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License? We Don't Need No Stinking License
There's a point of contention in my house these days about the "poison" contact solution that I used to clean my contacts the other day. I argue that Katie (my wife) should have told me not to use the "poison" contact solution. She argues that I should have read the bottle. Either way, this led me to a trip to Dr. Chris Heetland at Insight Eyecare in Chandler for an eye exam. He is excellent.
In the past, I had not had any kind of vision insurance so I have gone the cheap route of getting my contacts and eye exams from Nationwide Vision. Today, I learned that this has been an ongoing mistake for the past 10 years. It turns out that I have astigmatism in both eyes and the people at Nationwide Vision never bothered to address it. Thanks to Dr. Heetland, I know have the proper prescription and the proper contacts and I am amazed at how wonderful the world looks to me now. Good vision is really cool.
What's the point of all this? I realized after leaving Dr. Heetland's office that my eye care escapades are eerily similar to what is going with Loan Officer licensing.
Because of the S.A.F.E. Act, all loan originators are required to be licensed by July 1, 2010. Except for those that are employed by a Federally chartered bank. The good loan officers are getting their licenses. I believe this to be true. The not so good ones are either getting out of the business or going to work for one of the big banks.
What difference does that make? The licensed loan officer does not rely on his big name company to generate his business. If I do a bad job on a loan, word gets around pretty quick and my business suffers. But if I'm a loan officer at Bank of America for example, I can do a bad job and I don't have to worry about my business. I have millions of potential customers that walk through the doors of the thousands of branches everyday. I just have to wait for the next one to come to me.
I am not arguing that having a license will make a loan officer better. However, a loan officer that is not willing to put in the effort to obtain his license may also not be willing to put in the effort to make sure you home loan closes smoothly. The easy way out of licensing is to go work at a bank. It makes sense.
If you're an optometrist, maybe the easy way out is a place like Nationwide Vision. Why do a good job when all you have to do is wait for the next person to come in? No thanks. I'll stick with the professionals.
The Smooth Loan Process lesson for today: Check to see if your loan officer is licensed at http://www.nmlsconsumeraccess.org/ . Here's a copy of my license Harold License .
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
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Thursday, May 13, 2010
The Smooth Loan Process #2010-29
Lots of People Go To School for Ten Years--They're Called Doctors.
Today is my ten year anniversary with The Mortgage Advantage! Ten years ago, I was a young, idealistic loan officer with aspirations of changing the world. Today, I'm not so young and I've found that it's going to be harder than I thought to change the world. Hopefully, Diane Gerdes was joking when she told me it seems like it's been 20 years.
The year was 2000. We all just narrowly escaped the clutches of the Y2K bug. My oldest son was my only son. He was three and still at the peak of cuteness. It never occurred to me that he would be a teenager one day. I had just purchased my first home for the mind boggling price of $50,000. I wondered how I would ever be able to afford the $421 per month payment (that included escrows, by the way). That payment would be sweet now. It was also the year I got my first cell phone (my number is still the same) and it was the year I discovered email.
My journey that brought me to The Mortgage Advantage is filled with fate and destiny. I had been with another company for the first two years of my mortgage career. Something always seemed off to me about the other company. The day I finally realized it, I called a realtor friend of mine while I was driving to an appointment. I asked her what company I should talk to because I was thinking of a change. She told me to talk to The Mortgage Advantage. At the exact same time, an escrow officer in the area took it upon herself to call The Mortgage Advantage to tell them that they needed me. I made the call and the rest is history.
My trip down memory lane is not just for the nostalgia. What I realize is that any level of success that I have achieved is partially due to the longevity of my company and my longevity with my company. How many loan officers do you know that can say that they have been with the same company for 10 years? How many loan officers do you know that can say they have been in the business for 12 years? I know loan officers that changed companies more times than I change the oil in my car. What I always wonder is how their clients find them five years or even one year or even six months down the road.
Mortgage Originating is not a one shot deal. Often times, I will get calls with questions years after the loan has closed. I imagine that it is comforting for my clients to know that they can call me with a question years later and I will still be there to answer the phone. Remember, my number is still the same.
A couple of weeks ago, I was donating blood and the tech that was sticking me looked familiar. After staring at her for a few minutes, she finally broke the ice by reminding me that the reason I knew her was because I refinanced her house ten years ago. I'm not making this up. She said, "you're Harold Perkins with The Mortgage Advantage. I know you." As soon as she told me her name, I remembered exactly who she was. And, it didn't hurt when she stuck me with the needle so I'm guessing I did a good job on her loan. How many loan officers can say that they can walk into any place of business and have their client remember them from ten years earlier? Not only that, but then be able to tell the client that everything is still the same.
As I reflect, the one thing I realize is that I'm glad I'm not new in the business today. We all know how much more difficult it is to close a mortgage these days. I cannot imagine how difficult things are for the new people today. The level of expertise required to be efficient today is exponentially greater than it was ten years ago. There is nothing wrong with being new. Everybody is new at the beginning of their career. I'm just glad that's not me...and I'm glad I did not pick truck driving school.
The Smooth Loan Process lesson for today: Pick a loan officer who has experience or has the support of very experienced people. Those loan officers are still in the business for a reason.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
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Today is my ten year anniversary with The Mortgage Advantage! Ten years ago, I was a young, idealistic loan officer with aspirations of changing the world. Today, I'm not so young and I've found that it's going to be harder than I thought to change the world. Hopefully, Diane Gerdes was joking when she told me it seems like it's been 20 years.
The year was 2000. We all just narrowly escaped the clutches of the Y2K bug. My oldest son was my only son. He was three and still at the peak of cuteness. It never occurred to me that he would be a teenager one day. I had just purchased my first home for the mind boggling price of $50,000. I wondered how I would ever be able to afford the $421 per month payment (that included escrows, by the way). That payment would be sweet now. It was also the year I got my first cell phone (my number is still the same) and it was the year I discovered email.
My journey that brought me to The Mortgage Advantage is filled with fate and destiny. I had been with another company for the first two years of my mortgage career. Something always seemed off to me about the other company. The day I finally realized it, I called a realtor friend of mine while I was driving to an appointment. I asked her what company I should talk to because I was thinking of a change. She told me to talk to The Mortgage Advantage. At the exact same time, an escrow officer in the area took it upon herself to call The Mortgage Advantage to tell them that they needed me. I made the call and the rest is history.
My trip down memory lane is not just for the nostalgia. What I realize is that any level of success that I have achieved is partially due to the longevity of my company and my longevity with my company. How many loan officers do you know that can say that they have been with the same company for 10 years? How many loan officers do you know that can say they have been in the business for 12 years? I know loan officers that changed companies more times than I change the oil in my car. What I always wonder is how their clients find them five years or even one year or even six months down the road.
Mortgage Originating is not a one shot deal. Often times, I will get calls with questions years after the loan has closed. I imagine that it is comforting for my clients to know that they can call me with a question years later and I will still be there to answer the phone. Remember, my number is still the same.
A couple of weeks ago, I was donating blood and the tech that was sticking me looked familiar. After staring at her for a few minutes, she finally broke the ice by reminding me that the reason I knew her was because I refinanced her house ten years ago. I'm not making this up. She said, "you're Harold Perkins with The Mortgage Advantage. I know you." As soon as she told me her name, I remembered exactly who she was. And, it didn't hurt when she stuck me with the needle so I'm guessing I did a good job on her loan. How many loan officers can say that they can walk into any place of business and have their client remember them from ten years earlier? Not only that, but then be able to tell the client that everything is still the same.
As I reflect, the one thing I realize is that I'm glad I'm not new in the business today. We all know how much more difficult it is to close a mortgage these days. I cannot imagine how difficult things are for the new people today. The level of expertise required to be efficient today is exponentially greater than it was ten years ago. There is nothing wrong with being new. Everybody is new at the beginning of their career. I'm just glad that's not me...and I'm glad I did not pick truck driving school.
The Smooth Loan Process lesson for today: Pick a loan officer who has experience or has the support of very experienced people. Those loan officers are still in the business for a reason.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
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Thursday, May 6, 2010
The Smooth Loan Process #2010-28
Fake Tax Returns-What Could Possibly Go Wrong?
Fortunately, I've never had the pleasure of dealing with somebody that has provided me fake tax returns with their loan application. But there are people who would do this and those people suck.
These days, every piece of documentation that is provided has to be verified. Pay stubs are verified with the employer. Bank statements are verified with the bank and tax returns and W-2's are verified with the IRS. For the vast majority of us, verifying this information is not a problem. If you have purchased a house recently, you probably don't even know that this happened. If you are purchasing and you are aware of the IRS validation, you are probably not happy right now.
The problem is that taxes were just due on April 15 and millions of people file at the deadline. The IRS records all of the data from your tax returns and it can take several weeks for that to happen. If your closing is going to occur within a month or so of April 15, waiting for the IRS to process your tax returns could cause a delay.
If you're buying a house during this time of year, the best thing you can do with your taxes is to file electronically. Tax returns that are filed electronically are available for validation within a day or two. If you're not going to file electronically, the next best option is to hire a CPA to prepare your taxes. Sometimes we can have the CPA verify that the copy of your taxes we have are the same as what was filed with the IRS.
So why is all of this done? It's been discovered that one of the highest incidents of loan fraud involves tax returns. A self employed buyer might have a lot of deductions and expenses that makes his net income too low to qualify for the loan. There were many cases of self employed borrowers giving the bank tax returns without the deductions for qualifying but giving the IRS tax returns with the deductions to reduce his tax liability.
Also, we all have access to the software to produce W-2's and tax returns with any amount of income you want. There's even a website that will produce real looking pay stubs and you can put in any salary you want. They advertise that it's for entertainment purposes to "impress your friends." Come on!
This probably goes without saying but if you provide documentation that is not accurate for home loan, chances are your loan will not be approved.
The Smooth Loan Process lesson for today: Give your loan officer your real tax returns and W-2's. It's easier that way.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Share
Fortunately, I've never had the pleasure of dealing with somebody that has provided me fake tax returns with their loan application. But there are people who would do this and those people suck.
These days, every piece of documentation that is provided has to be verified. Pay stubs are verified with the employer. Bank statements are verified with the bank and tax returns and W-2's are verified with the IRS. For the vast majority of us, verifying this information is not a problem. If you have purchased a house recently, you probably don't even know that this happened. If you are purchasing and you are aware of the IRS validation, you are probably not happy right now.
The problem is that taxes were just due on April 15 and millions of people file at the deadline. The IRS records all of the data from your tax returns and it can take several weeks for that to happen. If your closing is going to occur within a month or so of April 15, waiting for the IRS to process your tax returns could cause a delay.
If you're buying a house during this time of year, the best thing you can do with your taxes is to file electronically. Tax returns that are filed electronically are available for validation within a day or two. If you're not going to file electronically, the next best option is to hire a CPA to prepare your taxes. Sometimes we can have the CPA verify that the copy of your taxes we have are the same as what was filed with the IRS.
So why is all of this done? It's been discovered that one of the highest incidents of loan fraud involves tax returns. A self employed buyer might have a lot of deductions and expenses that makes his net income too low to qualify for the loan. There were many cases of self employed borrowers giving the bank tax returns without the deductions for qualifying but giving the IRS tax returns with the deductions to reduce his tax liability.
Also, we all have access to the software to produce W-2's and tax returns with any amount of income you want. There's even a website that will produce real looking pay stubs and you can put in any salary you want. They advertise that it's for entertainment purposes to "impress your friends." Come on!
This probably goes without saying but if you provide documentation that is not accurate for home loan, chances are your loan will not be approved.
The Smooth Loan Process lesson for today: Give your loan officer your real tax returns and W-2's. It's easier that way.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Share
Tuesday, May 4, 2010
The Smooth Loan Process #2010-27
You Want To Buy A Condo? (or should I say con-d'oh!)
I'm officially putting condos in the category of ridiculous. In general, I like to believe that Fannie Mae and Freddie Mac have a pretty good grasp on what they're doing. Of course, I'm not talking about their management or leadership but their loan guidelines make sense for the most part. Except when it comes to condos! I never imagined I would say this, or even worse, put it in writing but I would rather finance a condo FHA than deal with Fannie or Freddie.
Here's the story:
Our perfect buyer decides he wants to buy a condo close to work. He lives in California and commutes to Arizona. Rather than stay in hotel, he wanted something small with low maintenance to stay in while he was in town. He has no mortgage on his house in California and no debt. Excellent credit and was planning on putting a 25% down payment. His payment would be 4% of his gross income. Can you imagine having a house payment that is 4% of your income? That would be sweet. So what's the problem?
The condo he found that suited him had 15.1% of the homeowners that were currently 30 days past due on their association assessments. Fannie and Freddie only allow for 15.0%. Not, 15.0001%. 15%. There were two homeowners too many that were past due out of 397. By Fannie's rules, that makes this property a piece of junk that is not financeable. Rules are rules so fine. We'll deal with it.
My first call was to the HOA manager. She informed me that the delinquency rate was not actually as high as they were reporting because they were still counting the properties that had been foreclosed and resold but in the sale, the previous owner still had a balance owing. They just needed to write off the old balances as a loss and the delinquency rate would reduce to about 5%. Great, right? No...we would be so wrong.
We waited a month as instructed by the HOA manager and sent her a new condo questionnaire to complete (which costs $100, by the way). I was giddy with excitement for the results. When the new questionnaire arrived, we found that delinquency rate had soared to 25% What?!?! How could this be? How could nearly 40 people go past due in just one month's time?
Back on the phone to the HOA manager. It turns out that she forget to tell me that her management company had just taken over the HOA from a different management company. Many of the homeowners had automatic debits from their accounts to pay their HOA dues. With the change in management company, many of the homeowners were now paying the wrong management company or their automatic debits had stopped and they had not made arrangements to start making payments to the new management company. D'oh!
Our buyer's journey on this property has now ended. I found out the other day that the delinquency rate in this subdivision has now dropped below 15%. Once the HOA manager sent notices out to the homeowners that were paying the wrong management company, the owners made the arrangements to pay. All of this about 30 days too late for our buyer.
So in the course of two months time, the property went from almost financeable to not a chance to no problem.
In fairness, an insolvent HOA will have a significant negative impact on the property value. The intention of Fannie is to ensure that they are not financing properties with an insolvent HOA. That makes sense but somewhere along the way, common sense left on a back packing trip through Europe to go 'find itself'. Let's hope it comes back soon to join the rest of us in the real world.
The Smooth Loan Process lesson for today: Spend the time and money to investigate a condo before you put your offer on the property.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@Perkins.com
Share
I'm officially putting condos in the category of ridiculous. In general, I like to believe that Fannie Mae and Freddie Mac have a pretty good grasp on what they're doing. Of course, I'm not talking about their management or leadership but their loan guidelines make sense for the most part. Except when it comes to condos! I never imagined I would say this, or even worse, put it in writing but I would rather finance a condo FHA than deal with Fannie or Freddie.
Here's the story:
Our perfect buyer decides he wants to buy a condo close to work. He lives in California and commutes to Arizona. Rather than stay in hotel, he wanted something small with low maintenance to stay in while he was in town. He has no mortgage on his house in California and no debt. Excellent credit and was planning on putting a 25% down payment. His payment would be 4% of his gross income. Can you imagine having a house payment that is 4% of your income? That would be sweet. So what's the problem?
The condo he found that suited him had 15.1% of the homeowners that were currently 30 days past due on their association assessments. Fannie and Freddie only allow for 15.0%. Not, 15.0001%. 15%. There were two homeowners too many that were past due out of 397. By Fannie's rules, that makes this property a piece of junk that is not financeable. Rules are rules so fine. We'll deal with it.
My first call was to the HOA manager. She informed me that the delinquency rate was not actually as high as they were reporting because they were still counting the properties that had been foreclosed and resold but in the sale, the previous owner still had a balance owing. They just needed to write off the old balances as a loss and the delinquency rate would reduce to about 5%. Great, right? No...we would be so wrong.
We waited a month as instructed by the HOA manager and sent her a new condo questionnaire to complete (which costs $100, by the way). I was giddy with excitement for the results. When the new questionnaire arrived, we found that delinquency rate had soared to 25% What?!?! How could this be? How could nearly 40 people go past due in just one month's time?
Back on the phone to the HOA manager. It turns out that she forget to tell me that her management company had just taken over the HOA from a different management company. Many of the homeowners had automatic debits from their accounts to pay their HOA dues. With the change in management company, many of the homeowners were now paying the wrong management company or their automatic debits had stopped and they had not made arrangements to start making payments to the new management company. D'oh!
Our buyer's journey on this property has now ended. I found out the other day that the delinquency rate in this subdivision has now dropped below 15%. Once the HOA manager sent notices out to the homeowners that were paying the wrong management company, the owners made the arrangements to pay. All of this about 30 days too late for our buyer.
So in the course of two months time, the property went from almost financeable to not a chance to no problem.
In fairness, an insolvent HOA will have a significant negative impact on the property value. The intention of Fannie is to ensure that they are not financing properties with an insolvent HOA. That makes sense but somewhere along the way, common sense left on a back packing trip through Europe to go 'find itself'. Let's hope it comes back soon to join the rest of us in the real world.
The Smooth Loan Process lesson for today: Spend the time and money to investigate a condo before you put your offer on the property.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@Perkins.com
Share
Monday, March 29, 2010
The Smooth Loan Process #2010-26 (Back from Vacation Edition)
USDA Funds Running Low
Feeling rested and refreshed, I've returned from vacation to news of changes to my second favorite loan program (VA is my favorite).
One of the best loan programs out there for first time buyers is the USDA Guaranteed Rural Housing Program. This program is designed for owner occupied single family properties located in Rural areas.
Congress appoints a certain amount of money every year for the program. For 2010, the available funds are $13.5 Billion. As of March 15, $9.5 Billion has already been used. That means only $4.0 Billion left which USDA anticipates will be depleted by the end of April. The new fiscal year does not begin until October.
What does this mean to you and I?
Unless you already have a property under contract and the loan is in process, it is unlikely that you will be able to utilize the USDA program for your home purchase. USDA will only honor loans that have received a final loan commitment from USDA at the time that the program runs out of funding.
If you are currently looking for a home and had planned on using the USDA for your loan program, be prepared that you may have to switch your loan to FHA. That's not a bad thing however, it does mean that a down payment of 3.5% of the purchase price will be required as compared to the zero down that USDA allows.
Not to worry, the funding will be back in October. It is actually very common for USDA to run out of funding before Congress renews the appropriation. Usually, it happens just a few days before the the new fiscal year so we never notice. This time its six months before hand so we'll have to make adjustments.
The Smooth Loan Process lesson for today: Be prepared to switch your loan to FHA if you are currently looking for a home and planned on using USDA.
Bonus Lesson: Spring break is not the time for a family vacation if you are going somewhere that college kids go for spring break. Call me if you want details on that.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Feeling rested and refreshed, I've returned from vacation to news of changes to my second favorite loan program (VA is my favorite).
One of the best loan programs out there for first time buyers is the USDA Guaranteed Rural Housing Program. This program is designed for owner occupied single family properties located in Rural areas.
Congress appoints a certain amount of money every year for the program. For 2010, the available funds are $13.5 Billion. As of March 15, $9.5 Billion has already been used. That means only $4.0 Billion left which USDA anticipates will be depleted by the end of April. The new fiscal year does not begin until October.
What does this mean to you and I?
Unless you already have a property under contract and the loan is in process, it is unlikely that you will be able to utilize the USDA program for your home purchase. USDA will only honor loans that have received a final loan commitment from USDA at the time that the program runs out of funding.
If you are currently looking for a home and had planned on using the USDA for your loan program, be prepared that you may have to switch your loan to FHA. That's not a bad thing however, it does mean that a down payment of 3.5% of the purchase price will be required as compared to the zero down that USDA allows.
Not to worry, the funding will be back in October. It is actually very common for USDA to run out of funding before Congress renews the appropriation. Usually, it happens just a few days before the the new fiscal year so we never notice. This time its six months before hand so we'll have to make adjustments.
The Smooth Loan Process lesson for today: Be prepared to switch your loan to FHA if you are currently looking for a home and planned on using USDA.
Bonus Lesson: Spring break is not the time for a family vacation if you are going somewhere that college kids go for spring break. Call me if you want details on that.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Thursday, March 11, 2010
The Smooth Loan Process #2010-25
Good Will Always Win Over Evil
Luke Skywalker, Spiderman and Jack Bauer. What do all of these characters have in common? They are the good guys and they always win. Granted, the last three Star Wars movies, Spiderman 3 and the last couple of seasons of 24 have all been awful but that does not diminish the basic truth that good wins over evil.
Let's add home buyers and home owners to this list of good guys. If you are a home buyer or home owner with good intentions, you will win. There is no doubt that you will have your challenges along the way. Short sales, bank owned properties and lower home values have been the evil that we've all had to contend with over the past couple of years but in the end, those of us who stay true to our principals and to our budgets will prevail. Despite all of their power, Darth Vader, The Green Goblin and assorted terrorists all got their comeuppances.
Perhaps you had to short sale your home or you have lost your house to foreclosure. This does not make you a bad guy. Your challenges are different but in the end, you will win too if you make the right choices.
If you can afford the home you are purchasing, you will qualify for the loan. If you can be patient while the bank negotiates your short sale offer, you offer will be accepted. If you are realistic about the bids you are making on a bank owned properties, your bid will be accepted. In reward for your diligence and effort, you get a wonderful home for you and your family. You may not win the first time and that's okay. What's important is that you win the last time.
Be honest, reasonable and patient. Don't give up! Don't swear at your Realtor because the bank negotiator has a heavy workload (that actually happens). In the end you will be rewarded. Sure, there are fewer loan programs available today and more challenges from sellers then there were a couple of years ago, but I have yet to see an application be declined from someone who could truly afford the home he wanted to purchase. And I have yet to see a qualified buyer that was not able to buy a house that suited him.
The Smooth Loan Process lesson for today: Be the good guy and you will win.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Luke Skywalker, Spiderman and Jack Bauer. What do all of these characters have in common? They are the good guys and they always win. Granted, the last three Star Wars movies, Spiderman 3 and the last couple of seasons of 24 have all been awful but that does not diminish the basic truth that good wins over evil.
Let's add home buyers and home owners to this list of good guys. If you are a home buyer or home owner with good intentions, you will win. There is no doubt that you will have your challenges along the way. Short sales, bank owned properties and lower home values have been the evil that we've all had to contend with over the past couple of years but in the end, those of us who stay true to our principals and to our budgets will prevail. Despite all of their power, Darth Vader, The Green Goblin and assorted terrorists all got their comeuppances.
Perhaps you had to short sale your home or you have lost your house to foreclosure. This does not make you a bad guy. Your challenges are different but in the end, you will win too if you make the right choices.
If you can afford the home you are purchasing, you will qualify for the loan. If you can be patient while the bank negotiates your short sale offer, you offer will be accepted. If you are realistic about the bids you are making on a bank owned properties, your bid will be accepted. In reward for your diligence and effort, you get a wonderful home for you and your family. You may not win the first time and that's okay. What's important is that you win the last time.
Be honest, reasonable and patient. Don't give up! Don't swear at your Realtor because the bank negotiator has a heavy workload (that actually happens). In the end you will be rewarded. Sure, there are fewer loan programs available today and more challenges from sellers then there were a couple of years ago, but I have yet to see an application be declined from someone who could truly afford the home he wanted to purchase. And I have yet to see a qualified buyer that was not able to buy a house that suited him.
The Smooth Loan Process lesson for today: Be the good guy and you will win.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Wednesday, March 10, 2010
The Smooth Loan Process #2010-21-A
Pure Fitness on Warner and McClintock Still Sucks!
I've never done a supplemental episode before. Thanks to Pure Fitness, you get one. In #10-21 http://bit.ly/TheSmoothLoanProcess10-21 , I told the story of my adventures with trying to cancel my membership with Pure Fitness on Warner and McClintock. The saga continues.
After cancelling my membership for the second time, I was assured that there would be no more charges to my credit card for their services. I was also given the cancellation form signed by the manager Katelin. On that cancellation form, she wrote very clearly that there would be no future billing. Excellent! This is what I wanted.
The next day, my card was charged double! Not excellent. I went back to the gym with my cancellation form to dispute this. I talked to the receptionist at the front desk and she told me that I would need to talk to a manager but there was not a manager in the building at that time. That was weird because Katelin was in the office behind me. I saw her. So I said, "Katelin is in the office behind me. I see her." The receptionist then informed me that I needed a different manager to handle this.
Wow! I've never been so angry so I left.
This morning I called my bank to dispute the charges for the past two months. When the customer service person got on the phone, I informed her that I wanted to dispute two of the charges on the account. Her response was very telling. She said, "Let me guess, Pure Fitness for $39?" I was astonished and asked her how she knew that. I hadn't said anything to her yet and it's not like those were the only charges on my card. I use that card for everything. She said she just kind of figured that's what it would be.
So it would appear this is not just me. The funny thing to me is that I have spent more time in the gym disputing the charges than I ever did working out. Maybe I'm getting in too much of a tizzy about $39 but I'm not one to let bad customer service get a free pass. You shouldn't either.
The Smooth Loan Process follow up lesson for today: Pure Fitness on Warner and McClintock still sucks!
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
I've never done a supplemental episode before. Thanks to Pure Fitness, you get one. In #10-21 http://bit.ly/TheSmoothLoanProcess10-21 , I told the story of my adventures with trying to cancel my membership with Pure Fitness on Warner and McClintock. The saga continues.
After cancelling my membership for the second time, I was assured that there would be no more charges to my credit card for their services. I was also given the cancellation form signed by the manager Katelin. On that cancellation form, she wrote very clearly that there would be no future billing. Excellent! This is what I wanted.
The next day, my card was charged double! Not excellent. I went back to the gym with my cancellation form to dispute this. I talked to the receptionist at the front desk and she told me that I would need to talk to a manager but there was not a manager in the building at that time. That was weird because Katelin was in the office behind me. I saw her. So I said, "Katelin is in the office behind me. I see her." The receptionist then informed me that I needed a different manager to handle this.
Wow! I've never been so angry so I left.
This morning I called my bank to dispute the charges for the past two months. When the customer service person got on the phone, I informed her that I wanted to dispute two of the charges on the account. Her response was very telling. She said, "Let me guess, Pure Fitness for $39?" I was astonished and asked her how she knew that. I hadn't said anything to her yet and it's not like those were the only charges on my card. I use that card for everything. She said she just kind of figured that's what it would be.
So it would appear this is not just me. The funny thing to me is that I have spent more time in the gym disputing the charges than I ever did working out. Maybe I'm getting in too much of a tizzy about $39 but I'm not one to let bad customer service get a free pass. You shouldn't either.
The Smooth Loan Process follow up lesson for today: Pure Fitness on Warner and McClintock still sucks!
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Thursday, March 4, 2010
The Smooth Loan Process #2010-24
Buying A Home After A Short Sale
Remember playing the post office game in grade school? The first person whispers something in the ear of the person next to him. The next person repeats what the first person said and so on. By the time the phrase gets to the last person in the game, it's completely different from what the first person said. Click the link for my favorite example of this from The Simpsons. http://bit.ly/5kBggd
The post office game is being played when it comes to HUD's guidelines on purchasing after a short sale. I've heard everything from one end of the spectrum to the other. This morning, KTAR reported "good news for all that have had a short sale."
Here are the facts. You can check it out on HUD's website. http://bit.ly/mortgagee09-52 . In order to be eligible to purchase a home with an FHA loan after a short sale, you must have been current on the mortgage for the 12 months prior to the short sale. The rest of your credit must meet FHA standards. The new home must not be within a reasonable commuting distance from the property that was sold. That last bit is the kicker. Essentially, It means that reason for your short sale must be because you were relocated by your company to a different metro area. It's not HUD's intention to reward people for short selling a property to improve their equity position.
There are also provisions for drastic increase or decrease in family size.
Unless you have been relocated to another city by your employer, or you are the Octo-mom, your short sale is going to be treated very similarly to a foreclosure when it comes time to purchase the next home. For FHA loans, that means three years from the date of the short sale.
The Smooth Loan Process lesson for today: It is very unlikely that you will qualify to purchase a home within three years of a short sale.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Remember playing the post office game in grade school? The first person whispers something in the ear of the person next to him. The next person repeats what the first person said and so on. By the time the phrase gets to the last person in the game, it's completely different from what the first person said. Click the link for my favorite example of this from The Simpsons. http://bit.ly/5kBggd
The post office game is being played when it comes to HUD's guidelines on purchasing after a short sale. I've heard everything from one end of the spectrum to the other. This morning, KTAR reported "good news for all that have had a short sale."
Here are the facts. You can check it out on HUD's website. http://bit.ly/mortgagee09-52 . In order to be eligible to purchase a home with an FHA loan after a short sale, you must have been current on the mortgage for the 12 months prior to the short sale. The rest of your credit must meet FHA standards. The new home must not be within a reasonable commuting distance from the property that was sold. That last bit is the kicker. Essentially, It means that reason for your short sale must be because you were relocated by your company to a different metro area. It's not HUD's intention to reward people for short selling a property to improve their equity position.
There are also provisions for drastic increase or decrease in family size.
Unless you have been relocated to another city by your employer, or you are the Octo-mom, your short sale is going to be treated very similarly to a foreclosure when it comes time to purchase the next home. For FHA loans, that means three years from the date of the short sale.
The Smooth Loan Process lesson for today: It is very unlikely that you will qualify to purchase a home within three years of a short sale.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Tuesday, March 2, 2010
The Smooth Loan Process #2010-23 (Birthday Edition)
1973 or 2010? The 70's Are Back In Style
It's the day of my birth! It happened in 1973. At least, that's what they tell me. I don't really remember it. Here are some other fun facts (according to the internet) about 1973. The average home price in the US was $32,500. The average annual household income was $12,900 and 30 Year mortgage rates were about 7.5%. The most fun of all, a gallon of gas was 40 cents and 94% of all people over 18 smoked cigarettes. Okay, I made up the last one about smoking, but it was a lot.
Oh, how things have changed. How sweet would it be today to have a $228 house payment on your $32,500 mortgage? Or fill up your car for $8.00? One thing that has changed since the 70's but has now come back in style is the way we qualify for our mortgages.
My dad remembers the home buying process for our family home in the 70's. He still lives there, by the way. He had to provide two years W-2's and tax returns, one months pay stubs and two months bank statements. His monthly debts could not exceed 41% of his gross monthly income. And he had to have had a history of paying his bills on time.
Sound familiar? If you said yes, you're right. These are essentially the guidelines today to qualify for a mortgage. If we look back at 1973, the foreclosure rate for all mortgages under these guidelines was about .5%. We hear in the news how difficult it is now to obtain financing. It's not that it's difficult, it's just back to how it used to be. Maybe that's not a bad thing. Is it unreasonable that we are expected to have the ability to repay the money that we borrow?
The Smooth Loan Process lesson for today: Your lender is going to ask you for more paperwork than they did a few years ago. Please don't be offended.
Bonus Lesson: The Sting was Best Picture of 1973. Avatar is the favorite this year. Avatar had better special effects.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
It's the day of my birth! It happened in 1973. At least, that's what they tell me. I don't really remember it. Here are some other fun facts (according to the internet) about 1973. The average home price in the US was $32,500. The average annual household income was $12,900 and 30 Year mortgage rates were about 7.5%. The most fun of all, a gallon of gas was 40 cents and 94% of all people over 18 smoked cigarettes. Okay, I made up the last one about smoking, but it was a lot.
Oh, how things have changed. How sweet would it be today to have a $228 house payment on your $32,500 mortgage? Or fill up your car for $8.00? One thing that has changed since the 70's but has now come back in style is the way we qualify for our mortgages.
My dad remembers the home buying process for our family home in the 70's. He still lives there, by the way. He had to provide two years W-2's and tax returns, one months pay stubs and two months bank statements. His monthly debts could not exceed 41% of his gross monthly income. And he had to have had a history of paying his bills on time.
Sound familiar? If you said yes, you're right. These are essentially the guidelines today to qualify for a mortgage. If we look back at 1973, the foreclosure rate for all mortgages under these guidelines was about .5%. We hear in the news how difficult it is now to obtain financing. It's not that it's difficult, it's just back to how it used to be. Maybe that's not a bad thing. Is it unreasonable that we are expected to have the ability to repay the money that we borrow?
The Smooth Loan Process lesson for today: Your lender is going to ask you for more paperwork than they did a few years ago. Please don't be offended.
Bonus Lesson: The Sting was Best Picture of 1973. Avatar is the favorite this year. Avatar had better special effects.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Monday, March 1, 2010
The Smooth Loan Process #2010-22
I Don't Need To Read That. I Trust You.
I have a birthday coming up and for the first time in my life, I'm realizing that I'm not a part of the younger crowd anymore. Last week, I took an application and pre-approved a buyer that was born in 1989. How is that possible?!?! It will be no time at all before my oldest son would be old enough (but not responsible enough the way he's going) to buy a house. Crazy!
The thing that struck me about the 20 year old that is buying a house is that he was so impatient. He was interested to know what his payment would be. And how much money he would need for down payment. Other than that, everything else was extraneous to him. He didn't care about the loan program or why I was recommending it. He just wanted to be done with the meeting. Or so I thought.
At first, I thought that maybe I had done something to offend him or that I had not built a good rapport with him so I asked him if he would like me to explain the application documents. His response was "I don't need to read that. I trust you." I just met him that morning. We had only spoken on the phone once. I realize that I'm charming, but I couldn't let him leave without explaining the paperwork. I have a responsibility to our clients to make sure they understand what they are getting with their financing.
Then he answered a text on his phone for the fourth time since our meeting started and it hit me. The way he gets his information is very different than the way I get my information. Admittedly, I'm nearly (but not quite) twice his age. Not old by any means, but not young either. I did not have a cell phone until I was in my 20's. I had a kid before I ever sent my first email. This buyer grew up with internet, texting and cell phones. The information is more instant and mobile now. I was showing him a bunch of paper. Not his style.
I stopped the meeting. I told him I would email all of the applications documents to him and asked him to sign and fax or email back to me. His face lit up with excitement. This was more his style. I made him promise to read all of the documents that I had emailed and he agreed.
By the way, this all happened in less than 30 minutes. Kids these days...
The Smooth Loan Process lesson for today: You have to read all of your documents. There's important information there. When, where and how you read it is up to you.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
I have a birthday coming up and for the first time in my life, I'm realizing that I'm not a part of the younger crowd anymore. Last week, I took an application and pre-approved a buyer that was born in 1989. How is that possible?!?! It will be no time at all before my oldest son would be old enough (but not responsible enough the way he's going) to buy a house. Crazy!
The thing that struck me about the 20 year old that is buying a house is that he was so impatient. He was interested to know what his payment would be. And how much money he would need for down payment. Other than that, everything else was extraneous to him. He didn't care about the loan program or why I was recommending it. He just wanted to be done with the meeting. Or so I thought.
At first, I thought that maybe I had done something to offend him or that I had not built a good rapport with him so I asked him if he would like me to explain the application documents. His response was "I don't need to read that. I trust you." I just met him that morning. We had only spoken on the phone once. I realize that I'm charming, but I couldn't let him leave without explaining the paperwork. I have a responsibility to our clients to make sure they understand what they are getting with their financing.
Then he answered a text on his phone for the fourth time since our meeting started and it hit me. The way he gets his information is very different than the way I get my information. Admittedly, I'm nearly (but not quite) twice his age. Not old by any means, but not young either. I did not have a cell phone until I was in my 20's. I had a kid before I ever sent my first email. This buyer grew up with internet, texting and cell phones. The information is more instant and mobile now. I was showing him a bunch of paper. Not his style.
I stopped the meeting. I told him I would email all of the applications documents to him and asked him to sign and fax or email back to me. His face lit up with excitement. This was more his style. I made him promise to read all of the documents that I had emailed and he agreed.
By the way, this all happened in less than 30 minutes. Kids these days...
The Smooth Loan Process lesson for today: You have to read all of your documents. There's important information there. When, where and how you read it is up to you.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Friday, February 26, 2010
The Smooth Loan Process #2010-21
Pure Fitness on Warner and McClintock Sucks!
Sorry guys, this one is not mortgage related but it's necessary.
A little over two years ago, I signed up my wife and I for a membership at the Pure Fitness on Warner and McClintock in Tempe. At the time that I signed up, they were building a new facility in Chandler just minutes from our house. Like many of us, the start of a new year brought the motivation (albeit temporary) to get to the gym more often. The new year special of no sign up fees and knowing that there would be a facility very close to home was enough to get me to sign. Unfortunately, construction stopped on the new facility close to my house and it never opened. I have no problem with Pure Fitness for this.
A couple of months ago, I realized that it had been at least a year since I had gone to the gym. My wife had never gone since we got the membership. By the way, a gym membership is NOT a good gift for your wife for many reasons. So in November, I went in to the facility to cancel our membership. The person at the front desk had me sign the form to cancel and informed me that I could still use the facilities for another 60 days because they required 60 notice for cancellation and I would be charged for December. No problem.
Here's where thing go awry. The person at the front desks says that they will also refund half of the charges since I took the membership because my wife never went into the facility. I thought that was awesome. I did not expect it. Then she says, "oh wait, she didn't come in here but she used a few of our other locations in Chandler and in Mesa." For that reason, now she wouldn't refund anything for my wife's account. This really didn't bother me. My wife never used the other locations, but I didn't expect the money back anyway so I let it go. Besides, how could I prove my wife had never been there? Her computer said my wife had. I told her not to worry about it and lets just cancel. Then I signed the cancellation.
This morning, I pulled up my bank account and saw that I had been charged this month for the membership. And not the usual $19. It was $38. I looked at last month statement and sure enough, there's a charge for $38 in January that I had not noticed (shame on me). I immediately dropped what I was doing and went into the gym to ask them about it. The front desk person pulled up my account and showed me on her screen that I had cancelled in November. I told her that I was still being charged and she argued with me and that I was wrong and was not being charged. Her computer said so. So I went back to my office, printed my bank statement and went back to the gym and got to talk to the condescending and fast talking General Manager Katelin.
Katelin is clearly accustomed to these situations.
Before even asking me why I was there or what my problem was, she went into a barrage of all of the reasons that I was wrong and they were right. First she said that this must be my banks fault. She sees it all the time. It's their way of getting more fees from me.
What?!?! I don't think my bank makes money off of paying bills that are presented to them.
Then she explained that I need to make sure I keep enough money in my account so that it will be their when they take their payment. Ms. Katelin, my account was not overdrawn. I'm not complaining about that. I'm trying to cancel my membership!
Then she informed me that I have to cancel in writing by signing their form. Again, Katelin, I have done that. I did that back in November. She could sense my agitation. Again, I suspect this is not new to her from their customers.
Finally, she went and got the cancellation form that I had signed in November. "Here's your problem!", she said. "You didn't put your wife's name on the cancellation form so we kept her account open". Oh, and the double charge? A group discount did not apply anymore because I cancelled my membership. Nice.
Are you serious?!?! I told them I wanted to cancel both memberships. They filled out the form. I signed it. If they had cancelled BOTH memberships as I had intended, you would not be reading this right now.
The question here is what happened to good customer service? I understand and accept that I should have made double sure that both memberships were cancelled. However, I do not believe that I could have been more clear about wanting that when I went in to cancel. I cannot speak to experiences with other locations of Pure Fitness, but the business practices at the Warner and McClintock location are deceptive and unethical. Legally, I would not have a leg to stand on. I signed a cancellation without my wife's name on it. I get it, but Pure Fitness knew full well that I wanted her membership cancelled also and they chose not to honor that request or help me correct the error on the form.
The part they don't seem to understand is that one day their new facility close to my house will open. Now there is no chance that I will use it. By charging me $38 today for a membership that I cancelled, they have lost the thousands of dollars that I would have paid for a membership when it opens.
The Smooth Loan Process lesson for today: Pure Fitness on Warner and McClintock in Tempe sucks!
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Sorry guys, this one is not mortgage related but it's necessary.
A little over two years ago, I signed up my wife and I for a membership at the Pure Fitness on Warner and McClintock in Tempe. At the time that I signed up, they were building a new facility in Chandler just minutes from our house. Like many of us, the start of a new year brought the motivation (albeit temporary) to get to the gym more often. The new year special of no sign up fees and knowing that there would be a facility very close to home was enough to get me to sign. Unfortunately, construction stopped on the new facility close to my house and it never opened. I have no problem with Pure Fitness for this.
A couple of months ago, I realized that it had been at least a year since I had gone to the gym. My wife had never gone since we got the membership. By the way, a gym membership is NOT a good gift for your wife for many reasons. So in November, I went in to the facility to cancel our membership. The person at the front desk had me sign the form to cancel and informed me that I could still use the facilities for another 60 days because they required 60 notice for cancellation and I would be charged for December. No problem.
Here's where thing go awry. The person at the front desks says that they will also refund half of the charges since I took the membership because my wife never went into the facility. I thought that was awesome. I did not expect it. Then she says, "oh wait, she didn't come in here but she used a few of our other locations in Chandler and in Mesa." For that reason, now she wouldn't refund anything for my wife's account. This really didn't bother me. My wife never used the other locations, but I didn't expect the money back anyway so I let it go. Besides, how could I prove my wife had never been there? Her computer said my wife had. I told her not to worry about it and lets just cancel. Then I signed the cancellation.
This morning, I pulled up my bank account and saw that I had been charged this month for the membership. And not the usual $19. It was $38. I looked at last month statement and sure enough, there's a charge for $38 in January that I had not noticed (shame on me). I immediately dropped what I was doing and went into the gym to ask them about it. The front desk person pulled up my account and showed me on her screen that I had cancelled in November. I told her that I was still being charged and she argued with me and that I was wrong and was not being charged. Her computer said so. So I went back to my office, printed my bank statement and went back to the gym and got to talk to the condescending and fast talking General Manager Katelin.
Katelin is clearly accustomed to these situations.
Before even asking me why I was there or what my problem was, she went into a barrage of all of the reasons that I was wrong and they were right. First she said that this must be my banks fault. She sees it all the time. It's their way of getting more fees from me.
What?!?! I don't think my bank makes money off of paying bills that are presented to them.
Then she explained that I need to make sure I keep enough money in my account so that it will be their when they take their payment. Ms. Katelin, my account was not overdrawn. I'm not complaining about that. I'm trying to cancel my membership!
Then she informed me that I have to cancel in writing by signing their form. Again, Katelin, I have done that. I did that back in November. She could sense my agitation. Again, I suspect this is not new to her from their customers.
Finally, she went and got the cancellation form that I had signed in November. "Here's your problem!", she said. "You didn't put your wife's name on the cancellation form so we kept her account open". Oh, and the double charge? A group discount did not apply anymore because I cancelled my membership. Nice.
Are you serious?!?! I told them I wanted to cancel both memberships. They filled out the form. I signed it. If they had cancelled BOTH memberships as I had intended, you would not be reading this right now.
The question here is what happened to good customer service? I understand and accept that I should have made double sure that both memberships were cancelled. However, I do not believe that I could have been more clear about wanting that when I went in to cancel. I cannot speak to experiences with other locations of Pure Fitness, but the business practices at the Warner and McClintock location are deceptive and unethical. Legally, I would not have a leg to stand on. I signed a cancellation without my wife's name on it. I get it, but Pure Fitness knew full well that I wanted her membership cancelled also and they chose not to honor that request or help me correct the error on the form.
The part they don't seem to understand is that one day their new facility close to my house will open. Now there is no chance that I will use it. By charging me $38 today for a membership that I cancelled, they have lost the thousands of dollars that I would have paid for a membership when it opens.
The Smooth Loan Process lesson for today: Pure Fitness on Warner and McClintock in Tempe sucks!
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Wednesday, February 24, 2010
The Smooth Loan Process #2010-20
GFE Stands For Gone From Estimate
Back in my day (I love it when my dad says that), GFE stood for Good Faith Estimate. As most of us know by now, the Good Faith Estimate has undergone some changes that are mandated by HUD. The spirit of it was good. The execution is leaving a lot to be desired. The idea is to give the borrower a clear and concise summary of the terms of their new loan. That way there are no surprises at closing and no surprise interest rate changes after closing. Sounds reasonable, right?
Well, sort of. If we assume that the cause of all of the foreclosures in the Country were due to an unclear disclosure of the terms of the loan, then new forms would be warranted. HUD would have you believe this. I would say that's a stretch even for the most cynical of us. Using myself as an example, I have never had a client tell me that they were surprised by their payment or their terms when they got to closing. I have managed to accomplish this using the old GFE. Most other Loan Officers will tell you the same thing.
Maybe it's the Loan Officer and not the form?
For most buyers, the two most important things about their financing is the payment and the total out of pocket cash to close. These are two items that are mysteriously missing from the new GFE. How does that make things more clear?
I know that HUD's intention in mandating the new GFE was to prevent the dishonest loan officers from changing the terms on buyers before they got to closing. Unfortunately, HUD has made it easier for those dishonest loan officers. If we don't have to give you your payment or your total out of pocket costs, then what prevents me from changing the terms (other than ethics)? If the terms changed, how would you know?
The Smooth Loan Process lesson for today: Request an old GFE along with the new GFE from your Loan Officer. The old one is more clear.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Back in my day (I love it when my dad says that), GFE stood for Good Faith Estimate. As most of us know by now, the Good Faith Estimate has undergone some changes that are mandated by HUD. The spirit of it was good. The execution is leaving a lot to be desired. The idea is to give the borrower a clear and concise summary of the terms of their new loan. That way there are no surprises at closing and no surprise interest rate changes after closing. Sounds reasonable, right?
Well, sort of. If we assume that the cause of all of the foreclosures in the Country were due to an unclear disclosure of the terms of the loan, then new forms would be warranted. HUD would have you believe this. I would say that's a stretch even for the most cynical of us. Using myself as an example, I have never had a client tell me that they were surprised by their payment or their terms when they got to closing. I have managed to accomplish this using the old GFE. Most other Loan Officers will tell you the same thing.
Maybe it's the Loan Officer and not the form?
For most buyers, the two most important things about their financing is the payment and the total out of pocket cash to close. These are two items that are mysteriously missing from the new GFE. How does that make things more clear?
I know that HUD's intention in mandating the new GFE was to prevent the dishonest loan officers from changing the terms on buyers before they got to closing. Unfortunately, HUD has made it easier for those dishonest loan officers. If we don't have to give you your payment or your total out of pocket costs, then what prevents me from changing the terms (other than ethics)? If the terms changed, how would you know?
The Smooth Loan Process lesson for today: Request an old GFE along with the new GFE from your Loan Officer. The old one is more clear.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Thursday, February 18, 2010
The Smooth Loan Process #2010-19
Loan Modifications Are A Disaster
We want to hear about your successful and not-so successful loan modifications. Let us know what's happened to you so we can spread the word. This is one of the not-so successful stories.
I have a friend named John who purchased his home in February of 2008. Just like the rest of us, he has seen the value of his home decrease since he purchased it. He is an a fixed rate loan and is able to afford the payments. In March of 2009, John contacted his loan servicer to inquire about a modification. He had heard that the HAMP program had been instituted and he wanted to see if he would qualify for it.
As it should have happened, John's mortgage servicer put him on the trial payments for three months while they processed his application. To his credit, John knew there would be the possibility that the modification would not be approved so he saved the money that would have gone to the regular payment while he was making the reduced trial period payment.
Here's where things go awry. The trial period is supposed to be three months. John's trial period ended up extending to December. Nine months total. His mortgage company stated that the back log of files prevented them from processing things faster. No problem, that makes sense. John still continued to bank the money that would have gone to the regular payment.
Then John called to check the status in January as he had done every week for the past nine months, by the way. That is when he was informed that the modification had been declined. He never received a letter or any correspondence from the servicer. He asked them what he should do and was told to continue making the reduced payment for February. He was told that even though he was declined for the HAMP program, the servicer would still try to get him approved on their own "in-house" modification.
Two weeks later, he called to check status again. This time he was told that he was also declined for the in-house modification but they were working on other options. John was done with it. He asked that his application be withdrawn and asked for the amount of money he would need to send to bring the loan current according to the original terms. Remember, he saved the money just in case this happened. The response to his question was shocking. The servicer told him that they could not tell him how much money he owed because they have started foreclosure proceedings! He would have to talk to the attorneys that are handling the foreclosure.
In a nutshell, John applied for the program and supplied every thing that was requested from him and made the payments he was instructed to make. In the end, he did not get his modification but he does have ruined credit (see episode #2010-9 for more on that http://bit.ly/2010-9), a foreclosure notice on his house and thousands of dollars in attorney and late fees.
Now, I'm no fancy big city modification negotiator, but it seems to me that the servicer should have sent a letter that said something to the effect of "Sorry your application was declined. Please send us the money you owe. We'll give you a few days to send it."
If they had done that, this episode would have been about the new Good Faith Estimate. Now you have to wait until tomorrow for that.
Let me know how your modification is going.
The Smooth Loan Process lesson for today: HAMP is only 7% successful. Know what you're getting before you apply.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
We want to hear about your successful and not-so successful loan modifications. Let us know what's happened to you so we can spread the word. This is one of the not-so successful stories.
I have a friend named John who purchased his home in February of 2008. Just like the rest of us, he has seen the value of his home decrease since he purchased it. He is an a fixed rate loan and is able to afford the payments. In March of 2009, John contacted his loan servicer to inquire about a modification. He had heard that the HAMP program had been instituted and he wanted to see if he would qualify for it.
As it should have happened, John's mortgage servicer put him on the trial payments for three months while they processed his application. To his credit, John knew there would be the possibility that the modification would not be approved so he saved the money that would have gone to the regular payment while he was making the reduced trial period payment.
Here's where things go awry. The trial period is supposed to be three months. John's trial period ended up extending to December. Nine months total. His mortgage company stated that the back log of files prevented them from processing things faster. No problem, that makes sense. John still continued to bank the money that would have gone to the regular payment.
Then John called to check the status in January as he had done every week for the past nine months, by the way. That is when he was informed that the modification had been declined. He never received a letter or any correspondence from the servicer. He asked them what he should do and was told to continue making the reduced payment for February. He was told that even though he was declined for the HAMP program, the servicer would still try to get him approved on their own "in-house" modification.
Two weeks later, he called to check status again. This time he was told that he was also declined for the in-house modification but they were working on other options. John was done with it. He asked that his application be withdrawn and asked for the amount of money he would need to send to bring the loan current according to the original terms. Remember, he saved the money just in case this happened. The response to his question was shocking. The servicer told him that they could not tell him how much money he owed because they have started foreclosure proceedings! He would have to talk to the attorneys that are handling the foreclosure.
In a nutshell, John applied for the program and supplied every thing that was requested from him and made the payments he was instructed to make. In the end, he did not get his modification but he does have ruined credit (see episode #2010-9 for more on that http://bit.ly/2010-9), a foreclosure notice on his house and thousands of dollars in attorney and late fees.
Now, I'm no fancy big city modification negotiator, but it seems to me that the servicer should have sent a letter that said something to the effect of "Sorry your application was declined. Please send us the money you owe. We'll give you a few days to send it."
If they had done that, this episode would have been about the new Good Faith Estimate. Now you have to wait until tomorrow for that.
Let me know how your modification is going.
The Smooth Loan Process lesson for today: HAMP is only 7% successful. Know what you're getting before you apply.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
Sunday, February 7, 2010
The Smooth Loan Process #2010-17 (Super Bowl Edition)
The Economy Needs the Colts to WinWe all know that the Denver Broncos are the only team in the NFL worth anybody's attention. Unfortunately, they are not in the Super Bowl this year so I will be rooting for the Colts. Looking back over the past 10 years, when the AFC team wins the Super Bowl, interest rates decline in the week following the game. It's true, check it out. When the NFC team wins, interest rates increase. We all like low interest rates, so we have to root for the Colts.
For the record, I don't like the Colts but I'll have to root for them for the greater good.
Tomorrow will be the 10th time the Big Game has been played in Miami. The AFC Team has won six of the previous nine games in Miami including twice by the Colts. History is on the Colts side in this one.
Other teams that will lower interest rates if they win are the Philadelphia Flyers, the Phoenix Suns and the Arizona Diamondbacks. I bet you didn't know that.
The Smooth Loan Process lesson for today: Root for the Colts if you want lower interest rates.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
For the record, I don't like the Colts but I'll have to root for them for the greater good.
Tomorrow will be the 10th time the Big Game has been played in Miami. The AFC Team has won six of the previous nine games in Miami including twice by the Colts. History is on the Colts side in this one.
Other teams that will lower interest rates if they win are the Philadelphia Flyers, the Phoenix Suns and the Arizona Diamondbacks. I bet you didn't know that.
The Smooth Loan Process lesson for today: Root for the Colts if you want lower interest rates.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Thursday, February 4, 2010
The Smooth Loan Process #2010-16
The Seller Does Not Own The House I'm Buying
One of my favorite shows on TV is Flip That House. Reality TV is great for watching other people's train wrecks of lives. The show features investors that "fix and flip" houses. In our current real estate market, the flippers are a key component to recovery. Even HUD has realized how important the flippers are to the Real Estate Market by temporarily waiving their anti-flipping rule a few weeks ago (visit my 1/17/10 episode for more info).
Just like everything, there are good flippers and there are bad.
First, the good. An investor goes to the public auction or trustee sale and purchase a foreclosed property well below its market value. The investor remodels, repairs or upgrades the home and sells at the current market value. If it's done well, the investor makes money and the buyer gets a like new home at a fair price. Win-win. As a lender, we have no problem with this because the increase in price to the buyer can be justified and accounted for in the improvements that have been done to the property.
Another example is the investor that purchase the property as a short sale. The investor finds an owner who is underwater on his mortgage. The investor helps negotiate the short sale below market value with the sellers mortgage company. While the short sale is being negotiated, the investor markets the property for sale to another buyer at market value. The investor uses his own money to complete the short sale, then gets his money back along with his profit when the buyer closes. In this example, the investor is marketing the property and probably has a contract to sell before he owns it. Normally, we would not like this. After all, you cant sell something you don't own. But if it's done properly, the contract with the buyer will not be executable until the investor closes on the initial transaction. The seller sells the house rather than going to foreclosure, the investor makes a profit, and the buyer gets the home at a fair price. Win-win-win. Well, sort of a win to the seller. He would still have to deal with a short sale on his credit.
Now the bad. An investor that purchases a property at market value and does very little or no improvements to the property and sells it at a higher price. Lenders will have a problem with that. An increase in price has to be justified for us to lend on it.
Or the short sale investor that uses his buyer's loan proceeds to pay off the original seller. Lenders are not okay with this. Purchase mortgages can only be used for the purchase of the home. If the investor tries to use the buyer's money to close on his transaction, then not only are we financing the price of the home, we are also financing the investors closing costs and profit. That's not acceptable to a lender. The house is the collateral for the loan. Not the investor profit and costs.
The Smooth Loan Process lesson for today: Make sure the seller owns the house you are purchasing before you go to closing.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
One of my favorite shows on TV is Flip That House. Reality TV is great for watching other people's train wrecks of lives. The show features investors that "fix and flip" houses. In our current real estate market, the flippers are a key component to recovery. Even HUD has realized how important the flippers are to the Real Estate Market by temporarily waiving their anti-flipping rule a few weeks ago (visit my 1/17/10 episode for more info).
Just like everything, there are good flippers and there are bad.
First, the good. An investor goes to the public auction or trustee sale and purchase a foreclosed property well below its market value. The investor remodels, repairs or upgrades the home and sells at the current market value. If it's done well, the investor makes money and the buyer gets a like new home at a fair price. Win-win. As a lender, we have no problem with this because the increase in price to the buyer can be justified and accounted for in the improvements that have been done to the property.
Another example is the investor that purchase the property as a short sale. The investor finds an owner who is underwater on his mortgage. The investor helps negotiate the short sale below market value with the sellers mortgage company. While the short sale is being negotiated, the investor markets the property for sale to another buyer at market value. The investor uses his own money to complete the short sale, then gets his money back along with his profit when the buyer closes. In this example, the investor is marketing the property and probably has a contract to sell before he owns it. Normally, we would not like this. After all, you cant sell something you don't own. But if it's done properly, the contract with the buyer will not be executable until the investor closes on the initial transaction. The seller sells the house rather than going to foreclosure, the investor makes a profit, and the buyer gets the home at a fair price. Win-win-win. Well, sort of a win to the seller. He would still have to deal with a short sale on his credit.
Now the bad. An investor that purchases a property at market value and does very little or no improvements to the property and sells it at a higher price. Lenders will have a problem with that. An increase in price has to be justified for us to lend on it.
Or the short sale investor that uses his buyer's loan proceeds to pay off the original seller. Lenders are not okay with this. Purchase mortgages can only be used for the purchase of the home. If the investor tries to use the buyer's money to close on his transaction, then not only are we financing the price of the home, we are also financing the investors closing costs and profit. That's not acceptable to a lender. The house is the collateral for the loan. Not the investor profit and costs.
The Smooth Loan Process lesson for today: Make sure the seller owns the house you are purchasing before you go to closing.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Wednesday, February 3, 2010
The Smooth Loan Process #2010-15
We'll Just "Say" I'm Going to Live There
One of my favorite Harold-isms is "If it doesn't make sense, it's probably not true". This came to mind the other day when my wonderful 13 year told me that the dog was the one the unlocked himself from his kennel, opened the freezer, ate a piece of chocolate, closed the freezer then locked himself back in his kennel. My son actually said this with a straight face. I like that the dog remembered to close the freezer.
Well, that doesn't make sense.
Same goes for whether your property that your purchasing is going to be owner occupied, second/vacation home or an investment property. Owner occupied properties get the best terms. Investment properties will require a larger down payment, higher closing costs and higher interest rate than the owner occupied properties. Second homes fall in between.
Statistics show that owner occupied loans have a lower default rate than the other two. It's in the bank's interest to make sure that if someone says they will live in the property, all of the provided documentation will support that. There are those people out there (Loan Officers included) that will try get better terms on the investment property they are purchasing by saying that it will be owner occupied.
First, the definitions. Owner occupied is just that. The person/people on the loan will actually live in the property as their primary residence. Technically, only one person on the loan has to live in the property. For example, parents co-signing for their kids. The parents are not living in the house but it is still owner occupied because the kid, who is on the loan also, is living in the house.
Second home is a home that is used by the owner to live in but not their primary residence. The general rule of thumb is that a second home will be located in a different metro area from the primary residence. In Arizona, it makes sense to have a primary residence in Phoenix and a second home in Flagstaff. It does not make sense to have a primary in Chandler and a second home in Glendale. Same metro area.
Investment is any property that will not be occupied by the owner. A property to be rented is obviously an investment property. Less obvious is a parent that buys a house for the kid to live in but the kid is not on the loan. This is an investment property even though it's family.
The bank underwriter is going to clue in on the intended occupancy of the property by the documentation that is required for the loan. For example, the source of your down payment. The source of the down payment is the single biggest indicator of your intent to occupy. If your down payment comes from the sale of your current home or from your savings, you are probably going to occupy. If your down payment comes from "some guy" who is not family, it's going to be questioned. Mysterious down payment is not normal for owner occupied homes so it doesn't make sense.
Another example is the person that "says" there are relocating from another State. But he does not have a new job or family or anything in the new State that would motivate him to move. That doesn't make sense. The address on your tax returns, w-2's, bank statements, pay stubs and driver's license can all be indicators of what the actual intent to occupy is going to be.
Of course, these are all just indicators and every scenario is different. Ultimately, if you tell the truth, you'll be fine.
The Smooth Loan Process lesson for today: If it doesn't make sense, then it's probably not true.
Bonus Lesson: You don't have to have a good memory if you tell the truth (I say that to my son all the time too!).
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
One of my favorite Harold-isms is "If it doesn't make sense, it's probably not true". This came to mind the other day when my wonderful 13 year told me that the dog was the one the unlocked himself from his kennel, opened the freezer, ate a piece of chocolate, closed the freezer then locked himself back in his kennel. My son actually said this with a straight face. I like that the dog remembered to close the freezer.
Well, that doesn't make sense.
Same goes for whether your property that your purchasing is going to be owner occupied, second/vacation home or an investment property. Owner occupied properties get the best terms. Investment properties will require a larger down payment, higher closing costs and higher interest rate than the owner occupied properties. Second homes fall in between.
Statistics show that owner occupied loans have a lower default rate than the other two. It's in the bank's interest to make sure that if someone says they will live in the property, all of the provided documentation will support that. There are those people out there (Loan Officers included) that will try get better terms on the investment property they are purchasing by saying that it will be owner occupied.
First, the definitions. Owner occupied is just that. The person/people on the loan will actually live in the property as their primary residence. Technically, only one person on the loan has to live in the property. For example, parents co-signing for their kids. The parents are not living in the house but it is still owner occupied because the kid, who is on the loan also, is living in the house.
Second home is a home that is used by the owner to live in but not their primary residence. The general rule of thumb is that a second home will be located in a different metro area from the primary residence. In Arizona, it makes sense to have a primary residence in Phoenix and a second home in Flagstaff. It does not make sense to have a primary in Chandler and a second home in Glendale. Same metro area.
Investment is any property that will not be occupied by the owner. A property to be rented is obviously an investment property. Less obvious is a parent that buys a house for the kid to live in but the kid is not on the loan. This is an investment property even though it's family.
The bank underwriter is going to clue in on the intended occupancy of the property by the documentation that is required for the loan. For example, the source of your down payment. The source of the down payment is the single biggest indicator of your intent to occupy. If your down payment comes from the sale of your current home or from your savings, you are probably going to occupy. If your down payment comes from "some guy" who is not family, it's going to be questioned. Mysterious down payment is not normal for owner occupied homes so it doesn't make sense.
Another example is the person that "says" there are relocating from another State. But he does not have a new job or family or anything in the new State that would motivate him to move. That doesn't make sense. The address on your tax returns, w-2's, bank statements, pay stubs and driver's license can all be indicators of what the actual intent to occupy is going to be.
Of course, these are all just indicators and every scenario is different. Ultimately, if you tell the truth, you'll be fine.
The Smooth Loan Process lesson for today: If it doesn't make sense, then it's probably not true.
Bonus Lesson: You don't have to have a good memory if you tell the truth (I say that to my son all the time too!).
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Tuesday, February 2, 2010
The Smooth Loan Process #2010-14
Big, Big Fraud From A Big, Big Bank
From the files of "I can't make this stuff up". A few months ago, we had a client that was purchasing a new build from one of the big builders that you have heard of. The buyer's best loan option was FHA. The FHA appraisal was done on the property and it came in $3000 less than the purchase price. When the buyers requested that the sales price be reduced to the appraised value, the builder informed them that the reason the appraisal came in low was because they used the wrong lender.
What?!?! It seems that the builder's opinion was that we intentionally influenced to the appraiser to bring the value in low. As wonderful as I think I am, I do not have the ability to change sales data in the area to influence the comps. That would be illegal. And for what? An extra $30 on my commission? I don't think so. I'll switch to domestic beer to save the money instead.
Then the buyers were told that if they switch their loan to the Builder's preferred lender which is a big, big bank that you have heard of, then they could "make sure" the appraisal comes in at the sales price. Seriously! So the buyers have just been told that Builder will do the very thing that they accused us of doing, but they'll do it better.
Here's the good part. FHA and HUD have systems in place to prevent this kind of thing from happening. Once an FHA appraisal is done, it stays with the property for 120 days. This is tracked with case numbers that are specific to the property. The borrower has the right to change lenders but the old lender has to transfer the case number to the new lender in order for the transaction to be completed.
We were never asked to transfer the case number, but the transaction has closed now with the big, big bank that you have heard of. How did they do this?
This big, big bank that you have heard of issued a new case number so that HUD would not be aware of the existing FHA appraisal. When they issued the case number they used a DIFFERENT property. Processed the appraisal and loan for the WRONG property. Then at closing, switched the property address on the closing documents so that it was correct for the buyers.
All of this information is available through public records and FHA Connection.
Wow! All of this over $3000. I don't think that the buyers knowingly participated in this, but they are involved now. Unfortunately, they did not have a Realtor representing them to point out that it doesn't make sense to use a lender that will "make sure" the appraisal comes in where it needs to.
The ironic thing to me is that this all happened at the same time that I was taking my licensing class in ethics. The same class that the big, big bank Loan Officers do not have to take because our government feels that they are big enough to monitor themselves.
The Smooth Loan Process lesson for today: Fraud is the worst of all the F words.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
From the files of "I can't make this stuff up". A few months ago, we had a client that was purchasing a new build from one of the big builders that you have heard of. The buyer's best loan option was FHA. The FHA appraisal was done on the property and it came in $3000 less than the purchase price. When the buyers requested that the sales price be reduced to the appraised value, the builder informed them that the reason the appraisal came in low was because they used the wrong lender.
What?!?! It seems that the builder's opinion was that we intentionally influenced to the appraiser to bring the value in low. As wonderful as I think I am, I do not have the ability to change sales data in the area to influence the comps. That would be illegal. And for what? An extra $30 on my commission? I don't think so. I'll switch to domestic beer to save the money instead.
Then the buyers were told that if they switch their loan to the Builder's preferred lender which is a big, big bank that you have heard of, then they could "make sure" the appraisal comes in at the sales price. Seriously! So the buyers have just been told that Builder will do the very thing that they accused us of doing, but they'll do it better.
Here's the good part. FHA and HUD have systems in place to prevent this kind of thing from happening. Once an FHA appraisal is done, it stays with the property for 120 days. This is tracked with case numbers that are specific to the property. The borrower has the right to change lenders but the old lender has to transfer the case number to the new lender in order for the transaction to be completed.
We were never asked to transfer the case number, but the transaction has closed now with the big, big bank that you have heard of. How did they do this?
This big, big bank that you have heard of issued a new case number so that HUD would not be aware of the existing FHA appraisal. When they issued the case number they used a DIFFERENT property. Processed the appraisal and loan for the WRONG property. Then at closing, switched the property address on the closing documents so that it was correct for the buyers.
All of this information is available through public records and FHA Connection.
Wow! All of this over $3000. I don't think that the buyers knowingly participated in this, but they are involved now. Unfortunately, they did not have a Realtor representing them to point out that it doesn't make sense to use a lender that will "make sure" the appraisal comes in where it needs to.
The ironic thing to me is that this all happened at the same time that I was taking my licensing class in ethics. The same class that the big, big bank Loan Officers do not have to take because our government feels that they are big enough to monitor themselves.
The Smooth Loan Process lesson for today: Fraud is the worst of all the F words.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Monday, February 1, 2010
The Smooth Loan Process #2010-13
Debt Ratios--The Most Exciting Part of Your Application
Actually, debt ratios are not very exciting at all. They are important though, especially in this new age of mortgage financing. By new age I mean fully documented loans since the demise of the three Russian sisters (SIVA, SISA and NINA).
These days (just like the old days, by the way), we have to verify that your income will support the house payment along with your other debts. Every loan program has it's guidelines as to what the debt ratios should be. In most cases, the guidelines can be expanded based on the overall strength of the borrower. There are two kinds of debt ratio to talk about. Front-end and Back-end. The front ratio is the percentage of total gross monthly income that is being used for the monthly house payment. The house payment is principal and interest, property taxes, homeowners insurance, mortgage insurance (if applicable) and HOA. The back is the percentage of total gross monthly income that is being used for all monthly debt.
The monthly debts that are considered in the ratios are the minimum monthly payments on credit cards, student loans, auto loans, personal loans and alimony or child support to name a few. Things like phone, insurance or utilities are not considered in the ratios. Essentially, if it's a loan of some sort or payments ordered by a court, it's going to count in your debt ratios.
Guidelines for FHA are 31/43. Front ratio of 31 and back ratio of 43. Some very strong borrowers get approved up to a back ratio of 55, but that is rare these days. 50 is pretty much the reality of things now.
VA and USDA loans are 29/41. Again 50 is pretty much the max for a very strong borrower.
Conventional loans are 28/36. With less than 20% the loan will not be approved if the back ratio is over 41% in Arizona. The MI companies will not allow it. With 20% down or more, 55 back ratio is the max.
These are just guidelines. Nothing is set in stone and there may be strategies to lower your debt ratio to help with qualifying. Please dont assume that you will not qualify if you think your debt ratios are higher than 43. Call your Loan Officer and have him/her take a look.
The Smooth Loan Process lesson for today: Debt ratios are just one piece of the puzzle. Talk to your Loan Officer to get the full picture.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Actually, debt ratios are not very exciting at all. They are important though, especially in this new age of mortgage financing. By new age I mean fully documented loans since the demise of the three Russian sisters (SIVA, SISA and NINA).
These days (just like the old days, by the way), we have to verify that your income will support the house payment along with your other debts. Every loan program has it's guidelines as to what the debt ratios should be. In most cases, the guidelines can be expanded based on the overall strength of the borrower. There are two kinds of debt ratio to talk about. Front-end and Back-end. The front ratio is the percentage of total gross monthly income that is being used for the monthly house payment. The house payment is principal and interest, property taxes, homeowners insurance, mortgage insurance (if applicable) and HOA. The back is the percentage of total gross monthly income that is being used for all monthly debt.
The monthly debts that are considered in the ratios are the minimum monthly payments on credit cards, student loans, auto loans, personal loans and alimony or child support to name a few. Things like phone, insurance or utilities are not considered in the ratios. Essentially, if it's a loan of some sort or payments ordered by a court, it's going to count in your debt ratios.
Guidelines for FHA are 31/43. Front ratio of 31 and back ratio of 43. Some very strong borrowers get approved up to a back ratio of 55, but that is rare these days. 50 is pretty much the reality of things now.
VA and USDA loans are 29/41. Again 50 is pretty much the max for a very strong borrower.
Conventional loans are 28/36. With less than 20% the loan will not be approved if the back ratio is over 41% in Arizona. The MI companies will not allow it. With 20% down or more, 55 back ratio is the max.
These are just guidelines. Nothing is set in stone and there may be strategies to lower your debt ratio to help with qualifying. Please dont assume that you will not qualify if you think your debt ratios are higher than 43. Call your Loan Officer and have him/her take a look.
The Smooth Loan Process lesson for today: Debt ratios are just one piece of the puzzle. Talk to your Loan Officer to get the full picture.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Saturday, January 30, 2010
The Smooth Loan Process #2010-12
How Many Loan Officers Does It Take To Screw In A Light Bulb?
Insert your punch line here: _________. Seriously, did you ever think about how many people are involved in closing a home loan? I find it quite astonishing. This may give us some insight as to why Real Estate is such an important part of our economy.
Let's say that today is the day you want to buy a house. Here's the list of all of the people that will have their hands on your transaction in one way or another (not in any particular order).
- Loan Officer
- Realtor
- Attorney (depending on your State)
- Loan Processor or Assistant LO
- Real Estate Transaction Coordinator
- Escrow Officer
- Title Examiner
- Insurance Agent
- Home Inspector
- Termite Inspector
- Appraiser
- Bank Coordinator
- Lock Desk
- Underwriter
- Quality Control Auditor
- Document Preparer
- Funder
- Courier
- All of the assistants and Staff for all of the above
Depending on the type of transaction and property, there could be more. If any one of these people does not perform adequately or better in their area, your transaction will not be smooth. Did you know there were so many people involved?
The Smooth Loan Process lesson for today: A good Loan Officer and a good Realtor will work together to coordinate all of the other services required for your real estate transaction.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
The Smooth Loan Process lesson for today: A good Loan Officer and a good Realtor will work together to coordinate all of the other services required for your real estate transaction.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Friday, January 29, 2010
The Smooth Loan Process #2010-11
5% Down Conventional - Don't Bother!
Over the past couple of days, I have been asked quite a bit if we'll ever see 95% financing on conventional loans again in Arizona. There are two answers to this question. First, it never went away. Second, who cares? It's no good anyway.
Let's take our time machine back to April of 2008. This is when conventional financing really began to make big changes. The changes were not so much with Fannie and Freddie on the loan end of things. The changes were with the Mortgage Insurance (MI) companies. We don't talk about MI too often, but the MI companies were also very hard hit by the real estate market. Every loan with MI that goes to foreclosure means that the MI company pays a claim to the bank that foreclosed. That claim can be as much as 40% of the loan amount.
So with all the foreclosures, the MI companies tightened their guidelines and raised their rates to reduce their exposure in the market. One of those tighter guidelines was maximum financing of 90% in the Foreclosure Axis of Evil. Also known as Arizona, California, Florida and Nevada. In all of this, there is one rogue MI company that has continued to do business in the Axis of Evil at 95% for certain "preferred" lenders (ourselves included). Recently, the preferred lender list was expanded a bit.
If 95% conventional financing has always been available, then why aren't we doing it? Well, it doesn't make sense. By raising their rates, the MI companies have pretty much made sure that we wont use them. If you compare the monthly payment for a conventional loan with 5% down to an FHA loan at the same rate with 3.5% down, the FHA loan will have a lower payment. The mortgage insurance on a 95% conventional is almost double of what FHA currently charges. So with less money out of pocket and a lower payment, FHA is typically my recommendation.
The one and only scenario that the 95% conventional makes sense would be if your purchase price exceeds the maximum FHA loan limit for your County, but less than the conforming loan limit of $417,000.
The Smooth Loan Process Lesson for today: If your down payment is less than 10% of the purchase price, do your loan FHA.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Over the past couple of days, I have been asked quite a bit if we'll ever see 95% financing on conventional loans again in Arizona. There are two answers to this question. First, it never went away. Second, who cares? It's no good anyway.
Let's take our time machine back to April of 2008. This is when conventional financing really began to make big changes. The changes were not so much with Fannie and Freddie on the loan end of things. The changes were with the Mortgage Insurance (MI) companies. We don't talk about MI too often, but the MI companies were also very hard hit by the real estate market. Every loan with MI that goes to foreclosure means that the MI company pays a claim to the bank that foreclosed. That claim can be as much as 40% of the loan amount.
So with all the foreclosures, the MI companies tightened their guidelines and raised their rates to reduce their exposure in the market. One of those tighter guidelines was maximum financing of 90% in the Foreclosure Axis of Evil. Also known as Arizona, California, Florida and Nevada. In all of this, there is one rogue MI company that has continued to do business in the Axis of Evil at 95% for certain "preferred" lenders (ourselves included). Recently, the preferred lender list was expanded a bit.
If 95% conventional financing has always been available, then why aren't we doing it? Well, it doesn't make sense. By raising their rates, the MI companies have pretty much made sure that we wont use them. If you compare the monthly payment for a conventional loan with 5% down to an FHA loan at the same rate with 3.5% down, the FHA loan will have a lower payment. The mortgage insurance on a 95% conventional is almost double of what FHA currently charges. So with less money out of pocket and a lower payment, FHA is typically my recommendation.
The one and only scenario that the 95% conventional makes sense would be if your purchase price exceeds the maximum FHA loan limit for your County, but less than the conforming loan limit of $417,000.
The Smooth Loan Process Lesson for today: If your down payment is less than 10% of the purchase price, do your loan FHA.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Thursday, January 28, 2010
The Smooth Loan Process #2010-10
Simple Mistake or Rip-off?
I have found a disturbing trend with the payment calculations for those of you that are in Adjustable Rate Mortgages that I want to make you all aware of. First, let's go back in time a bit.
We all remember 2005. Star Wars Episode III was the top movie. Battlestar Galactica was the top tv show (yes, I'm a sci-fi geek too). And everybody refinanced or purchased with an adjustable rate mortgage. Well, not everybody but nearly 50% of the home loans closed in 2005 were adjustable rates. Most of those ARM's were 5 year arms that had a fixed rate for the first five years, then the rate can adjust once per year.
Now its 2010 and all of these 5 year ARM's will be adjusting soon. For most of us with the adjustable, we did not expect to still be in the same house we purchased in 2005. Or we expected that there would be enough equity to refinance to a fixed rate. The burst of the housing bubble took care of that plan. We can't refinance because there's no equity. We can't sell because there's no equity. And we can't afford a higher payment if the interest rate goes up. So what do we do now?
Nothing! The good news in all of this is that for most ARM's, you will see your interest rate decrease. The new interest rate on your loan is determined by adding the index on your loan to the margin. Your loan most likely (but not all) uses the London Inter-Bank Offer Rate (LIBOR) as its index. At the time I am writing this, the LIBOR is about 0.875%. Your margin was determined by your lender when you took the loan. It is basically the profit that your mortgage company will earn on your loan. Most margins range from 2.0% to 3.0%. The index changes daily. The margin is always fixed.
So let's say your adjustable has a margin of 2.25% and the current index is 0.875%. Your new rate would be 3.125%. Your rate probably started at about 5.125% in 2005 so you've just seen your rate decrease by 2%. Very good, for now. We'll have to worry about this again next year because the rate will adjust annually from this point forward.
You will receive a letter from your current mortgage company that will state what your current rate and new rate will be when the rate change goes into affect. Read this letter very carefully! We have found that on a few occasions the rate was not adjusted correctly. If you dont catch this, you could be paying more for your mortgage than you actually owe.
One of our clients received such a letter the other day. It said that his current rate is 5.125%. The letter also says that the Index is .905% and the margin is 2.25% so the new rate would be 5.125%. Wait a minute... I'm no math wizard (actually, I am) but .905 + 2.25 equals 3.155. Not 5.125. When the client called his mortgage servicer, their response was "oh, I guess we made a mistake". Needless to say, our client is suspicious. How many of us did not catch this mistake?
The Smooth Loan Process lesson for today: If your adjustable rate loan has changed recently, the rate should have gone down and double check the notice that your rate has changed against your closing documents to make sure it's been done correctly.
Bonus Lesson: Today, the most popular show on TV is House (according to the internet) and the top movie is Avatar.
Harold Perkins
Galaxy Lending Group LLC
602-595-1233
Harold@HaroldPerkins.com
I have found a disturbing trend with the payment calculations for those of you that are in Adjustable Rate Mortgages that I want to make you all aware of. First, let's go back in time a bit.
We all remember 2005. Star Wars Episode III was the top movie. Battlestar Galactica was the top tv show (yes, I'm a sci-fi geek too). And everybody refinanced or purchased with an adjustable rate mortgage. Well, not everybody but nearly 50% of the home loans closed in 2005 were adjustable rates. Most of those ARM's were 5 year arms that had a fixed rate for the first five years, then the rate can adjust once per year.
Now its 2010 and all of these 5 year ARM's will be adjusting soon. For most of us with the adjustable, we did not expect to still be in the same house we purchased in 2005. Or we expected that there would be enough equity to refinance to a fixed rate. The burst of the housing bubble took care of that plan. We can't refinance because there's no equity. We can't sell because there's no equity. And we can't afford a higher payment if the interest rate goes up. So what do we do now?
Nothing! The good news in all of this is that for most ARM's, you will see your interest rate decrease. The new interest rate on your loan is determined by adding the index on your loan to the margin. Your loan most likely (but not all) uses the London Inter-Bank Offer Rate (LIBOR) as its index. At the time I am writing this, the LIBOR is about 0.875%. Your margin was determined by your lender when you took the loan. It is basically the profit that your mortgage company will earn on your loan. Most margins range from 2.0% to 3.0%. The index changes daily. The margin is always fixed.
So let's say your adjustable has a margin of 2.25% and the current index is 0.875%. Your new rate would be 3.125%. Your rate probably started at about 5.125% in 2005 so you've just seen your rate decrease by 2%. Very good, for now. We'll have to worry about this again next year because the rate will adjust annually from this point forward.
You will receive a letter from your current mortgage company that will state what your current rate and new rate will be when the rate change goes into affect. Read this letter very carefully! We have found that on a few occasions the rate was not adjusted correctly. If you dont catch this, you could be paying more for your mortgage than you actually owe.
One of our clients received such a letter the other day. It said that his current rate is 5.125%. The letter also says that the Index is .905% and the margin is 2.25% so the new rate would be 5.125%. Wait a minute... I'm no math wizard (actually, I am) but .905 + 2.25 equals 3.155. Not 5.125. When the client called his mortgage servicer, their response was "oh, I guess we made a mistake". Needless to say, our client is suspicious. How many of us did not catch this mistake?
The Smooth Loan Process lesson for today: If your adjustable rate loan has changed recently, the rate should have gone down and double check the notice that your rate has changed against your closing documents to make sure it's been done correctly.
Bonus Lesson: Today, the most popular show on TV is House (according to the internet) and the top movie is Avatar.
Harold Perkins
Galaxy Lending Group LLC
602-595-1233
Harold@HaroldPerkins.com
Wednesday, January 27, 2010
The Smooth Loan Process #2010-09
The HAMP Modification Program Could Have Unintended Consequences
By now, we have all heard of the Home Affordable Modification Program (HAMP). Essentially, the program gives incentive to the Banks to modify the home loans to make the payments lower and more affordable for the homeowners. But there's a catch for the homeowner (and there's always a catch).
HAMP requires a three month "trial period" where the homeowner will make a reduced payment. The homeowner must make the payments during the trial period on time in order to be eligible for the final modification. Here's the catch: During the trial period, your mortgage will be reported on your credit as "paying under a partial payment agreement". In other words, not paid as agreed. This will have the negative affect of about 100 points to your credit score. Here's the spicy part. If your modification is not approved and made permanent, the trial period payments will be reported as late and you will be past due for the difference between your trial period payment and your regular payment.
According to the Wall Street Journal, to date there have been about 900,000 applications for HAMP modification since the programs inception in April 2009. Only 7% of those modification applications have been approved. That means about 840,000 households are worse off now than before they applied for the modification. The unintended consequence of all of this is that many of the 840,000 households that did not qualify for the modification would have qualified to refinance or purchase something more affordable but now, their credit has suffered to the point that they can no longer qualify for a new loan.
The spirit of HAMP was to be an option for people that have the intention of keeping their home to live in but have had an adverse change in financial circumstances. Used any other way, HAMP can be disastrous for your credit.
The Smooth Loan Process lesson for today: Get all of the facts and educate yourself before applying for any new loan or modification program.
Harold Perkins
Galaxy Lending Group
602-595-1233
Harold@HaroldPerkins.com
By now, we have all heard of the Home Affordable Modification Program (HAMP). Essentially, the program gives incentive to the Banks to modify the home loans to make the payments lower and more affordable for the homeowners. But there's a catch for the homeowner (and there's always a catch).
HAMP requires a three month "trial period" where the homeowner will make a reduced payment. The homeowner must make the payments during the trial period on time in order to be eligible for the final modification. Here's the catch: During the trial period, your mortgage will be reported on your credit as "paying under a partial payment agreement". In other words, not paid as agreed. This will have the negative affect of about 100 points to your credit score. Here's the spicy part. If your modification is not approved and made permanent, the trial period payments will be reported as late and you will be past due for the difference between your trial period payment and your regular payment.
According to the Wall Street Journal, to date there have been about 900,000 applications for HAMP modification since the programs inception in April 2009. Only 7% of those modification applications have been approved. That means about 840,000 households are worse off now than before they applied for the modification. The unintended consequence of all of this is that many of the 840,000 households that did not qualify for the modification would have qualified to refinance or purchase something more affordable but now, their credit has suffered to the point that they can no longer qualify for a new loan.
The spirit of HAMP was to be an option for people that have the intention of keeping their home to live in but have had an adverse change in financial circumstances. Used any other way, HAMP can be disastrous for your credit.
The Smooth Loan Process lesson for today: Get all of the facts and educate yourself before applying for any new loan or modification program.
Harold Perkins
Galaxy Lending Group
602-595-1233
Harold@HaroldPerkins.com
Friday, January 22, 2010
The Smooth Loan Process #2010-08
When Should I Lock My Rate?
For those of you that know me, you know that I have my favorite catch phrases (my friends call them Harold-isms). A lot of them are not appropriate for this blog, but one of my favorites is "lock 'em if you got 'em". The bond and treasury markets have been so volatile for the past couple of years that from one day to the next, there's no way to know what the rates are going to do. True, all of us want the best rate possible. But it's gut wrenching to have had the opportunity to lock at 5.0% but end up with 5.5% because you gambled that the rate would be 4.875%. The advice I give is that if you are happy with the rate on the day you get your purchase offer accepted, lock in and don't look back. In the end, you'll feel better.
What is a rate lock? Think of it as a contract between you and your lender for a certain rate, for a certain period of time at a certain cost. Customarily, rate locks are for 30 calendar days but can range anywhere from 10 to 90 days. The longer the lock period, the higher the cost will be. For example, a rate that costs one point to lock for 30 days could cost 1.5 points to lock for 45 days or going the other way, .5 points to lock for 15 days. If your loan does not close by the expiration of the lock, then you are subject to higher costs if rates worsened since you originally locked. Rate locks are specific to the property and to the borrower. If you had locked in your rate and decided to cancel your purchase contract, your lock would not transfer to the new house.
Also, your lock is only good for the loan program that you have applied for. For example, if you locked your rate for a Conventional loan, but then had to switch your loan to FHA, you would also have to re-lock at the current market conditions. Finally, always have a signed lock in agreement of some kind with your lender. If the rate lock is a contract, wouldn't you want a copy of the contract?
The Smooth Loan Process lesson for today: Lock 'em if you got 'em
Harold Perkins
Galaxy Lending Group
602-595-1233
Harold@HaroldPerkins.com
For those of you that know me, you know that I have my favorite catch phrases (my friends call them Harold-isms). A lot of them are not appropriate for this blog, but one of my favorites is "lock 'em if you got 'em". The bond and treasury markets have been so volatile for the past couple of years that from one day to the next, there's no way to know what the rates are going to do. True, all of us want the best rate possible. But it's gut wrenching to have had the opportunity to lock at 5.0% but end up with 5.5% because you gambled that the rate would be 4.875%. The advice I give is that if you are happy with the rate on the day you get your purchase offer accepted, lock in and don't look back. In the end, you'll feel better.
What is a rate lock? Think of it as a contract between you and your lender for a certain rate, for a certain period of time at a certain cost. Customarily, rate locks are for 30 calendar days but can range anywhere from 10 to 90 days. The longer the lock period, the higher the cost will be. For example, a rate that costs one point to lock for 30 days could cost 1.5 points to lock for 45 days or going the other way, .5 points to lock for 15 days. If your loan does not close by the expiration of the lock, then you are subject to higher costs if rates worsened since you originally locked. Rate locks are specific to the property and to the borrower. If you had locked in your rate and decided to cancel your purchase contract, your lock would not transfer to the new house.
Also, your lock is only good for the loan program that you have applied for. For example, if you locked your rate for a Conventional loan, but then had to switch your loan to FHA, you would also have to re-lock at the current market conditions. Finally, always have a signed lock in agreement of some kind with your lender. If the rate lock is a contract, wouldn't you want a copy of the contract?
The Smooth Loan Process lesson for today: Lock 'em if you got 'em
Harold Perkins
Galaxy Lending Group
602-595-1233
Harold@HaroldPerkins.com
Wednesday, January 20, 2010
The Smooth Loan Process #2010-07
Changes Coming to FHA Financing FHA financing for home loans has been the bright spot in the Real Estate market for the past few years. In 2005, less than one percent of the loans we closed were FHA. Today it's about 40 percent of the loans we close. This is due in part to the rise in FHA loan limits coupled with the decline in property values. In 2005, the FHA loan limit for Maricopa County, AZ was $273,500 but the median home price in my zip code was $350,000 (according to azcentral.com). Today, our County's FHA loan limit is $346,250 and the median home price is $275,000. That's a good combination for buyers. Another reason for the rise of FHA is the fall of the three Russian Sisters. SISA, NIVA and NINA. Stated Income Stated Assets, No Income Verified Asset and the biggest of the sisters, No Income No Asset. We'll talk about them in another episode. The increase in FHA loan volume also comes with an increase in problems for FHA so HUD is making changes to reduce their risk.
The Smooth Loan Process lesson for today: FHA loans are good. Just be sure to keep up with the changes.
Harold Perkins
Galaxy Lending Group
602-595-1233
Harold@HaroldPerkins.com
- -The Upfront MIP will increase from 1.75% to 2.25%. The upfront MIP is charged on every FHA loan. This is part of where HUD gets the money to pay claims to the banks that have FHA loans that have defaulted. The charge is a percentage of the loan amount and is usually financed back in to the loan. The Upfront MIP can vary depending on loan purpose and loan to value. A credit score requirement of 580 will be required. This is a big change for FHA but it kind of doesn't matter. Up to now, FHA had no minimum credit score requirement. In today's world, if the borrowers credit score is below 620, the loan would not have been approved anyway. Realistically, at least a 640 score is ideal. FHA borrower with less than 580 will be required to put 10% down. Again, FHA will allow it but finding a bank to fund that loan will be challenging.
- -Seller contributions for closing costs will reduce from 6% to 3% of the sales price.
- -FHA appraisals must be HVCC compliant beginning February 15, 2010. We'll no longer have direct contact with the appraiser. The appraisal will be ordered through a third party management company that will assign an appraiser to the transaction. The appraisal process will be completely independent of the Lenders and the Realtors. We're getting used to this on the Conventional side of things. The transition should not be too bad for FHA Except for the appraisals, these changes have not gone into affect yet but they are coming soon.
The Smooth Loan Process lesson for today: FHA loans are good. Just be sure to keep up with the changes.
Harold Perkins
Galaxy Lending Group
602-595-1233
Harold@HaroldPerkins.com
Tuesday, January 19, 2010
The Smooth Loan Process #2010-06
Origination Fee or No Origination Fee?
We've all gotten the emails from the African Prince who needs our help to access his millions of dollars in a Trust account, right? It's easy, you just send some to him and he'll send back your cut of the millions. What could possibly go wrong? Origination fees can be the same thing (on a much smaller scale, of course).
What is an origination fee and should you pay an origination fee for your home loan? The origination fee is what it sounds like. It's your lender's charge for their services in originating your home loan. Customarily, it is one percent of the loan amount but it can vary depending on the loan scenario and market conditions on the day you lock in your rate.
So let's say you are given two good faith estimates (GFE) for the purchase of a primary residence. Both are 30 year fixed rate loans. The first GFE has a note rate of 5.0% and a 1% origination fee. The other is at 5.25% with 0 origination fee. Which option is better? Depends on how long you plan to stay in the loan. You will find that at five years, the difference in monthly payment between the two rates will be equal to the cost of the origination fee. So if you planned to sell the home in less than five years, the higher rate and lower cost option is best. Conversely, if this is the last house you will ever purchase, take the lower rate because it pays off in the long run.
What about paying more than 1% to get an even lower rate? Maybe. You will find that more you pay in points, the less bang you get for your buck. Usually, a .25% reduction in rate costs 1% of the loan amount. But a .5% reduction in rate could cost 2.5% of the loan amount. That would make the break even point 7 years instead of 5.
Also, the shorter the term of your loan, the less it will make sense to pay for a lower interest rate. The break even point for a .25% lower rate on a 15 year loan is 7 years. Almost half of the term of the entire loan! If you are taking an adjustable rate loan (yes, people still do that), then you want to make sure you break even before the first adjustment to the rate happens.
Sometimes, it is just not an option to take your loan with no origination fee. If you are purchasing an investment property, plan on paying an origination fee. The fees that are charged by Fannie Mae and Freddie Mac for investment properties are practically impossible to cover through the interest rate making it necessary to charge the origination fees. Also, if your credit score is below 700 for conventional or 640 for FHA, plan on an origination fee.
The Smooth Loan Process lesson for today: Depending on your situation, the lowest rate may not be the best. Or the lowest cost might not be the best. Look at all of your options before you decide.
Bonus Lesson: Don't send money to the African Prince!
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
Sunday, January 17, 2010
HUD Waives FHA 90 Day Rule
On Friday, HUD announced that they would temporarily waive the 90 day seasoning rule for FHA buyers. This is the link to the waiver from the HUD website. http://bit.ly/5Umop5
The waiver goes in to effect on February 1, 2010 for one year.The 90 day seasoning rule had prevented a buyer from purchasing a home with an FHA loan if the seller had not owned the property for at least 90 days prior to the buyer's purchase contract being executed.
There were exceptions for Bank owned properties, relocation companies and inherited properties.The biggest benefit will be for the "fix and flip" investors. They will now be able to market their properties sooner to FHA buyers which is currently the largest segment of the market. HUD has determined (finally!) that these investors are good for the market.
Of course, there are restrictions. For example, an increase in sales price from the seller to the buyer of more than 20% will require a second appraisal and documentation of the improvements that were done to justify the increase in sales price. Also, the transaction must be an arms length transaction.
Please call, email or stay tuned for more information. The announcement was just made on Friday. There are not lender specific guidelines yet.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
Friday, January 15, 2010
The Smooth Loan Process #2010-05
How Do I Pick My Mortgage Lender?
There are many Loan Officers at many mortgage companies to choose from. Most are good. Some are bad. Very few are out to cheat you (and they'll get their comeuppance in the end). So how do you pick your Loan Officer? Clearly, you'll want to make a good decision on who you use for what will probably be the largest purchase you ever make.
With a few exceptions, every mortgage lender has the same products. For example, an FHA loan at Lender "A" is the same as Lender "B" or Bank "C". Granted, there are lender specific guidelines to every loan program, but that's another episode. In general, the products are the same regardless of where you get it.
Your first step in picking your Loan Officer (LO) should be picking up the phone and talking to your friends and family. Who did they use when they purchased their home? How strongly would they recommend their LO? Did he do a good job? A referral from somebody who has actually worked the person they are recommending gives you the best chance for success in your own transaction. That LO has already proved himself and doing a good job doesn't happen on accident. It takes work. If you don't have any friends or family that can refer you to a LO, then ask your Realtor. Your Realtor has a working relationship with a LO. The longer a Realtor and LO have worked together, the better. That will tell you that the LO has consistently done a good job for as long as the two have worked together. The referral is about trust. Talk to the people you trust and find out who they trust.
Once you get that referral, your work is not done yet. If it's practical, make an appointment to meet your LO. You will learn a lot about who your going to be working with just by spending about an hour in completing your loan application. Did your LO answer his phone when you called? Or return your call promptly if he couldn't answer? When you meet your LO, did he explain the different options you have for financing? Did he explain why he recommended a certain loan program? Did he provide you a Good Faith Estimate? Did you feel comfortable? If the answer to all of those questions is yes, then you're probably going to be fine.
What did you find when you searched your Loan Officer's name in Google? Facebook? LinkedIn? Don't worry about MySpace. Nobody uses that garbage.
One of the least important things in determining who to use for your loan is the interest rate or fees. Yeah, that's right. I said it. Seriously, a lender that consistently charges a higher rate or higher fees than the rest of the market is not going to get referral business anyway. I'm very nice, but I can't charge a higher interest rate because of it. Part of doing a good job is providing competitive rates and fees for the services that are being provided. In all likelihood, you would not be able to answer yes to any of the questions from the above paragraph if you were being charged a significantly higher interest rate or fees for your loan. I'm not saying that you should not check around to make sure your getting a fair rate, but the lowest is not always the best.
I have friends that blame their Loan Officer (it wasn't me) for their divorce. They found him by calling on a radio ad. They say that the delays in closing which lead to hotel and other expenses put too much of a strain on their relationship. I asked why they didn't use someone else when the loan started going bad. They admitted the LO did not seem trustworthy but the interest rate he quoted was .125% lower than the other quotes they had gotten so they stayed with him. I didn't have the heart to point out that they spent more on hotels, eating out and divorce attorney fees than that .125% in rate saved them.
This example is a little extreme. I suspect their were other issues with their marriage, but had they gotten a referral from someone they trusted, they might still be married now.
The Smooth Loan Process lesson for today: Work with a Loan Officer you trust, or get a referral for a Loan Officer from someone you trust.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
Thursday, January 14, 2010
The Smooth Loan Process #2010-04
Why Do You Care Where the Money Comes From?
One of the biggest challenges in getting your final approval for your home loan can be documenting the source of your funds for your down payment. This can be a area of frustration for the buyer and Loan Officer alike. If you have purchased a home before, your Loan Officer may have asked you about every little piddly deposit in your checking account. Why do we do this? I think my daughter, Claire puts it best when she yells at one her brothers for getting them in trouble. "You ruined it for all of us! Thanks a lot!"
The source of the down payment is a very good indication as to whether or not the buyer will actually live in the property that is being purchased. Owner occupied properties get better terms on the loan than non-owner occupied properties or investment properties. The terms are better for owner occupied because statistics show that those loans are less likely to go to foreclosure. So the people that "ruined it for all of us" are the people that intended to purchase a rental property but want the better interest rate and lower down payment so they use someone else to take the financing for the property. That other person (or straw buyer) gets the down payment money from the investor to close and never moves into the house. Later, if the investor cannot make the payments, the house goes to foreclosure. No problem for the investor because the loan is not on his credit but the bank is stuck with a foreclosed property. For the record, I'm against this.
So we have to ask you for not just the balances in your bank account, but the full transaction history of your bank accounts for the past 60 days. If there are unusual or large deposits into the account, we have to document where it came from. Of course, payroll and tax refunds are always okay. But let's say your parents are helping you with your down payment. We'll not only have to document that they gave you the money, but also that they had the money to give you. That means looking at the parent's bank statement to see if they had any large deposits and if they did, document the source of their deposit.
Actually, it's not as bad as it sounds. As long as you are not a straw buyer, you will not have any problems with documenting the source of your down payment.
There are a few sources of down payment that will make your home loan very challenging. The shoe box of cash in the closet is a problem. There's no way to properly document cash like that. Taking a picture of it for the underwriter does not work (I've tried). If you're thinking of buying a house and you have cash for your down payment, get that money in the bank. After it's been in the bank for 60 days, no questions asked. Taking cash off of a credit card is no good either. That's an unsecured loan and is not acceptable for down payment. Other types of loans are just fine though. A loan against your 401k, car or home equity is perfectly fine. Of course, we'll have to document that too.
The Smooth Loan Process lesson for today: Be prepared to document the source of your down payment.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
Tuesday, January 12, 2010
The Smooth Loan Process #2010-03
Why Is Your Credit Score Different Than Mine?
Most of us are familiar with the three major credit bureaus. Experian, Equifax and Transunion. Most of us are equally familiar with credit scores. After all, it is our report card for grown ups. But did you know that your credit score might be different depending on who pulls your credit? I had a client a few months back that had his credit pulled three times in one day. Once by me, once by him and once by another bank. We all pulled different credit scores!
Here's why: The consumer credit report that you can get on your own from an online credit report company like uses a different scale than creditors use. The consumer credit report ranges from 400 at the bottom to 900 or sometimes 1000 at the top depending on the company. The scoring scale for creditors starts at 300 and only goes up to 850. So the exact same credit could get a 700 score on one report, but only 650 on the other.
Confusing? Wait, it gets worse. The credit bureaus have different versions of the scoring modules that determine the score. For example, Transunion has at least four versions of the FICO score (FICO is the brand name of the scoring module). Each creditor can choose which version of the FICO score they want to use. It is generally accepted that FICO Classic version 04 is used for mortgages, but not always. There is a big bank out there that uses version 02 for their loans. The difference between the two can be about 25 points on your score. That can be very expensive for your loan if you are knocked down a credit tier because of the scoring module that gets used.
So, if you're pulling your own credit report because you want to know your credit score, take it with a grain of salt. It might be different when your loan officer pulls your credit.
The Smooth Loan Process Lesson for today is that the most important thing about credit is to make sure the data on your credit report is correct. If there is incorrect data, we can work together to correct it and raise your score (but that's another episode).
Harold Perkins
The Mortgage Advantage
480-831-1588
harold@aztma.com
Monday, January 11, 2010
The Smooth Loan Process #2010-02
Can I Quit My Job Before We Close?
"Is it bad if I quit my job before we close on our loan?" I get this question from borrowers more often than I would expect. I suppose that for those of us in the business, this is kind of a no-brainer but the question comes up enough that I feel like giving the answer and the reason.
Yes, it's bad.
The reason is that the lender wants a reasonable expectation that the income used for qualifying is likely to continue. On most loans, we'll have to contact the employer to verify that the borrower is still an active employee on the day of funding and closing the loan. Usually, this is done by phone but it can also be done in writing. So if we find out that you have quit, put in your notice or took a leave of absence, the loan is not going to fund. The lender will also verify your start date with the company to make sure there is a proper employment history, but that's another episode.
Maybe my sense of humor is off (after all, I am a mortgage nerd), but I think some of the situations we have had with a lack of employment at closing are really funny. Here are some of the responses I've gotten when I asked the buyer why their employer says they are no longer employed:
- "I know I got fired, but they owe me two weeks vacation. We close in less than two weeks, so what's the difference?"
- "Oh...I didn't think that mattered."
- "You said I was pre-approved. I thought that meant I could do whatever I wanted."
- " I know you want me to get my job back, but that's not gonna happen. Not the way I quit!"
By the way, in all of the cases, the buyers were able to close on their home loans. We just had to verify employment for their new jobs.
The Smooth Loan Process lesson for today: Try to avoid changes in your employment status before you close on your home. If there is a change, let your Loan Officer know right away.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@aztma.com
Friday, January 8, 2010
The Smooth Loan Process #2010-01
You Didn't Ask Me if I Bought a Timeshare
Every once in a while, there is a loan application that has little hidden surprises. And, I don't mean the happy surprises like a better interest rate or lower closing costs. Sometimes, the surprises are a little on the ridiculous side of things. This one is one my favorites (and I can't make this stuff up):
They were first time buyers with a very limited credit history and very little money to work with for down payment. The credit scores were a little bit on the low side, but could be improved by paying down the balance on a credit card by just a couple hundred dollars. The higher credit score would improve the interest rate, there by making the loan approval much easier to obtain. The buyers were advised to wait until the credit was updated before they put on offer house, but they found the house of their dreams so they decided not to wait.
So the plan was in place and the buyers found a house and got their offer accepted. So far, so good. They paid for their home inspection. No problems there. They paid for the appraisal. No problems there either. This is too easy! Now it's time to update the credit report since they've also paid down that credit card.
Wait a minute... the score is lower?!?! Wait a minute... what's this new loan on the credit report?!?! Surprise!
There was a brand new $10,000 loan on the credit report. To make matters worse, it was reporting 30 days late for the first payment! Immediately, I called the buyers to ask if they new about this mistake. Surely, they would not have taken a new loan at the same time that they were purchasing their first home. Especially after my usual post-application speech of "Don't take any new debt". The buyer's response was not what I was expecting. It turns out that the buyers purchased a timeshare condo just days before they came to see me for the loan application. My original credit report was pulled before the timeshare showed up. I had no idea they had it.
A little stunned, I asked them why they didn't tell me about the timeshare when I took their application. The answer is still my favorites to this day. "You didn't ask me if I bought a timeshare." Good point. I did not ask that. However, I do ask if there is are any other debts that are not on the credit report and starting now, I will always ask if you have just purchased a time share.
The Smooth Loan Process Lesson: Always disclose all of your debts. Even the ones that don't show up on the credit report.
Harold Perkins, Loan Officer
The Mortgage Advantage
480-831-1588
Harold@haroldperkins.com
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