Posts Categorized ‘General Info’

Apr 16

Michele

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Be Proactive with Time

From my March 28th, 2010 column in the Sacramento Bee…

If you are buying your first home, chances are you are dealing with more than what first time homebuyers have dealt with in the past. One reason is that today most of the homes on the market are either Short Sales or REO’s both of which require more time to get offers accepted.

Another reason is that prices have dropped so much on houses that the competition for entry level houses is fierce and those homes are also attracting investors which creates even more competition for the lower priced, starter homes.

Short Sales are properties where the property is worth less than is owed on the property. If the owners want to sell the property, they need to first have the potential sale approved by the bank that holds the mortgage. REO properties are properties that banks own because they have been foreclosed on by the bank.

Buyers become frustrated having to make offers on so many properties and then by the long waits. So what can you do to help lessen the stress? You can be a “proactive buyer” while you are waiting.

One thing that may lessen the confusion that occurs with so many offers is to set up a notebook with copies of the offers being made. It is not uncommon for buyers to have offers out on several properties at one time so you may want to have dividers with tabs that have the various addresses.

In this notebook, you can not only keep copies of the offer but also flyers any on the property. You may also want to have pages where you can make notes on the property listing things like pros and cons on each property.

Do you have children? You can also use the waiting period to research the schools that surround each property in a little more depth. Some buyers are incredibly good at checking neighborhood details that includes more than schools. It can also include nearby shopping, freeway access, and convenience to your work.

These things are all important but often buyers don’t have the time to check these things out because an offer on a property is accepted so soon. Once you have an accepted offer of course, most buyers want to have a home inspection done to check the overall condition of the property. Gathering other information though is just a bonus of having extra time.

Another proactive thing buyers can do is to make sure that their financial information is up to date with the lender. More often than not these days there can be months that pass before the buyers actually have their property.

Lenders always need to have things like bank statements and paystubs be no older than 30 days when the file is underwritten. Buyers often forget about this and in getting ready to move, pack up their financial papers. Your financial information is very important to the lender so be sure that you keep that information nearby. For instance, you might have done your income taxes since you first applied. Your lender may need these depending on the loan type you are doing.

Another proactive thing buyers can do is to start getting ready to move. Waiting to get an accepted offer may be a good time to start sorting things. Why move things that you will wind up throwing out when you get to your new home. Moving is always a perfect time to sort through things but usually people don’t have that extra time that buyers have right now.

One thing not to do is to start buying things for a new home. This is so tempting when you see new furniture or things for a bathroom or kitchen possibly on a great sale. But buying new things can either add to your debt or deplete your cash supply. Lenders most likely will need to rerun your credit because the existing credit report is too old.

Keeping your lender in the loop about anything that affects or may affect your financial picture is a very proactive thing. Sometimes that may just be something like whether you should be renewing your car lease. The dealer may be offering a great new lower rate that sounds appealing to anyone but by starting anew you may be increasing the debt. If there is anything financial, make that call to your lender and ask the question before rather than later.

Waiting for offers to be accepted and losing out on properties is frustrating to most buyers. Making use of that time can be a benefit if you use it wisely.

Apr 6

Michele

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Tax Credit Update

For those of you worrying about loosing out on the federal tax credit for first-time homebuyers, California is working on its own tax credit. I’ll post more details soon!

Mar 8

Michele

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Overlays Add to the Humps

From my February 28th, 2010 column in the Sacramento Bee…

The loan process has many layers and is often overwhelming to borrowers especially with everything changing so often. In making mortgage loans, lenders use guidelines regarding the borrowers and the property. During the early 2000’s, guidelines were relaxed quite a bit causing many loans to be made that later resulted in foreclosures. Investors took huge losses as well and many lenders went out of business.

Generally speaking, underwriting guidelines for most loans are set by Fannie Mae, Freddie Mac, FHA (Federal Housing Administration) or VA (Department of Veteran Affairs). These guidelines are set so lenders know what each of these agencies will accept and underwriters know how to underwrite the loan accordingly.

Some guidelines cannot be changed or the loan will not be saleable. For instance, FHA (Federal Housing Administration) is changing the upfront premium on their loans after April 5th 2010.   An upfront premium is mortgage insurance that is added upfront to the loan to reduce the monthly premium which makes it easier for borrowers to qualify. Mortgage insurance protects the lender when there is less than 20 percent down. FHA loans only require 3.5 percent down but loans with so little down are considered very high risk loans which is why they have the mortgage insurance. The new upfront premium will be 2.25 percent, up from the current 1.75 percent.

Beyond these guidelines however is where some of the confusion comes in. Lenders need to get the money from Investors who will buy the loans. Investors can have some addition guidelines—these are called Overlays.

Overlays are put in place to further protect the Investor from more loan defaults. One example of an Overlay in place by many Investors is regarding credit scores. While FHA, VA or FannieMae may have a limit that they won’t go below, a certain Investor may have an even higher credit score requirement and the lender must follow that guideline in order to be able to sell the loan to the Investor.

Low credit scores are one of the greatest risk factors in making a loan. Lenders are seeking to lessen the risk as much as possible and having higher credit scores required is one of the easiest ways to lessen that risk. Lenders then are requiring this because it is an Investor Overlay.

Another Overlay can have to do with the loan amount. The Lender may require an add-on (extra cost) for a loan amount that is too low or may have a minimum loan amount that they will do. They may also require an add-on for a high loan to value (LTV).

Still another Overlay may have to do with appraisals. The Investor may require more than one appraisal on a property if the loan is over a certain amount, it is a non-owner property or for some other reason that concerns that particular Investor.

Investors look at where the greatest number of defaults were with loans and that is where they are more prone to add Overlays. Cash-out loans for instance are yet another area where Overlays may occur.

Overlays mean that Lenders not only have to follow the underwriting guidelines of whatever program a borrower is using like FHA but then they have to check out any Overlays a given Investor may be requiring.

Sometimes real estate agents or borrowers themselves hear about some new change in say FHA loans—something that seems to have eased up on some guideline. The problem is that lenders may not be able to put that change into affect for a while because they need to find out what the Investors are going to do about that regulation. This time delay can be very frustrating to all involved, including loan consultants who want to make the loans.

It may seem that Overlays have made getting loans even more difficult but in an era where taxpayers have had to bailout large banks and many homeowners have lost their homes, using more caution in making loans may ultimately serve borrowers more.

Now is such a wonderful time to buy if you really are qualified to buy—low sales prices, low interest rates—but the right time isn’t the same for all buyers.

Feb 20

Michele

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Helpful Documents for Your Application Appointment

When it comes time for your application appointment, it helps to be prepared.  Having the needed documentation will make it easier for your loan officer to get your application started.  Below is a list of helpful documents to bring to your appointment.  This is a broad list to cover all possible borrowers, so some documents may be relevant to you and your co-borrower while others are not.

IDENTIFICATION

  • Current photo identification (drivers license, I.D. card) for each borrower
  • Resident alien card

INCOME

  • Current pay stubs (one full month)
  • W2s/1099s (last two years)
  • Evidence of social security/retirement income (i.e. copy of check or award letter)
  • Federal tax returns, with all schedules/attachments (last two years)
  • Partnership/corporate tax returns (last two years)
  • Signed year-to-date profit and loss statement
  • K1s for all partnerships
  • Evidence of child support income (i.e. 12 months of canceled checks)
  • Rental agreements on all rental properties

ASSETS

  • Bank statements, all pages (last three months)
  • Money market statements
  • 401k statements
  • Original gift letter
  • Copy of transfer of gift funds to escrow or your bank account
  • Verification of donor’s ability to give funds (i.e. bank statement)

CREDIT

  • Account numbers for installment and revolving debts
  • Last 12 months mortgage payment history
  • Landlord addresses (last two years)
  • Complete divorce settlement documents
  • Complete bankruptcy papers
  • Explanation of derogatory credit

Good luck with your appointment!

Nov 15

admin

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Welcome to my new blog…

Not much to see here just yet, but this is a work-in-progress. Keep checking back for more news and info. Until then, keep up-to-date with my weekly column in the Sunday Sacramento Bee.

Have a great day!

Michele Dillingham

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