Secrets of Mortgage Underwriting.

Imagine if all the frustration surrounding loan approvals disappeared. No more sweating it out wondering what the lender (and the ever-so-mysterious underwriter) were doing. We'll explain exactly how a loan is underwritten. There's no reason at all that anything involved in mortgage approvals should be "secret", so we're going to tell you how it all works.
The class is for anyone who wants to know how to get their own (or someone else's) home loan approved. The mortgage industry is much, much different than it was a few years ago, and any agent who wants to maximize their income potential needs to know what happens once you turn your deals over to a lender.

The class is free. All you have to do is register for the class at Colorado Free University. Their number is 303-399-0093.
The next class is scheduled for Wednesday, April 27, 2011 from 6:30 PM - 9:30 PM. It will be at the Lowry campus of Colorado Free University (near 1st and Quebec).

You don't want to miss our other great real estate financing classes.

How Not to Get Ripped-Off When Buying a House (everything you wanted to know about loan fraud). Next class is Wednesday, April 20 from 6:30 PM - 9:30 PM. This class is free, but you must register.
Understanding Your Credit Score (everything you wanted to know about credit reports and credit scores). Next class is Tuesday, May 17 from 6:30 PM - 9:30 PM. This class is $41 for non-members and $29 for members of Colorado Free University.

All the really cool real estate agents send their clients to the video library on our web site. Here is the link:

http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Want to make sure your loan closes? Call us at 303-345-3683.

Why NOT to Dispute Credit Reports

2011-04-13T08:05:00.000-06:00

Many credit repair companies advise their clients to dispute accounts on their credit report, telling them the accounts will be removed from their report. That is horrible advice. Here's why:

When you dispute a credit account, lenders are now required to underwrite loans manually, rather than using the software that allows higher debt-to-income ratios. If a borrower is approved for a loan by the software with a 50% debt-to-income ratio and they have disputed an account, the manual underwriting guidelines say that the debt-to-income ratio must be lowered to:

36% for conventional loans
41% for VA loans
43% for FHA loans

If you dispute an old, unpaid collection account, the collection company will now know you are trying to improve your scores, and they may start trying to collect from you again. Your credit scores will drop.

Never advise anyone to use a credit repair company. Everything you can possibly do to raise your credit score is available for FREE from The Mortgage Experts. Give us a call for the details.

All the really cool real estate agents send their clients to the video library on our web site. Here is the link:
http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

If you want your loan to close, call us at 303-345-3683.

The REAL Debt-to-Income Ratios

2011-04-13T08:00:00.000-06:00

We received a number of calls in the past few weeks from prospective home buyers who had been told by various lenders that they were unable to qualify for a mortgage because their debt-to-income ratios (DTI) were too high. Most of them had been misinformed.

Here are the real debt-to-income ratio numbers:

FHA loans do not have a maximum DTI ratio. With good credit, borrowers are commonly approved with a DTI of 50% or slightly higher.
VA loans do not have a maximum DTI ratio. With good credit, borrowers are commonly approved with a DTI of 50%.
Conventional loans have a maximum DTI of 50%.

Check out the video library on our web site for more detailed information on DTI ratios. Here's the link:

http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

If you want to be sure your loan is going to close, call us at 303-345-3683.

Locking Your Interest Rate

2011-03-31T19:12:00.000-06:00

What is a Rate Lock?

When a loan originator (loan officer) locks the interest rate for a home loan, they are making a commitment to deliver that loan to the lender.
When the interest rate is locked, it cannot go higher or lower until the rate lock expires.

Do You Have to Lock the Interest Rate?

Yes, the interest rate MUST be locked before the lender can issue the final loan approval.
Here’s why: if the rate is not locked, it could go higher, and the borrower may no longer qualify for the loan.
Most lenders require the interest rate to be locked at least 10 days before the closing.

Are All Rate Locks the Same?

No, they are not! An interest rate is locked for a certain number of days – usually in 15-day increments (15 days, 30 days, 45 days, etc.).
If the rate is not locked through the closing date, then the lock could expire before the loan closes.
The rate quote the lender gives you should be for a rate lock that extends through the closing date.

Float-Down Locks

Some lenders offer “float-down” locks, meaning the interest rate can go lower if the market interest rates go lower. It still cannot go higher.
Float-down locks are a bad idea, because the lender ALWAYS charges you a higher interest rate to begin with.

What Happens if the Lock Expires?

The lender can always extend the rate lock, but it usually will cost the borrower some money. It can cost hundreds (or thousands) of dollars to extend a lock.
ALWAYS make sure your interest rate is locked through the closing date!

When Can You Lock the Interest Rate?

For a purchase transaction, you can lock the rate as soon as you have a fully-executed sales contract (both the buyer and seller have signed it).
For a refinance transaction, you can lock the rate as soon as the loan application is completed.

How Do You Know the Rate is Locked?

Colorado law requires the loan originator to give you a rate lock disclosure within 3 days of completing the loan application.
If the rate is not locked at that time, the disclosure must say the rate is not locked.
Once the rate is locked, the loan originator must give you a new disclosure saying that the rate is locked.
No lender is exempt from this law in Colorado.

How Do You Lock the Rate?

The lender locks it for you.
All you have to do is tell your lender to lock your interest rate. It takes the lender about 30 seconds to lock the rate.
You should never pay for a rate lock. It does not cost the lender anything to lock the interest rate.

When Should You Lock the Rate?

As soon as you can!
Rates can always go lower, but they can also always go higher. You are just gambling if you don’t lock the interest rate. You do not want to gamble with your mortgage.

How Do You Know if Rates Will Go Up or Down?

You cannot possibly know if rates are going to go up or down. No one knows if rates are going to go up or down.
Interest rates depend on how the mortgage-backed securities bond market is trading.
If someone knew where rates were going, they would not be selling mortgages, or dispensing advice about interest rates. They would be making billions of dollars a week trading bonds on Wall Street.
NEVER trust anyone who tells you they know where interest rates are going! They are making it up.

Want to watch a video of this tip? Check it out on our web site:
http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Want to make sure your loan closes? Call The Mortgage Experts at 303-345-3683.

Some Title Companies Are No Longer Accepting Bank Checks

2011-03-28T17:08:00.000-06:00

Some title companies are now requiring buyers to wire funds to their office if the funds due at closing exceeds a certain amount. In the past, just about every title company allowed buyers to bring a bank check. If your buyer doesn't know about this, it could delay the closing because it sometimes takes a few days to arrange for a wire.

Not every title company has this new requirement, but it's certainly worth asking about.

Check out our mortgage tips on video at:

http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

How to Find and Buy a HUD Home

2011-03-24T11:53:00.003-06:00

What is a HUD Home?

HUD stands for the Department of Housing and Urban Development. HUD is the US government agency that oversees the FHA loan program.

A HUD home is a house that used to have an FHA mortgage, but it went into foreclosure. HUD now owns the property.

How to Buy a HUD Home

• HUD homes are sold by bidding on them.
• HUD lists a sales price on their web site, but you can bid more or less than the price listed on the web site.
• You must use a real estate agent to place the bid for you.
• Not every real estate agent is signed up with HUD to place bids, but it is very easy and quick for them to do so.

How to Find HUD Homes

Here is the web site to find HUD homes:
http://hudhomestore.com/HudHome/Index.aspx

Special HUD Home Programs

• Occasionally, HUD will offer special programs so they can sell HUD homes faster.
• Some examples: HUD homes for $100 down, closing costs paid by HUD, special incentives to real estate agents.
• Check the HUD home web site for details and to see if any specials are in effect now.

Financing a HUD Home

• HUD will accept any type of loan or cash for one of their properties.
• If the financing is going to be an FHA loan, the web site listing will tell you which types of FHA financing are available for that particular property.

Common Misconceptions

• You do NOT need to get FHA financing to buy a HUD home.
• HUD homes are NOT just for first-time home buyers. Anyone can buy a HUD home.
• An individual CANNOT buy a HUD home for $1 down. That program is reserved for non-profits and government agencies.
• NOT all HUD homes are destroyed. Some are in good shape and some are in bad shape, just like other properties.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Miscellaneous Income

2011-03-06T17:43:00.002-07:00

Here's what you need to know about using various types of miscellaneous income to qualify for a mortgage.

Alimony or Child Support

• A divorce decree or other legal document must show that the income will continue for at least three years
• Must document that full, regular, and timely payments have been made for the past 12 months
• 6-12 months is acceptable, provided the alimony or child support is not more than 30% of the total income used to qualify the borrower

Capital Gains Income

Only acceptable if the borrower can document the following:
• Capital gains income has been received for the previous two years – income tax returns are required. The income is then averaged over the past two years.
• The borrower must document that they have additional property or assets that can be sold to pay the mortgage

Disability Income

• If the income will continue for at least three more years, it can be counted
• If the borrower is currently receiving short-term disability, which will be converted to long-term disability in the next three years, and the payments will decrease, the lower, long-term payments must be used

Income from Employment-Related Assets

• Examples: 401(k), IRA, SEP, and KEOGH retirement accounts – income is NOT being withdrawn
• The assets must be available for withdrawal without penalty – borrower must be old enough to withdraw
• The assets must be owned individually by the borrower, unless the only other owner is the co-borrower
• Only 70% of the assets can be counted
• Income is calculated as: total assets x 70% / 360
• Example: $500,000 in assets would be calculated as $972 per month in income500,000 x 70% / 360 = 972

Retirement, Government Annuity, Social Security, and Pension Income

• Must document that the income is being received – W-2’s or 1099’s, retirement award letter, etc.
• Must document that the income will continue for at least three years

Foreign Income

• Must have been received for the previous two years
• Must be converted into US dollars

Foster Care Income

• Must have received the income for the previous two years as shown on tax returns
• 12 months is acceptable if the foster care income is not more than 30% of the income used to qualify the borrower
• Must document that the income will continue at a level high enough to qualify for the mortgage

Interest and Dividend Income

• Must show that interest or dividend income was received for the previous two years
• Income is averaged over the past two years
• Must show that it will continue for at least three years

Non-Occupying Co-Borrower Income

• Example: parents buy a condo for their child – often referred to as a “kiddie condo” loan
• Income from the non-occupying co-borrower is allowed for FHA loans
• It is not allowed for conventional loans, unless the occupying borrower can qualify by themselves, without the income

Tip Income

• Must document that the income has been received for the previous two years
• The tip income is averaged over the previous two years
• The borrower’s employer must state that the tip income is likely to continue

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Length of Employment - Self-Employed and Commission Income

2011-02-24T12:22:00.002-07:00

Self-Employed Underwriting Guidelines

• A borrower who has a 25% or greater interest in a business is considered self-employed
• The borrower must be self-employed for a minimum of 24 months to count income
• However, if the borrower has between 12 – 24 months of self-employed income AND previously earned the same amount or more in a similar position, the income may be counted
–Example: doctor was formerly paid a salary by a hospital and for the past 12 months has owned his own medical practiceEarnings trend must be stable or increasing

How is Self-Employed Income Calculated?

• Earnings trend must be stable or increasing
• Net income (as shown on tax returns) is averaged over the past two years
–Example: if the net income in 2009 was $20,000, and the net income in 2010 was $40,000, then average income used for qualifying for the loan is $30,000
• The following expenses are added back to the borrower’s net income: depreciation, depletion, amortization, casualty losses, and if the borrower is a sole-proprietor (files taxes with IRS Schedule C), business use of a home

Commission Income Guidelines

• Commission income is averaged over the last two years
• 12 – 24 months of commission income may be acceptable, provided the loan application shows there are positive factors indicating the commission income will continue
• If 25% or more of the borrower’s income is from commission, their tax returns must show a full 12 months of commission income
• Income must be stable or increasing from one year to the next
• Non-reimbursed business expenses must be subtracted from gross income

Important Note

Underwriters have a great deal of discretion in determining whether income is acceptable.
Don’t assume income can or cannot be used before talking to a competent lender.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Length of Employment - Hourly and Salary Income

2011-02-21T16:42:00.002-07:00

What Matters to a Lender?

• Length of employment
• Stability of income
• Continuity of income

Length of Employment

“Typically, when a borrower has been generating income for two or more years from either part-time or full-time work with any number of employers, the lender may base its underwriting decision on the borrower’s current income.” – Fannie Mae

First Jobs and Jobs in a New Field

• Only need one month of income if the job is a first job or a job in a new field
• HOWEVER, the borrower must have recently completed specific training for the first or new job. Examples:
–Recent college degree and job in same field as degree major
–Recent training certificate for the job
• One paycheck and an offer letter is acceptable in lieu of one full month of income

Stability of Income

• Income stability, rather than employment stability, is what matters
• You do NOT need to have the same job for two years to qualify for a mortgage
• It is acceptable to change jobs often, as long as the income earned is stable (the same or increasing)

Continuity of Income

• Must be a likelihood of continued receipt of income for at least three years
• IMPORTANT: unless there is evidence that it will NOT continue for three years, the lender should conclude that the income WILL continue

Part-Time, Second-Job, and Multiple-Job Income

• Income must be uninterrupted for the previous two years
• Sometimes, 12 months is acceptable, provided there is strong evidence that the income will continue
• Must have a strong likelihood of continuation
• Income must be averaged over the previous two years

Seasonal Income

• Borrower must have worked the same job, or in the same line of seasonal work, for the previous two years
• Employer must verify that there is a reasonable expectation that the borrower will be rehired for the next season

Bonus and Overtime Income

• Bonus and overtime income must have been received for the previous two years
• Employer must confirm that the income is likely to continue
• Income must be averaged over the previous two years
• If the earnings trend is stable or increasing, then it is acceptable
• If the earnings trend is decreasing, then it is not acceptable

Periods of No Employment

• If the period between employment is less than one month, then no explanation is required
• If a few months, then an explanation is required (looking for work is an acceptable explanation)
• If greater than six months, then the borrower must be employed for six months before qualifying for a mortgage, and the work must be related to the previous employment
–Example: taking a few years off to raise children

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Your Monthly Mortgage Payment

2011-02-17T08:52:00.003-07:00

How is My Mortgage Payment Calculated?

• There are four basic components of the typical mortgage payment:
–Principal
–Interest
–Taxes
–Insurance
• Sometimes, additional amounts are due monthly:
–Mortgage Insurance
–Condo Owner’s Insurance: HO-6 policy
–Homeowners’ Association fees

Principal and Interest

• Principal = the money you borrowed
• Interest = paid to the lender for the use of the money you borrowed
• With a fully-amortized fixed-rate loan, the amount of principal is very small and the interest is very large at the beginning of the loan term
• Interest due each month = (loan balance X interest rate) / 12

Principal and Interest Example

• Assume a $200,000 loan balance at 5% interest on a 30-year mortgage
• Principal and interest payment = $1073.64

(200,000 X 5%) / 12 = 833.33 interest payment

1073.64 – 833.33 = 240.31 principal payment

Property Taxes and Insurance Escrows

• 1/12th of the annual property taxes and homeowner’s insurance is collected each month by the lender and held in an escrow account until it is due
• When the taxes and insurance payments are due, the lender makes the payments
• Even though the bill comes to the borrower, the lender will pay it
• Conventional (non-government) loans allow a borrower to avoid the escrow account and pay the taxes and insurance themselves, but lenders usually charge .25% of the loan amount at the closing. This is known as an “escrow waiver”.

Mortgage Insurance

• If the loan is for more than 80% of the value of the house, the lender will require mortgage insurance
• 1/12th of the annual mortgage insurance premium is collected by the lender each month as part of the mortgage payment
• VA loans do not have mortgage insurance

Condo Owner’s Insurance

• The Homeowners’ Association will have insurance coverage for the structure, but not for the contents
• If the property is a condo or a townhouse, the lender MAY require the borrower to have condo insurance, covering everything inside the unit
• This is known as an HO-6 insurance policy, and is sometimes referred to as “walls-in” coverage because it insures everything inside the walls of the unit. It is similar to renter’s insurance.
• Some lenders allow the borrower to pay for this insurance themselves, and some lenders require it to be escrowed, like the taxes
• The insurance for the structure is included in the HOA fees

HOA Fees

• If there is a homeowner’s association (HOA), the borrower will need to pay HOA fees
• There is always an HOA with condos and townhouses, and sometimes for planned unit developments (PUDs)
• The HOA fees are NOT part of the mortgage payment, although they do have to be considered when the lender is qualifying the borrower for the loan

Mortgage Payment Review

• Principal (all mortgages, except interest-only loans)
• Interest (all mortgages)
• Taxes (all mortgages, except if the borrower pays the taxes themselves)
• Homeowner's Insurance (all mortgages, except condos, a very few townhouses, and when the borrower pays the insurance themselves)
• Mortgage Insurance (if required by the lender)
• Condo Owner’s Insurance (if required by the lender for condos and townhouses)
• HOA fees (all condos, all townhouses, some single family residences). Never paid with the mortgage!

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Mortgage Insurance

2011-02-15T06:29:00.002-07:00

What is Mortgage Insurance (MI)?

• Mortgage insurance is an insurance policy that is required on loans that are for amounts greater than 80% of the value of the property (or the sales price, whichever is lower)
• The borrower pays for the insurance policy
• The lender is the beneficiary of the policy if the borrower goes into foreclosure

How are MI Rates Determined?

Conventional loans – MI rates depend on a number of things
–Size of the loan
–Borrower’s credit score
–Down payment amount
–Property location
–Terms of the loan (30 years, 15 years, etc.)

FHA loans – MI rates only depend on the down payment and terms of the loan

What is PMI?

• PMI stands for Private Mortgage Insurance, and is mortgage insurance from a private company
• PMI is only used with conventional loans
• FHA loans have mortgage insurance, but it is paid to the federal government. There is no private mortgage insurance company involved. It is referred to as MI, not PMI.

When Does MI Go Away?

Conventional loans
• Automatically goes away when the borrower has 22% equity in the property, based on the purchase price
• The borrower can get it removed earlier if they can prove that they have 20% equity in the property – requires an appraisal
• Most lenders require MI to be paid for at least 1 year, regardless of the equity

FHA loans
• Automatically goes away when the borrower has 22% equity in the property, based on the purchase price
• MI must be paid for 5 years, regardless of the equity in the property
• Borrower cannot get the MI removed early by proving they have sufficient equity

Lender-Paid MI

• Some lenders offer loans that are advertized as not requiring mortgage insurance
• They really do have MI, but the lender is buying it themselves, usually without telling the borrower
• Interest rates are higher for “no MI” loans
• Overall payment might be lower, but the payment never goes down, regardless of the equity the borrower has in the property

Things to Consider

• FHA loans require an up-front MI payment of 1% of the loan amount – can be added to the loan – not required to be paid in cash
• If a borrower gets two loans and neither one is greater than 80% of the purchase price, there is no MI
–Example: $100,000 purchase price, one loan for $80,000, a second loan for $10,000, and a $10,000 down payment = no MI
• VA loans never require mortgage insurance!

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Refinancing a Mortgage

2011-02-11T08:41:00.002-07:00

What is a Refinance?

• An existing mortgage is paid off and replaced with a new mortgage
• If a homeowner currently has two or more mortgages, they can all be paid off and combined into one new mortgage
• If the existing mortgage is kept in place, but the terms are changed, that is a loan modification, not a refinance

Rate and Term Refinance

• The new mortgage is paying off an existing mortgage (or mortgages) that was used to purchase the house, OR
• The new mortgage is paying off an existing mortgage that is a refinance of a mortgage that was used to buy the house
• The borrower can get the lesser of $2,000 or 2% of the new loan amount in cash
• Interest rates are lower for rate and term refi’s than for cash-out refi’s

Cash-Out Refinance

• The new mortgage is paying off an existing mortgage (or mortgages) and the borrower is also taking out cash in excess of $2,000 or 2% of the new loan amount, OR
• The new mortgage is paying off a mortgage that was not used to buy the house, OR
• The new mortgage is paying off an existing cash-out refinance
• Interest rates are slightly higher for cash-out refi’s than they are for rate and term refi’s

Subordinating an Existing Mortgage

• If a borrower currently has two mortgages, but only wants to refinance the first mortgage, that is allowed
• However, when the first mortgage is paid off, the second mortgage automatically moves into first lien position, and the new lender will not allow that, SO…
• The lender that owns the second mortgage that is NOT being refinanced must agree to put that mortgage back into second lien position
• They do NOT have to agree to do it

Can Closing Costs be Included in the Refi?

• Yes, they can, for both rate and term and cash-out refinances
• If the closing costs are included in a rate and term refi, it does not become a cash-out refi

Streamline Refinances

• FHA and VA both have rate and term refinance loans that have reduced underwriting requirements
–No income verification (must have a job, though)
–No appraisal
• You must be refinancing an existing FHA or VA loan with a new FHA or VA loan to get a streamline refinance
• The underwriting guidelines change frequently for streamline refi’s, so always check with a competent lender before assuming you can get one

What is the Process for Getting a Refi?

• The application process and the underwriting process for refinances is exactly the same as they are for a mortgage used to purchase a house
• The only difference is that there is no seller or real estate agent involved – only the borrower and the lender

Who Can Sell Me a Refinance Loan?

• Any mortgage broker can sell a refinance loan
• However, if the refinance is an FHA or VA loan, then the lender must be approved by the government to sell FHA and VA loans. Not every lender is approved to sell government loans.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Waiting Periods after a Foreclosure or Short Sale

2011-02-02T16:24:00.002-07:00

Here is what you need to know about getting a mortgage after a foreclosure or a short sale.

Definitions

• Foreclosure: Homeowner has stopped making mortgage payments, and the property is sold at auction.
• Short Sale: Homeowner sells the property to a buyer for less than the amount owed to the homeowner's current lender. The homeowner’s lender agrees to accept less than the amount owed on the mortgage, and allows the sale.

Conventional Loans - Foreclosure

• 7 years from the completion date of the foreclosure
• 3 years is permitted with extenuating circumstances (death of a spouse, serious illness). Divorce is not an extenuating circumstance.
–Minimum 10% down
–Only primary residences. No second homes or investment properties.

Conventional Loans – Short Sales

• 2 years with 20% down
• 4 years with 10% down
• 7 years with less than 10% down
• With extenuating circumstances, 2 years is permitted with 10% down

FHA Loans - Foreclosures

• 3 years from the completion date of the foreclosure
• Exceptions to the 3-year period are allowed with extenuating circumstances

FHA Loans – Short Sales

• No waiting period if the borrower was current on their mortgage payment at the time of the short sale, AND
–There were no late payments on the mortgage for the 12 months prior to the loan application date
–There were no late payments on any installment debt for the previous 12 months
• 3 years if the borrower was in default at the time of the short sale. Exceptions are allowed if there are extenuating circumstances and credit was good up until the time of the default.

Other FHA Considerations

• No new FHA loans if the borrower pursued the short sale simply to take advantage of declining market conditions, and
• Wants to purchase a similar or superior property at a reduced price within a reasonable commuting distance

VA Loans – Foreclosures & Short Sales

• Foreclosures
–2 years from the completion date
–1 year with extenuating circumstances
• Short Sales
–VA does not have a specific policy regarding short sales
–Most lenders follow the FHA guidelines

Additional Restrictions

• The borrower must have “re-established good credit”, meaning they had no late payments, collection accounts, or any other derogatory credit for the 12 months prior to the loan application
• To re-establish credit, you must use credit
• The guidelines mentioned here are ONLY for Fannie Mae, FHA, and VA. The borrower must ALSO comply with the guidelines of the individual lender and the mortgage insurance company (if the loan is a conventional loan).

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Waiting Periods after a Bankruptcy

2011-01-31T06:26:00.002-07:00

Here's how long you have to wait after a bankruptcy before you can get a mortgage.

Two Types of Bankruptcies

• Chapter 7: Debts are wiped out and no longer due. They are discharged.
• Chapter 13: Debts are “reorganized”. The court provides a payment plan to pay the debts.
–Discharged if the person sticks to the payment plan
–Dismissed if they do not stick to the payment plan

Conventional Loans

• Conventional loans are non-government loans
• Chapter 7 Bankruptcy
–4 years from the discharge date
–2 years from the discharge date with extenuating circumstances (death of a spouse, serious illness). Divorce is not an extenuating circumstance.
• Chapter 13 Bankruptcy
–2 years from the discharge date
–4 years from the dismissal date (2 years with extenuating circumstances)

FHA Loans

• Chapter 7 Bankruptcy
–2 years from the discharge date
–1 year with extenuating circumstances
• Chapter 13 Bankruptcy
–1 year of the payment period must have elapsed
–All payments must be made on time
–Need approval of the court

VA Loans

• Chapter 7 Bankruptcy
–2 years from the discharge date
–1 year with extenuating circumstances
• Chapter 13 Bankruptcy
–1 year of the payment period must have elapsed
–All payments must be made on time
–Need approval of the court

Additional Restrictions

• The borrower must have “re-established good credit”, meaning they had no late payments, collection accounts, or any other derogatory credit for the 12 months prior to the loan application
• To re-establish credit, you must use credit
• The guidelines mentioned here are ONLY for Fannie Mae, FHA, and VA. The borrower must ALSO comply with the guidelines of the individual lender and the mortgage insurance company (if the loan is a conventional loan)

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

What is a Conventional Loan?

2011-01-27T11:55:00.004-07:00

Here's what you need to know about conventional loans.

A conventional loan is any non-government loan. Government loans include FHA, VA, and USDA loans.

Conforming Vs. Conventional

• Conforming loans “conform” to the Fannie Mae or Freddie Mac underwriting guidelines
• Fannie Mae and Freddie Mac are private companies that buy mortgages from lenders
• All conforming loans are conventional loans because they are not government loans
• NOT all conventional loans are conforming loans, however, because not all non-government loans conform to the Fannie and Freddie guidelines
• Conforming and conventional are NOT interchangeable terms

Some examples of conventional loans that are NOT conforming loans:

• Portfolio loans: loans that lenders keep in their own portfolio and do not sell to Fannie Mae or Freddie Mac
• Sub-prime loans: loans with very relaxed underwriting guidelines

Is Conventional Better than FHA, VA, or USDA?

• Sometimes yes, and sometimes no
• You need to discuss your situation with a lender to know which is best for you
• Lenders must be approved by the government to sell government loans
• If your lender is not approved to sell a government loan, do you think they will tell you how good it is? Make sure your lender is approved by the government to sell government loans.

Fannie Mae Guidelines

Here's the link:

http://www.allregs.com/tpl/public/fnma_freesiteconv_tll.aspx

• Click on 2011 Selling Guide
• Then on Part B, Originating Through Closing
• Then on Subpart B3, Underwriting Borrowers
• Then on Chapters B3-1, B3-2, B3-3, B3-4, B3-5, and B3-6

Ask your lender if they know how to find the Fannie Mae guidelines. We'll bet they can't!

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Seller-Paid Closing Costs

2011-01-23T10:21:00.002-07:00

Here's what you need to know about seller-paid closing costs.

What are seller-paid closing costs?

• The seller is allowed to pay a certain percentage of the sales price towards the buyer’s closing costs
• The amount depends on three things:
–The type of loan: conventional, FHA, or VA
–The occupancy type: principal residence, second home, or investment property
–The amount of the down payment

How much can the seller pay?

Conventional (non-government) loans
• Principal residence or second home
–3% if the down payment is less than 10%
–6% if the down payment is 10% or greater, but less than 25%
–9% if the down payment is 25% or greater
• Investment property
–2%, regardless of the size of the down payment

FHA loans (primary residences only)
• 6%, regardless of the size of the down payment

VA loans (primary residences only)
• 4% for seller concessions
–VA funding fee
–Tax and insurance escrows
–Excessive discount points
• Unlimited for all other closing costs

What about the sales contract?

• The amount of seller-paid closing costs that is in the sales contract DOES NOT have any effect on the allowable amount.
• If the contract says the seller will pay 4% towards the buyer’s closing costs, but the limitation is 3%, then the amount in the contract DOES NOT matter. 3% is the max.
• Check with the lender before writing the contract!

Can anyone else pay?

• Yes. The real estate agents can pay the buyer’s closing costs. The same limitations apply.
• The lender can pay the buyer’s closing costs. The amount the lender can pay is unlimited.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Underwriting Overlays

2011-01-20T09:22:00.002-07:00

Here's all you need to know about underwriting overlays.

What is an underwriting overlay?

• Fannie Mae, Freddie Mac, FHA, and VA have underwriting guidelines that all lenders must follow if the loan is going to be sold to, insured by, or guaranteed by them
• Lenders are allowed to add their own, more restrictive underwriting guidelines on top of these guidelines
• The additional guidelines are called underwriting overlays

Why do overlays matter?

• The loan must be underwritten according to the most restrictive guidelines
–If the loan is going to Fannie Mae and Fannie Mae has the most restrictive guidelines, the Fannie Mae guidelines are the real guidelines.
–If the individual lender has more restrictive guidelines than Fannie Mae, then the lender’s guidelines are the real guidelines.

Some Examples of Overlays

• Fannie Mae has a minimum credit score of 620, but the lender has a minimum score of 640. 640 is the minimum score allowed!
• Fannie Mae allows a maximum debt-to-income (DTI) ratio of 50%, but the lender has a maximum DTI of 45%. 45% is the maximum DTI allowed!

What about mortgage insurance?

• Mortgage insurance companies have their own underwriting overlays.
• If the mortgage insurance overlays are more restrictive, then they are the real guidelines.
• Mortgage insurance guidelines are almost ALWAYS more restrictive than the lender’s or Fannie Mae’s
• FHA loans do not have mortgage insurance overlays

Why do loans fall apart?

• A conventional loan with mortgage insurance needs to be underwritten to Fannie Mae’s, the individual lender’s, and the mortgage insurance company’s guidelines.
• If the loan officer only looked at the Fannie Mae guidelines, then they only did one-third of their job.
• Loan officers must check ALL the guidelines, or the loan might fall apart and not close.

How do you protect yourself?

• Ask your lender if they check all three sets of guidelines before giving you a pre-approval.
• If they don’t know what you’re talking about – dump the bum. They are no good.
• Underwriters do not make up guidelines. Everything is written down for everyone to read.
• Your lender needs to read the guidelines!!! Loan approvals are easy if you read.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Down Payments

2011-01-17T08:39:00.004-07:00

Here's what you need to know about down payments:

How is the down payment determined?

• Type of loan
– Conventional (non-government)
– FHA
– VA
• Type of occupancy
– Primary residence
– Second home
– Investment property

How much is the down payment?

• Conventional loans
–Primary residence = 3%
–Second homes = 10%
–Investment properties = 15%
• FHA loans
–Primary residence ONLY = 3.5%
• VA loans
–Primary residence ONLY = 0% (100% financing)

What about mortgage insurance?

• Conventional loans
–With 20% down, there is no mortgage insurance
• FHA loans
–There is always mortgage insurance for the first 5 years, regardless of the size of the down payment
• VA loans
–There is never any mortgage insurance

Why pay more than the minimum for the down payment?

Conventional loans
• The interest rate is cheaper if the down payment is 5%, rather than the minimum of 3%
• Mortgage insurance is cheaper
–3% down = most expensive
–5% down = less expensive
–10% down = even less expensive
–15% down = even less expensive
–20% down = no mortgage insurance
• Lower loan amount = lower mortgage payment

FHA loans
• Mortgage insurance is cheaper if the down payment is 5%, rather than the minimum of 3.5%
• Lower loan amount = lower mortgage payment

Things to consider when deciding how much to put down

• How much money do I have?
• How big a mortgage payment can I afford?
• Do I want to avoid paying for mortgage insurance?
• Is it more important to me to have equity in my house, or cash in the bank?

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Debt-to-Income Ratios (DTI)

2011-01-13T12:34:00.004-07:00

What is a debt-to-income ratio?

• The debt-to-income ratio (DTI) is the ratio of liabilities to gross income.
• Used to determine whether someone can afford to pay their mortgage.
• Different loan programs have different DTI ratio requirements.

Front-end and back-end DTI

• FHA loans have 2 DTI ratios
–Front-end ratio (housing ratio)
–Back-end ratio (total debt ratio)
• Conventional loans (non-government loans) and VA loans have only one DTI ratio. In the past, there were 2, but this guideline has changed.

How is the DTI calculated?

• Front-end DTI =
(Principal + interest + taxes + insurance + HOA fees) / total monthly gross income

• Back-end DTI =
(Housing expenses + monthly payments on credit report) / total monthly gross income

What are the DTI ratio guidelines?

• DTI depends on whether the loan is underwritten manually (by a human) or by Fannie Mae’s underwriting software system
• Maximum DTI is always higher when the loan is underwritten using the software
• This is the major reason why you should NEVER use a lender who doesn’t use the underwriting software

Conventional DTI ratio

• Manually underwritten = 36%
–Up to 45% with strong compensating factors
• Underwritten using Fannie Mae software = 45%
–Up to 50% with strong compensating factors
• Compensating factors include:
–Excellent credit
–Very high reserves (money in the bank)
–Large down payment

VA DTI Ratio

• Manually underwritten: 41%
• Underwritten using VA software
– no set maximum ratio
– 45% - 50% is common

FHA DTI ratios

• Manually underwritten: 31% front-end and 43% back-end
• Underwritten using FHA software
– no set maximum ratio
– front-end of 40% and back-end of 50% is common

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Mortgage Asset Documentation

2011-01-09T17:15:00.002-07:00

Here are the basics (and more) about asset documentation requirements for a mortgage.

Lenders care about a borrower's assets for two reasons:

Do you have enough money for closing - to cover the down payment and closing costs?
Do you have enough money for any required reserves?

Lenders only care about liquid assets (cash or assets that can quickly be turned into cash).

If you are using a checking, savings, or money market account to prove you have enough money for a loan, you will need the most recent 2 months of bank statements.

If you are using a retirement account or a stock account, you will need the most recent statement.

Here's what the lenders look for:

Is the money really yours? Can you explain large deposits into your account?
Do you manage money responsibly? Do you have insufficient funds charges?
Do you have any liabilities that are not on your credit report? Car loans, child support payments, etc.?

You do NOT need to document all of your assets - only those assets that will be used to qualify for the mortgage. If you only need $5,000 to cover the down payment, closing costs, and reserves, then that's all you need to prove.

Why do some lenders ask for more documentation? More than likely, they don't know what they're doing. They probably did not use the underwriting software that Fannie Mae provides to lenders that tells them EXACTLY what is needed.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Mortgage Income Documentation

2011-01-05T21:34:00.005-07:00

Lenders require much less income documentation than most people think. Here is what is generally needed:

W-2 income:
-- Most recent 30 days of pay stubs
-- Last two years of W-2's

Self-employment income:
-- Most recent two years of federal tax returns. State returns are not needed.

Commission income (if you make 25% or more of your income from commissions):
-- Most recent two years of federal tax returns. State returns are not needed.

Retirement and disability income:
-- Most recent award letter.

You only need to document the income you are actually using to qualify for the loan. If you don't need all your income to qualify, you don't need to document it.

Why do most lenders ask for more documentation than this? Because they don't know what they're doing! A good lender always runs a loan through software that Fannie Mae provides, and it tells us exactly what is required.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

New Credit Rule

2010-12-14T18:29:00.000-07:00

There is a new underwriting regulation for Fannie Mae (non-government) loans that is important to know.

If a borrower pays off a revolving debt (like a credit card) to qualify for a loan, the borrower must close that account before closing or at closing. If they don't close the account, the debt must be counted against them when calculating the debt-to-income ratio, even if the balance is zero.

If the account is paid off but not closed, the balance that showed on the first credit report that was pulled by the lender must be used. Pulling a new credit report to show the balance as zero is not allowed.

This is one of those underwriting guidelines that most lenders will not know about because most lenders do not read the underwriting guideline updates every day. If your lender doesn't read the updates and your deal falls apart, dump the bum and start using a good lender who reads.

Want to make sure your loans close? Call the Mortgage Experts at 303-345-3683.

New Licensing Regulations

2010-12-09T10:50:00.002-07:00

On January 1, 2011 - just a few weeks from now - all mortgage brokers in Colorado must be licensed by the State and registered with the Nationwide Mortgage Licensing System (NMLS). At the moment, thousands of Colorado mortgage brokers have chosen to either ignore the new regulations, or have failed to complete the paperwork correctly or pay the required fees.

On January 1, any mortgage broker who is not licensed by Colorado or registered with NMLS will not be allowed to originate loans in Colorado. However, no one will know that a broker is not licensed and registered until the loans they have sold go to underwriting. That means many deals may fall apart.

Here's how to protect yourself and your clients:

If you are the selling agent, ask the mortgage broker who is working with your buyers if they are licensed and registered. If they are, they will have a Colorado Mortgage Loan Originator License number and an NMLS registration number.
If you are the listing agent, you should also ask the mortgage broker. Don't assume that the selling agent has done it for you. If they haven't, and the mortgage broker is not licensed and registered, your deal will fall apart.

Mortgage Booklet Gets Business for Realtors

2010-12-06T14:51:00.001-07:00

When we get a referral from a real estate agent, one of our main goals is to do everything we possibly can to make sure the home buyer refers the agent to other home buyers. The easiest way to do that is by demonstrating to the client that their real estate agent has referred them to the most knowledgable lender in the Metro Denver area.

We have an 11-page booklet entitled "Mortgage Essentials" that is regarded by everyone who reads it as being the most comprehensive handout on mortgages they have ever seen.

Here is the Table of Contents:

How Do I Qualify for a Loan?
Credit
Income
Assets
The Down Payment
Down Payment Assistance Programs
Mortgage Insurance
Closing Costs
Locking the Interest Rate
Getting Pre-Approved
The Loan Application
Loan Disclosures
How to Tell if You Have a Good Mortgage Broker
Should You Use a Real Estate Agent?

"Mortgage Essentials" closes deals for us, and it helps to build the business of the real estate agents who refer their clients to us. If you would like to see a copy, give us a call and we'll be happy to email it to you.

Want to make sure you loans close? Call the Mortgage Experts at 303-345-3683.

FHA and Conventional Loan Limits for 2011

2010-12-03T10:25:00.001-07:00

The loan limits for Fannie Mae, Freddie Mac, and FHA have been announced for 2011 for the Denver Metro area. Here they are:

The Fannie Mae and Freddie Mac limit is $417,000 for the Denver Metro counties, and $460,000 for Boulder County. Anything over those amounts is considered a jumbo loan. Fannie Mae and Freddie Mac loans are conventional loans, which means they are non-government (FHA or VA) loans.

FHA loan limits also vary depending on the county in which the property is located. For the Denver Metro counties, the limit is $406,250. For Boulder County, the limit is $460,000.

Need to find the limits for a property in a different location? Here's the link to get to the web site that will give you all the loan limits in the country:

https://entp.hud.gov/idapp/html/hicostlook.cfm

Here's how to use the web site:

- From the SORTED BY menu, select County.
- Select the state.
- From the LIMIT TYPE menu, select FHA Forward for FHA loans, or Fannie/Freddie for conventional loans.
- In the LIMIT YEAR menu, make sure the correct year is selected. CY2010 means calendar year 2010 and CY 2011 means calendar year 2011.
- Click on SEND and you will get the loan limits.

Have a question about how to find the loan limits? Call us at 303-345-3683.

Want to make sure you loan closes? Call the Mortgage Experts at 303-345-3683.

# 1 Reason Loans Don't Close

2010-11-18T11:48:00.001-07:00

Most real estate agents have experienced the frustration of a loan falling apart at the last minute. Here's the # 1 reason that happens.

When a conventional (non-government) loan is underwritten, it must comply with three sets of underwriting guidelines: Fannie Mae or Freddie Mac guidelines, the individual lender guidelines, and the mortgage insurance company guidelines. When a deal falls apart, it's probably because the loan originator (the person who is selling the loan) didn't check all three sets of guidelines.

Here's an example of how the additional guidelines might affect a loan:

First set of guidelines is Fannie Mae's. Minimum credit score of 620.

Second set of guidelines is the individual lender's. Minimum credit score of 640.

Third set of guidelines is the mortgage insurance company's. Minimum credit score of 680.

The strictest set of guidelines is always the set that matters, so the minimum credit score is 680.

If the person selling the loan only checked the Fannie Mae guidelines (either manually or by using the underwriting software that Fannie Mae provides) and the borrower has a credit score below 680, they may think the loan can get approved and will write you a pre-approval letter. However, the loan needs a 680 credit score and the borrower doesn't have a score that high, so there really is no deal. It falls apart at the last minute when the person selling the loan gets the bad news from the mortgage insurance company. They will probably tell you that the guidelines changed, but that's not true - the loan originator just didn't check them.

With FHA loans, there are two sets of guidelines: FHA's and the individual lender's. The mortgage insurance guidelines are included in the FHA guidelines.

With VA loans, there are also two sets of guidelines: VA's and the individual lender's. There is no mortgage insurance with VA loans.

How do you protect yourself from deals falling apart? It is super easy. Make sure you are using a lender who knows there are three sets of guidelines. The way to tell is to ask them. If they don't know what you're talking about, dump the bum because you might have a bogus pre-approval letter. If you keep using a lender who doesn't know what they're doing, you are the only one to blame for ruining your business.

Refinance Your Rental with an FHA Loan

2010-11-09T09:56:00.000-07:00

Here’s a great deal for anyone who has an FHA loan on an investment property.

FHA will allow you to refinance the loan into another FHA loan, even though it’s an investment property. And you do not need an appraisal! The only requirement is that you reduce your total monthly mortgage payment by 5%. Considering how low interest rates are now, that should not be too hard to do.

Not many people know about these loans, but we sure do.

Want one of these great refi’s? Call the Mortgage Experts at 303-345-3683.

Check out our web site at www.mtgsupportservices.com

Second Home Guidelines

2010-11-04T17:51:00.000-06:00

When someone buys a property, there are three possible types of occupancy: primary residence, second home, and investment property.

All three types of occupancy have different underwriting guidelines, and interest rates for primary residences and second homes are lower than they are for investment properties. Here are the Fannie Mae guidelines that determine whether a property is a second home:

-- The property must be located a reasonable distance away from the borrower's principal residence. Most lenders interpret this to mean 50 miles. If the second home is in an obvious vacation area (beach, ski resort, etc.) then the 50-mile limit does not apply.
-- The borrower must live in the property for some portion of the year.
-- The second home can only be a one-unit property.
-- It must be suitable for year-round occupancy.
-- The borrower must have exclusive control over the property.
-- The property must not be a rental or a timeshare.
-- The property cannot be subject to any agreements that give a management firm control over the occupancy of the property.

VA Loans Quick Reference Guide

2010-10-31T08:53:00.002-06:00

Need a Quick Reference Guide for VA Loans? Here you go.

Down Payment and Seller Concessions
-- No down payment required – 100% financing
-- No limit on seller-paid closing costs
-- Pre-paids (insurance, taxes, permanent buydown points, etc.) are limited to 4% of purchase price

Declining Market Restrictions
-- VA does NOT have declining market restrictions

Borrower Eligibility
-- Limited to active and retired members of the military and their surviving spouses
-- NOT limited to first time homebuyers
-- NO income limitations

Occupancy Requirements
-- Primary residences only

Maximum Loan Size
-- $417,000 in all counties and some counties are much higher – it is possible to purchase a house over the limit, but 25% of anything over the limit must be paid in cash

Credit Requirements
-- Each lender has their own minimum credit score – typically 640
-- Non-traditional credit is OK (need 3 trade lines verified for the past 12 months)
-- Bankruptcy – Chapter 7 is 2 years from the discharge date, Chapter 13 is 1 year of timely payments
-- Foreclosure – 2 years from the recording date of the Public Trustee’s Deed
-- Collection accounts do NOT have to be paid

Mortgage Insurance
-- No mortgage insurance
-- VA funding fee of 1.25% - 3.3% is paid at closing (it can be financed into the loan)
-- Funding fee is waived if the borrower is receiving permanent military disability benefits

Appraisals
-- The property must be in good condition and safety issues must be addressed

Mortgage Insurance with 3% Down

2010-10-28T13:00:00.001-06:00

Last month, Fannie Mae announced that they were lowering their down payment requirement to 3% for one-unit primary residence purchase transactions. However, at the time of the Fannie Mae announcement, the mortgage insurance companies required 5% down, so the Fannie Mae announcement did not really change things.

But here's some GREAT NEWS! The mortgage insurance companies have just announced that they will now insure loans with 3% down. Here are some details:

-- The minimum down payment is only 3%.
-- The minimum credit score at the moment is 700.
-- These are not restricted to first-time home buyers. If you have owned a home in the last three years, you are still eligible.
-- Primary residences only. No second homes and no investment properties.
-- One-unit properties only.

What impact does this have on the real estate industry?

Lowering the down payment requirement from 5% to 3% will increase the number of people who will be able to buy a house. However, these new down payment rules are only for people with good credit. When a loan that is insured by a mortgage company goes into foreclosure, the mortgage insurance company has to write a very big check to the lender, and they want to make sure they don't write too many big checks. Do not think that the lower down payment requirement is the beginning of a return to the sub-prime mortgage days! The mortgage insurance underwriting guidelines are still very strict.

FHA Quick Reference Guide

2010-10-24T09:56:00.004-06:00

Need a Quick Reference Guide for FHA Loans? Here you go.

Down Payment and Seller Concessions
-- 3.5% down
-- A relative can either GIVE the money to the borrower or LEND the money to the borrower
-- 6% seller concessions are allowed

Declining Market Restrictions
-- FHA does NOT have declining market restrictions

Borrower Eligibility
-- NOT limited to first time homebuyers
-- NO income limitations
-- Non-occupying co-borrowers are allowed (occupying borrower does not need any income to qualify)

Occupancy Requirements
-- Primary residences for maximum financing
-- 2, 3, and 4 units properties are allowed, as long as one unit is occupied by the borrower
-- Two FHA loans to the same borrower are OK, but they need 25% equity in the first property

Maximum Loan Size
-- Varies by county
-- The maximum loan size is $406,250 in Metro-Denver counties; Boulder County is $460,000
-- Loan size is higher for 2, 3, and 4 family units

Credit Requirements
-- Each lender has their own minimum credit score – typically 640
-- Non-traditional credit is OK (need 3 trade lines verified for the past 12 months)
-- Bankruptcy – Chapter 7 is 2 years from the discharge date, Chapter 13 is 1 year of timely payments
-- Foreclosure – 3 years from the recording date of the Public Trustee’s Deed
-- Short Sales – no waiting period if the mortgage was not delinquent at the time of the short sale, 3 years if the mortgage was delinquent – (other restrictions may apply – call us for details)
-- Collection accounts do NOT have to be paid

Mortgage Insurance
-- 1% up-front mortgage insurance premium is required, but it can be financed into the loan
-- Monthly mortgage insurance premium is based on a 0.90% annual rate (for most FHA loans)

Appraisals
-- They are NOT any more restrictive than conventional appraisals (safety issues must be addressed)

Bankruptcy, Foreclosure, and Short Sale Timelines

2010-10-13T14:09:00.003-06:00

Here are the current waiting periods before someone who has had a bankruptcy, foreclosure, or a short sale can qualify for a mortgage:

Chapter 7 Bankruptcies:

Conventional (non-government) loans:
-- 4 years from the discharge date
FHA loans:
-- 2 years from the discharge date
VA loans:
-- 2 years from the discharge date

Chapter 13 Bankruptcies:

Conventional loans:
-- 2 years from the discharge date or 4 years from the dismissal date
FHA loans:
-- 1 year of the payout period must elapse
VA loans:
-- 1 year of the payout period must elapse

Foreclosures:

Conventional loans:
-- 5 years from the completion date with 10% down and a 680 credit score
-- 7 years from the completion date with 3% or 5% down
FHA loans:
-- 3 years from the completion date
VA loans:
-- 2 years from the completion date

Short Sales:

Conventional loans:
-- 2 years with 20% down
-- 4 years with 10% down
-- 7 years with 3% or 5% down
FHA loans:
-- No waiting period if all mortgage payments and all other installment debt payments were made on time for the 12 months prior to the short sale
-- The short sale payoff must serve as payment in full. No outstanding deficiency can exist after the short sale.
-- The new purchase cannot be for a property of equal or greater value than the property sold in the short sale if the new property is within a "reasonable commuting distance" of the short sale property.
-- If the borrower is in default on their mortgage at the time of the short sale, the waiting period is 3 years.
VA loans:
-- VA does not have a specific policy regarding short sales.

In addition, each lender is allowed to impose their own, more restrictive guidelines on top of these guidelines. Always check with the individual lenders to find out what their guidelines are. Some lenders follow the guidelines above, and some have much stricter guidelines.

What impact does this have on the real estate industry?

These guidelines (and all guidelines) are not put in place to prevent people from owning houses. Rather, they are intended to keep people in houses.

The short-term effect of strict underwriting guidelines is never good for the industry because fewer people will be able to qualify for a mortgage. However, the long-term effect of strict underwriting guidelines is very good for the industry. Fewer properties will go into foreclosure, helping to preserve values. If values are maintained or go up, more people will want to buy a house.

It is important to understand the guidelines so you can advise your clients correctly. For instance, no one should ever tell a client to stop paying their mortgage so they can qualify for a short sale.

The FHA and VA rules for bankruptcies, foreclosures, and short sales are actually quite lenient when compared to conventional underwriting guidelines.

Learn ALL the Mortgage Rip-Offs -- for Free!

2010-10-07T13:48:00.001-06:00

By now, everyone knows that you can get ripped-off when you get a mortgage, but most people are a little fuzzy on exactly how those rip-offs occur. Want to know how it's done?

Attend our "How Not to Get Ripped-Off When Buying a House" class at Colorado Free University on Wednesday, October 20, and find out how the bad guys operate and how to protect yourself from their evil ways.

The class is a crowd pleaser and it's FREE!

Here's who should attend:

-- Your prospects who are sitting on the fence because they're afraid of the banks and the mortgage brokers.
-- You. Unless you've been a mortgage broker, you can't even begin to imagine how bad some of them are. Protect YOUR deals by learning what to look for.
-- Everyone in your sphere of influence. If you are the person who educates your sphere, then you are the person who gets the deals.

Here's what we cover:

-- The flow of mortgage money, from the closing until when China buys our mortgage backed securities. Learn how it all works, in plain English. If you don't know how the money flows, you can't possibly understand how the rip-offs occur. If you've ever wondered about how or why the money gets (or doesn't get) to a closing, this class is for you.
-- Get a look at an actual rate sheet. Learn exactly how much lenders get paid (it's a lot more than you think). Learn how almost EVERYONE gets ripped off when they pay points.
-- Learn all the common rip-off lines.
-- Learn why interest rates change.
-- Learn how to tell in a minute if your lender is honest, or good, or honest AND good.

Here are the details:

-- The class is FREE.
-- The date is Wednesday, October 20, from 6:30 PM - 9:30 PM.
-- The place is the Colorado Free University campus at Lowry - near 1st and Quebec.
-- To register, call Colorado Free University at 303-399-0093.
-- We do NOT offer CEU credits for this class.

Tell your prospects, tell your friends, and make sure you attend yourself.

How to Determine the Interest Rate

2010-10-04T07:53:00.002-06:00

We get calls every day from real estate agents, people interested in buying a house, and people interested in refinancing their current loan. Just about every conversation includes the question, "What's the interest rate?"

We never know the answer. Not because we're out of touch, but because we know that we need to have certain information before we can quote someone a rate (and not just be making it up). Here's the magic list of the things every lender needs to know before they can quote an accurate interest rate.

First the easy questions (most people know the answers to these):

-- What is the term of the loan (10, 15, 20, 25, 30, or 40 years)?
-- How big is the loan?
-- Is it fixed rate or adjustable rate?
-- Is it fully amortized (principal and interest payments every month) or interest only?
-- Is it a primary residence, a second home, or an investment property?
-- How many units are there? 1 unit, 2 units, or 3-4 units?

Next are the questions that about half the people can answer:

-- What is the credit score? "Excellent", "very good", "good", "fair", and "poor" don't help us because those terms mean different things to different people. Every 20 points in score below a 740 raises the rate for a conventional loan. The middle score of the borrowers' three credit scores is the one that counts. If there is more than one borrower, then the lower of the two middle scores counts.
-- What is the down payment?
-- What type of loan is it: FHA, VA, or conventional?
-- Is it a condo?

And finally, the questions that very few people can answer:

-- How long does the rate lock need to be? Every 15 days raises the rate.
-- Is there subordinate financing (a second lien)? Home equity lines of credit (HELOCs) count as second liens.
-- If the new loan is for a refinance transaction, is it a rate and term refinance or a cash-out refinance? The rules for this are very complicated.

Want to know the easiest way to tell if a lender is being honest with you? Ask for the rate. If they don't ask you all of these questions, they're just making it up.

And that's one of the reasons we have so many foreclosures!

Two Credit Reports for Conventional Loans

2010-09-30T07:11:00.004-06:00

Two credit reports are now needed for conventional loans. A conventional loan is any loan that is NOT a government loan - if a loan is not an FHA loan, a VA loan, or a USDA loan, then it is a conventional loan.

If the loan is a conventional loan, lenders are required to refresh the credit reports of all borrowers shortly before the closing. A refreshed credit report updates account balances, minimum payments, and credit inquiries (every time someone pulls your credit, you have a credit inquiry).

If there are any major differences between the original credit report and the refreshed report, they must be explained. This can cause delays in closings, and in some cases, can cause the loan to be denied.

How do you combat this new problem? Very easily. If you have applied for a mortgage, do NOT apply for any new credit (credit cards, car loans, furniture loans, increases in credit card limits, etc.) and do NOT charge more on your existing accounts. Wait until after the closing to buy all those things you need for your new house.

Changes for Conventional Loans

2010-09-23T07:39:00.003-06:00

Fannie Mae (the ruler of conventional loans) is making some changes to their underwriting guidelines that will affect many real estate deals. Here are the two changes that will get the most press:

The minimum down payment for one-unit, primary residence loans is being lowered to 3%. This does not apply to cash-out refinances. It is incredibly important to note that mortgage insurance companies will not insure these loans at the moment, with the exception of loans for first-time homebuyers with very good credit, so do NOT assume that 3% down is the new standard. FHA loans (3.5% down) are still, at the moment, the lowest down payment option for most borrowers.
The down payment can now be paid by a relative of the borrower, as long as it is a gift. Again, private mortgage insurance companies are NOT insuring these loans at the moment. FHA loans allow gifts from relatives and FHA will insure the loans, the same as always.
These changes affect loan applications dated December 11, 2010 and later.

By the time these changes take effect, the mortgage insurance companies may insure the loans, but that is anyone's guess.

What the Heck Does POC Mean?

2010-09-19T08:56:00.004-06:00

We are often asked what POC means on a Final Settlement Statement.

Quick quiz - does POC stand for:

Primary Occupancy Charge
Pickled Onion Curry
Ponies On Causeway
Paid Outside of Closing

POC stands for Paid Outside of Closing, and refers to any fee that is not being disbursed at the closing. The two most common POC charges are the appraisal fee (if it has been paid by the borrower before the closing) and the yield spread premium (the rebate that the lender pays the mortgage broker).

When POC is listed on the Settlement Statement, the letters are often followed by the words Borrower, Seller, Broker, or Lender. This refers to who paid the fee. For example, if the borrower paid for the appraisal before the closing, the fee would be marked as "POC Borrower" on the Settlement Statement.

If a fee is marked as POC, it is not included in the bottom line on the settlement statement because someone has already paid it (in the case of a paid appraisal) or the borrower does not owe it (in the case of a yield spread premium).

POC fees are listed on the Settlement Statement because the Real Estate Settlement Procedures Act (RESPA) states that all fees associated with a federally regulated mortgage must be shown on the Settlement Statement, regardless of whether they have already been paid or not.

How Much Does a Mortgage Broker REALLY Get Paid?

2010-09-15T06:02:00.003-06:00

Here's how mortgage brokers get paid.

We can make money in two ways. The first is by charging the borrower directly for fees. This is known as front-end compensation. The second way we get paid is by receiving a payment from the lender. This is known as back-end compensation.

Here are some examples of front-end compensation (direct charges to the borrower):

Origination fee
Discount fee
Underwriting fee
Processing fee
Admin fee
Marketing fee
Warehouse fee
Any other fee we decide to charge

On the Good Faith Estimate (GFE), all of these fees except the discount fee will be combined into Our Origination Charge (line 1 on the second page of the GFE). The discount fee will be on line 2. Always ask your mortgage broker for a breakdown of these fees. If he won't tell you, dump the bum and find someone who will be honest with you.

Does the broker get to keep all of these fees? No, they don't. However, there is absolutely no way for a borrower to know which fees the broker is paying to someone else and which fees he is keeping for himself.

Here is how back-end compensation works:

If the mortgage broker is acting as a true broker (meaning he is arranging for the financing, but does not actually fund the loan with his company's money), then he gets a check from the lender for increasng the interest rate. The more he increases the interest rate, the more money he gets. This is known as a Yield Spread Premium, or YSP. This is supposed to be reported on the Good Faith Estimate (GFE), but people still cheat in the mortgage industry, so it may or may not be on the GFE.

If the mortgage broker is acting as a mortgage banker (meaning he is not only arranging for the financing, but also funding the loan with his company's money), then he gets an additional check from the lender. This is known as a Servicing Released Premium, or SRP. This does not have to be reported on the GFE, so the borrower will never know if the broker is getting this check.

Every loan works this way, regardless of whether the person selling the loan works for a retail bank or sells loans for more than one bank.

Mortgage Insurance Rates

2010-09-12T15:35:00.001-06:00

Now that FHA mortgage insurance is going up from .55% a year to .90% a year, conventional loans will become more attractive to many borrowers. If a borrower has good credit, their monthly mortgage payment might be cheaper with a conventional loan than it would be with an FHA loan.

However, it is important to know that not all private mortgage insurance companies have the same rates. On a loan that we originated recently, the lender told us the mortgage insurance (MI) payment was going to be $195 a month for a $250,000 loan. We told the lender that we wanted to use a different MI company and got a cheaper payment of $139 a month, lowering the borrower's payment by $56 a month.

It was cheaper with the company we asked to use because they give discounts for good credit scores. The MI company that the lender wanted to use does not give discounts for good credit.

Not every state has approved the MI rates that are based on credit scores, but Colorado has approved the lower rates.

Make sure you are using a lender who knows about the rates that are based on credit scores. The cheap rates are not automatically given to people when they apply for a loan.

Quick Way to Raise Credit Scores

2010-09-08T11:10:00.001-06:00

When we run someone's credit through the software that tells us exactly what to do to raise their credit scores, the most common recommendation is to lower the percentage of the person's credit limit that is being used.

Here are the percentages that affect credit scores:

-- If the balance is more than 70% of your credit limit, it lowers your score the most.
-- If the balance is 50% - 70% of your credit limit, it lowers your score a bit less.
-- If the balance is 30% - 50% of your credit limit, it lowers your score even less.
-- If the balance is below 30%, it will improve your score the most.

These percentages apply to individual credit accounts and also to the total credit limit of all credit accounts. So if you pay off a credit card account, do not close the account. That will lower your total available credit limit and therefore lower your credit scores.

How to Find the Correct Property Address

2010-08-22T19:29:00.000-06:00

Here's a great way to avoid having to amend sales contracts.

Before approving a loan for closing, underwriters need to make sure the address that is on the sales contract is the correct address. If the address is incorrect, the sales contract will need to be amended to show the correct address, and that can cause unnecessary delays.

The address that shows on the title commitment is NOT the official address, so if for some reason you have the title commitment before writing the contract, you can't rely on that address.

Underwriters use the United States Postal Service Zip Code look-up web site to get the official addresses of properties.

Here's the link to the site:

http://zip4.usps.com/zip4/welcome.jsp

Once you are on the site, enter the street address, city, and state that you have (you do not need to enter the Zip Code), and hit SUBMIT. The correct USPS address will be returned.

If you use this official USPS address on the sales contract, you will avoid closing delays.

How to Find Public Records

2010-08-17T20:06:00.000-06:00

Ever wonder how underwriters find out all the details about a buyer or a property? One of the greatest resources for an underwriter is the Public Records Online Directory. This web site is a portal to all the official Assessor's, Recorder's, and Treasurer's web sites.

Here are just a few of the things that can be found by using this site:

- assessed value
- taxes
- current owners' name and address
- sales history
- deed recording dates
- zoning information
- property type (end the confusion about whether a property is a condo or a townhouse)

Here's the link to the site:

http://publicrecords.netronline.com

When the web page opens, just click on the state, then the county, and then the link to the Assessor, Recorder, or Treasurer. If the link says "Go to Data Online" that means you will be able to access the information yourself. If the link says "Website Only" or "No Information Online", then you won't be able to get the information yourself, but you can call the phone number listed next to the link to get what you need.

We use this web site for every loan we originate, just so we'll know exactly what the underwriter is going to see when they start their research. It's much better to head off problems early in the game than to have a deal fall apart at the last minute.

How to Speed Up Short Sales

2010-08-13T08:02:00.003-06:00

You've finally gotten the short sale approval from the seller's lender, and they've given you 3 weeks to close. But the buyer's lender says they need 5 weeks to close.

How do you prevent this from happening? By being proactive.

Any good lender will get the loan file into underwriting as soon as a sales contract is signed. They won't wait until the short sale approval arrives. If things are done this way, the loan can already be approved except for the following:

-- Appraisal
-- Any necessary updates to income and assets (most recent pay stubs and bank statements)

If that's all that the underwriter needs to see to issue the final approval, 3 weeks should be plenty of time to close.

Updated Roll-Out Date for FHA Mortgage Insurance Changes

2010-08-11T08:39:00.001-06:00

The roll-out date for the change in FHA mortgage insurance premiums has been moved to October 4, 2010. The new mortgage insurance rates affect all loans that have the FHA case number issued on or after October 4, 2010.

See the previous post for the original announcement and how it will change monthly payments for FHA loans.

FHA Mortgage Insurance Is Going Up!

2010-08-09T07:37:00.001-06:00

In a press release dated August 5, 2010, FHA Commissioner David Stevens announced that effective September 7, 2010, FHA intends to lower the up-front mortgage insurance premium from 2.25% to 1.00%.

At the same time, FHA will increase the monthly mortgage insurance premium from .55% to .90% for loans with less than 5% down, and to .85% for loans with 5% or more down.

Of course, everyone will go bananas when they hear this, so let's see what it really means before declaring that HUD is killing the real estate industry. Let's look at two examples of how the changes will affect the industry.

In our first example, we will assume the purchase price is $100,000, the down payment is the minimum 3.5%, and the interest rate is 5%. We will also assume that the borrower will finance the up-front mortgage insurance premium (because they almost always do).

Under the current mortgage insurance rules, the monthly payment for principal, interest, and mortgage insurance would be $573.62. Under the new rules, the principal, interest, and mortgage insurance would be $595.10.

That's an increase of $21.48.

In our second example, let's assume a purchase price of $200,000, a down payment of 3.5%, and an interest rate of 5%. Again, we will assume that the borrower will finance the up-front mortgage insurance premium.

Under the current mortgage insurance rules, the monthly payment for principal, interest, and mortgage insurance would be $1147.24. Under the new rules, the principal, interest, and mortgage insurance would be $1190.21.

That's an increase of $42.97.

Will either of those increases kill many deals? Probably not. Will they help to ensure that FHA will be able to continue its role of providing very stable, very low interest rate mortgages to borrowers who otherwise might not qualify for a loan? Absolutely.

3% Down Mortgages from Fannie Mae

2010-08-05T15:08:00.000-06:00

3% down payment mortgages from Fannie Mae are still available! They never went away!

They're called Flexible mortgages and the "flexible" part means that the 3% down payment can come from what Fannie Mae calls "flexible" sources. Gifts or loans from relatives are the two most common sources of flexible funds.

Here are some of the highlights of these loans:

- There are no income limits.
- Down payment is only 3% of the purchase price.
- There is no "up-front mortgage insurance premium" like there is with FHA loans. There is monthly mortgage insurance.
- The down payment and closing costs can come from "flexible" sources: primarily gifts or loans from relatives.
- They are for 1-unit primary residences only.
- They are not only for first-time home buyers. As long as the property will be the buyer's primary residence, it doesn't matter if they own other property.
- They are all underwritten using Fannie Mae's online underwriting system for quick approval decisions.
- The seller can pay up to 3% of the purchase price towards the buyer's closing costs.

Property Tax Credit

2010-08-03T11:17:00.000-06:00

One of the most common questions we get asked is "What is the property tax credit and how is it calculated?"

Property taxes are paid in arrears in Colorado, meaning the property taxes for this year are paid to the county next year. If you buy a house on August 15, 2010, then the property taxes for all of 2010 will be due in 2011. But wait! You only lived in the house from August 15, 2010 until the end of the year - why should you have to pay the taxes for all of 2010? Well, you don't. That's where the property tax credit comes in.

At the closing, the seller will pay you one day's worth of property taxes from January 1 until the last day that they owned it - August 14. That's 7 1/2 months of taxes that get moved from the seller's account into the buyer's account.It doesn't matter when you close on your house - you will only pay property taxes for the time you owned it. As the year goes on, the property tax credit gets larger. For example, if you close on a house on January 2, you will only get 1 day of taxes from the seller. If you close on December 31, you will get an entire year of taxes from the seller (less the one day you lived in it - December 31). This is important to know if you are asking the seller to pay some of your closing costs.

If the closing costs are $5,000 and the property tax credit is $2,000, then the most you should ask the seller to pay is $3,000. You don't need all $5,000 from the seller, so don't ask for it. Instead, ask for $3,000 in closing costs and lower your offer price by $2,000. The seller will end up netting the exact same amount of money, and you will pay $2,000 less for the property. Both parties will be happy. If both parties are happy, you have a well-constructed sales contract.

One more reason why you need to get your home loan financing from people who understands everything there is to know about mortgages - people like The Mortgage Experts!

Why Do Lenders Want My Bank Statements?

2010-07-30T19:09:00.001-06:00

"Why does a lender want to see my bank statements?"

Here are the reasons that lenders ask to see a borrower's bank statements:

They need to verify that the money being used for the down payment and closing costs really belongs to the borrower. If there are deposits that came from sources other than a pay check, the borrower will need to provide some sort of documentation showing where they got the money.

The lender wants to make sure that the borrower does not have any insufficient funds charges. If they do, then they will need to provide an explanation about why they had problems keeping track of their money.

The lender is looking for loans that might not show up on the borrower's credit report. If a borrower gets a loan for a car, furniture, or something else directly from their bank, the bank might not report it to the credit bureaus. However, the lender must count the debt against the borrower in order to sell the loan to Fannie Mae, Freddie Mac, FHA, or VA.

The lender wants to make sure that the borrower has full access to all of the money in their bank accounts. If the borrower has a joint account with someone other than their spouse, the lender will require a letter from the other person saying that the borrower can use all of the money in the account.

Do All Late Payments Show Up on Your Credit Report?

2010-07-27T16:37:00.001-06:00

In order for a late payment to appear on your credit report, it must be a full 30 days late. If your credit card (or mortgage, or car loan) payment is due on the 1st of the month, and you pay it on the 20th of the month, you will have a late payment fee, but it will not be reported to the credit bureaus and no lender will ever know that you paid late. Your credit score will not go down at all.

It is possible to be late on every single bill you ever have and still have excellent credit. You may pay a lot of money in late fees, but your credit scores will not go down at all as long as you pay within 30 days of the due date.

Is Earnest Money Part of the Down Payment?

2010-07-27T12:28:00.001-06:00

Buyers often ask us if the earnest money check they write when they make an offer on a house is part of the down payment.

The answer is YES. The earnest money check is a good-faith deposit to demonstrate to the seller that the buyer is serious about the transaction. If the transaction closes, the earnest money deposit can be counted as part of the down payment.

In addition, if the earnest money deposit is larger than the required down payment, then any excess amount can be applied towards the buyer's closing costs.

If there is any money left over after the earnest money is used for the down payment and the closing costs, then the buyer will receive a refund at the closing. A good example of when this might happen is when a buyer gets 100% VA financing and the seller agrees to pay the buyer's closing costs. There is no down payment with a VA loan, and if the seller agreed to pay the buyer's closing costs, then 100% of the earnest money would be refunded to the buyer at closing.

Can All Lenders Sell Purchase Loans AND Refinance Loans?

2010-07-23T13:07:00.001-06:00

Can all lenders sell purchase loans AND refinance loans?

That's a common question and the answer is YES. Unless a lender only deals in a very small niche (fix and flip loans, hard money loans, etc.) they can sell loans for both purchase and refinance transactions.

The underwriting guidelines are different for refinances (generally a little stricter than they are for purchases), but there is nothing preventing a mortgage originator from selling either type of loan.

Most originators market themselves towards one market (either purchase or refinance) depending on their sales skills and preference for dealing with one market over the other. If an originator likes working with real estate agents, then they will probably be more inclined to concentrate on purchase transactions. If they prefer to work more independently, or prefer not to be tied down by contract deadlines, then they will usually concentrate on refinance transactions.

The majority of our loans are purchase transactions, but we still sell refinance loans as well. Even though the number of purchases across the country is low compared to the number of refinances, marketing ourselves to real estate agents has proven to be very effective. As more and more loan originators drop out of the industry, the number of agent referrals we get steadily increases. So far, things have worked out pretty well.

We would like to remind everyone that we do sell refi loans and always love more business, so pass the word to your clients and friends that The Mortgage Experts can get them those super low rates that everyone should have right now.

Since refinance business is just extra business for us (we spend $0.00 marketing ourselves as refi lenders), we pass that low overhead onto our refi clients. We always sell refi loans at the par interest rate (the lowest rate that does not require the borrower to pay points). That means we almost always have lower interest rates than anyone else.

Finance Reform - How Will It Affect Mortgages and Real Estate?

2010-07-19T11:09:00.002-06:00

Now that the Wall Street Reform and Consumer Protection Act (the new finance reform law) has been passed by Congress, we’re getting many questions about how this new law is going to affect the lending and real estate industries.

The specifics of the new law will only be known when the new Bureau of Consumer Financial Protection is formed and hammers out the details. However, here are a few things that are known:

-- Unless a loan is a “qualified mortgage”, meaning it is low risk: full doc (income and assets verified), fully amortized (no interest-only payments), no balloon payment, no negative amortization (option ARMs), etc., the lender will need to cover 5% of the risk. That means the lender will be on the hook for 5% of the loan if the borrower goes into foreclosure. Not many sane lenders are going to want to write checks that big, so kiss stated doc, interest-only, and risky loans good-bye – unless the interest rates are a lot higher than they are for a low-risk “qualified mortgage”.

-- Income for mortgage loan originators (loan officers) will be restricted, but only for mortgage brokers, not mortgage bankers. The difference between a broker and a banker is that a broker only arranges for the financing, but does not fund the loan themselves. The money that is sent to the closing comes directly from the lender. A banker, on the other hand, funds their own loans. No one except the loan officer and the title company typically knows how the loan is funded, so don’t expect much of a change here. Any broker can very easily become a banker. It just takes a few hours to sign up with a different company. Wholesale bankers can still represent more than one lender, just as they do now, so everyone will NOT end up working for one of the big banks.

-- Loan disclosures (including the Good Faith Estimate) will change once again. Not much of an impact here because no one reads anything anyway.

The bottom line is that loans will continue to get harder to qualify for because sub-prime is dead and not coming back until the economy is fixed. That will take years and years. To get a loan, people will need good credit, steady income, and some money for a down payment.

The new law makes it official – things have changed.

Will Fannie Mae's New Requirement to Pull a Second Credit Report Lower Your Score?

2010-07-12T16:27:00.001-06:00

Now that Fannie Mae "recommends" that all lenders pull a new credit report right before closing (meaning "do it or else we won't buy the loan"), there is much concern about whether the extra credit pull will lower a borrower's credit scores.

The short answer is NO, provided the report is "refreshed" and not just re-pulled as a new report. A refreshed credit report is considered to be a "soft" credit pull, which does not impact a borrower's scores. A "hard" credit pull occurs when someone applies for new credit and that may impact the scores.

Again, if the credit report is just being refreshed, and not being pulled again as a new report, then it will not change the credit scores.

Also, keep in mind that multiple credit pulls by a mortgage lender within a 14-day period only count as one credit pull, even if different lenders pull the credit. If a lender tells you or your buyers that you shouldn't shop around for a mortgage because it might lower your credit scores, find a new lender because the one you have is not very knowledgeable.

HUD $100 Down Loan Program

2010-07-08T20:49:00.002-06:00

We've gotten a number of requests for information about HUD's $100 down deals in the past week, so here's a rundown of what you need to know:

-- A HUD home is a house that used to have an FHA loan, but it went into foreclosure. HUD now owns the property.
-- HUD (the Department of Housing and Urban Development) is the agency that oversees the FHA loan program.
-- If a buyer makes a full price offer on a HUD home, they are able to buy the property with a down payment of only $100 if they get an FHA loan.
-- If they bid more than the listing price and want FHA financing, they have to pay any excess amount in cash.
-- A buyer does not have to get FHA financing to buy a HUD home. HUD does not care at all where the money comes from. They just want to sell the property.
-- HUD will pay up to 3% towards the buyer's closing costs and pre-paids. To get the 3%, you need to ask for it when you bid on the property.
-- Earnest money requirements are as follows: if the sales price is $49,999 or less, the earnest money is $500; if the sales price is $50,000 or more, the earnest money is $1,000.
-- If the buyer uses the FHA $100 down program and does not have to pay for any closing costs, they will be able to get their earnest money back at the closing (except for $100).

Do not let anyone try to talk your buyers out of getting FHA financing. The appraisal guidelines for FHA loans are a tiny bit more restrictive than they are for conventional loans, but there is hardly enough difference to avoid FHA loans. Some brokers who have "been in the business for years" have not kept up with the changes in the mortgage industry and are doing themselves and their clients a real disservice by avoiding FHA loans.

If a lender ever tells you to stay away from FHA loans, that probably means they are not approved to sell them. You should not use those lenders.