Is Trump good for home loans?

Is President Trump good for home loans?

Minneapolis, MN: Its only been two weeks, but clearly the new Trump Administration is driving a different road from the past administration. Only time will tell what this all means for real estate and home mortgage loans, but here are a few observations, most relating to a reduction in regulations.

After the housing collapse, legislators and regulators came down hard on the mortgage industry under the false belief that if you could fog a mirror, you automatically got a loan.  While guidelines were looser, and third party verification of documents supplied by home buyer were lax, NO LENDER ‘knowingly‘ let the french fry guy at McDonald’s buy a million dollar home.

Were there a few bad players? Yes, But think of it more as it was easy to beat the system, as opposed to everyone in the mortgage world was a crook.

The Frank-Dodd financial reform laws, and the creation of the Consumer Financial Protection Bureau (CFPB) put the hammer down on many industries, not just mortgages. Of all the new regulations, only a few actually made a difference and make sense. The rest have cause home buyer costs to rise dramatically, added huge paperwork and delays to closing, and ultimately left many good people unable to buy homes because of unintended consequences.

It is expected that the Trump administration will go after many of the Frank-Dodd financial reform rules, and seek to reign in the CFPB, resulting in fewer rules, regulations, and paperwork. Meaning lower costs for home buyers, quicker closings, and less hassle to get a home mortgage loan.

A prime example is the CFPB designed a new ‘Loan Estimate‘, which replaced the ‘new’ Good Faith Estimate, which replaced the old Good Faith Estimate that existed since 1972. Today my clients are more confused than ever over the document and disclosures.

A second example is Loan Officers themselves. The rules put into place after the crash REQUIRE non-bank Loan Officers to go to school, pass difficult state and federal testing, and have mandatory continuing education. Sounds great, but Loan Officers at depository lenders (banks, credit unions, and lenders owned by banks or credit unions) DO NOT have to pass the same requirements of the S.A.F.E. Act. Don’t they all do the same thing? Why to bank Loan Officers not have to go to school, pass federal testing, or meet the same educational requirements?

Another example is that over the past 10-years, and especially the past 5-years, many lenders have pulled away from writing FHA loans. While not just for first time buyers, those are the people who primary use FHA loans. This was done because the Obama administration went after lenders from every angle under the False Claims Act for any minor error in FHA underwriting. Failing to cross even the most minor T, or dot the smallest I could have, and did,  leave lenders with huge multi-million dollar settlements paid to the government.

I’m all for slapping the hands of people doing blatantly wrong things. But lenders are not stupid. If the government is going to come after you for minor items, why bother.  It isn’t worth it. Those still offering FHA loans charge higher rates than needed to new buyers to offset anticipated government lawsuits. Someone has to pay those lawsuits, and it has simply been pass on to the consumer.

It is expected the Trump administration will have the CFPB and the Justice Department back off of their overzealous pursuit of lenders.

A smart balance of less unnecessary regulation, less paperwork, and a positive attitude towards business should be good for mortgage loans, the financial markets, home owners, and the country in general. It is way too early to tell, but lets all pray the county goes in a good direction.


How long does it take to close a loan

How long does it take to close a loan?

Getting a home mortgage loan in today’s world is a cumbersome paperwork intensive process.  Especially with all the recent regulatory changes added since the market crash.

images98725Not everyone realizes how long the process takes, but this is good information to understand when setting proper expectations for closing dates.

A large portion of mortgage lenders use the same software from Ellie Mae. Through this software, they are able to track the entire process, providing great industry insights.

According to the December 2014 Origination Insight Report from Ellie Mae, the average time to close a loan in 2015 took 49 days.

The average time to close a refinance dropped to 47 days, while the average time to close a purchase transaction increased to 50 days.

Obviously these are averages, so can some loans go through the process faster?  You bet.  Some slower?  Of course.

As a Loan Officer for 20+ years, by far the biggest delay I see in closings is cause by the client, by the client not providing requested documents to the lender in a timely fashion. By having standard documents ready to go up front, and responding to any document request from a lender in a timely fashion, the client can help achieve a smooth and successful on time closing.

Here are a few additional tips for a smooth home loan closing.


Mortgage scams coming to an end?

After year and years of abuse, it appears a big area of real estate transaction abuse may be finally coming to and end. What is that you say?  Something you probably experienced, but didn’t realize, which is known as a Marketing Service Agreement, or MSA.

MSA are agreements between various companies, more often than not, companies owned by the same people, to steer you into using the services of the other company.

For example, you buy your home using a Real Estate Agent from ABC Realty, who talks you into getting your mortgage loan from their affiliated company ABC Mortgage. Then they get you to close your home loan at their affiliated Title Company, ABC Title. Some, even go as far as even trying to get you to get your homeowners insurance from their affiliated company!  cfpb_logo

Another great example is in new construction, where the builder uses fake incentives (like free appliances) if your use the mortgage company and title company they own.

These MSA have become prevalent in the market, but have started to fall out of favor with many companies since the CFPB (Consumer Financial Protection Bureau) started going after these service agreements over their legality. Numerous companies have been slapped with large fines for their practices, so many others, seeing the writing on the wall, and just getting out of MSA’s all together.

Essentially these agreements require one company to be obligated to recommend the other, even when they know there is a better alternative for the client.

Almost always, it comes down to money. If the client believes they are required to use the company and they don’t shop, or are not allowed to shop, what sort of deal do you think the related provider is providing?  incentive2That’s correct, rare is their offering the best deal, and many times, the consumer is paying a significant premium for the related company services. Because the related provider costs more, if allowed to shop, it would usually put their own overpriced companies at a competitive disadvantage.  Therefore many companies employ tactics to scare or otherwise discourage clients from shopping.  The aforementioned builder incentive is classic. People, the builder is NOT giving away anything. The appliance allowance, or finished basement upgrade is already built into the price of the house. They only “offer” that as a great incentive for you to also use their MSA partner.

While MSA’s are not currently illegal, the CFPB has strongly stated that if you are going to be making a referral, it better be because it is the best deal from the client, and not the best deal for them.

The bottom line for a home buyer is that you should always shop for the other services.  Almost without fail, because of the nature of Marketing Service Agreements, you’ll usually get a better deal somewhere else.

 


The importance of Mortgage Lender Pre-Approval

The Importance Of Full Lender Pre-Approval 

Initial mortgage loan pre-qualification and full lender pre-approval are two of the most important steps you can take towards owning a new home. In most areas, Real Estate Agents either won’t even show you homes, or for sure, will not let you make an offer on a home without a full lender pre-approval.

Basic Pre-Qualification

house_from_wordPre-qualification is the first step to securing a home loan. Essentially, it is an initial “how do you look”, and “feels good” start.  Pre-qualification is quick and involves answering only a few questions about your income, existing debt and accumulated savings. It is also important that we discuss your long-term financial objectives. With so many loan options available, we want to select the one that meets your goals. With this information and your consent, lenders can access your credit report and begin to determine which loans you may qualify for, how much house you can afford, what the payments might look like, and how much money you will need to make it all come together.

Full Pre-Approval

Full pre-approval is the next step up up from basic pre-qualification. In this step, the lender verifies your basic supporting documentation, like pay stubs, W2s, tax returns, and bank statements. Upon review, the mortgage lender will provide a written Pre-Approval Letter. While never a loan guarantee, this is written documentation showing that a lender have taken an application, reviewed your documents, and believes once you find the exact dream house, you will make it all the way through the underwriting process.

If you’ve never given any documents to your lender, you are NOT pre-approved.

With a pre-approval in hand, you can shop almost as a cash buyer! This gives you strong negotiating power because the seller will take your offer more seriously. A lender’s pre-approval will often convince the sellers to accept a lower offer for the home because they know the financing is in place and the deal is safe.

———-

Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and was ranked #98 of the Top 100 Loan Officers in the Nation by Origination News. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681



How Real Estate Agents Risk their License everyday

Don’t risk your Real Estate License

Many Real Estate Agents put their license at risk on a daily basis without knowing it.  Generally this is by stepping outside of their official duties, and stepping into areas they shouldn’t.

Title Company Risk

Did you know that most states have insurance solicitation laws that may apply when you refer a client to an in-house title firm (or one with which you have a Marketing Service Agreement)?

That means that you might need a title insurance license to make certain referrals. The safest thing a real estate agent can do is to discuss title, what it is, and let their clients decide who to use.images1923532412

This includes real estate agents automatically ordering title services from their preferred title company without talking to clients and getting their permission.

Mortgage Risk

Did you know that mortgage laws also prevent non-licensed mortgage originators from discussing loans, loan terms, programs and interest rates?  A Mortgage Loan Originator License must be obtained BEFORE doing any of the following residential property mortgage loan activities: soliciting, originating a loan application, offering, or negotiating any residential mortgage loans.

Can are real estate agent refer a client to a lender or Loan officer?  You bet, but they need to be very careful if they suggest loan programs, or talk about interest rates. A real estate agents best bet is to simply tell the client that they are not a lender, and they need to ask the Loan Officer all mortgage questions.

CFPB (Consumer Financial Protection Bureau)

“Solicit” means attempting to sell or asking or urging a person to apply for a particular kind of insurance or loan from a particular company, and no person shall sell, solicit, or negotiate any insurance or mortgage without a license.

Regulators at the CFPB are turning their heads towards Real Estate Agents, now that they have caused a lot of headache in the banking, mortgage, and credit card industries.  Just like giving legal advice,  it is generally best for real estate agents to simply avoid the potential trouble, and think before you act, even if your heart is in the right place by not giving advice and referrals.


Current State Of Mortgages and Homeownership WARNING!

This from Dave Stevens, President & CEO of the Mortgage Bankers Association:

Where We Are Today.

We are currently in the middle of a housing crisis.  That’s right…I said it.  Industry experts, economists and even consumer groups have predicted one would emerge, albeit this is not what they expected and it is certainly sooner than anticipated.

Dave Stevens - Mortgage Bankers Association
Dave Stevens – Mortgage Bankers Association

Yes, the word crisis is harsh and alarmist, but it accurately reflects the complete void of focus on housing as an opportunity by Washington policy makers, including the actions of the regulators and enforcement officials that are narrowing the credit box.  Fact – there is a shortage of affordable housing (both rental and owned) and the homeownership rate today is at its lowest point in over two decades.  Today’s environment is not encouraging credit expansion. It’s forcing lenders to be overly conservative – ultimately failing entry-level homeowners on every front.

What’s the number one issue choking off access to affordable credit? Regulating through enforcement and it’s happening on a case-by-case basis.  The guessing game for businesses to know if and when they may be penalized has produced the most defensive lending posture in years. This atmosphere of the unknown; this environment of fear and trepidation rather than an environment of constructive engagement and compliance have a steep cost. And we’re not just talking costs for compliance or production.  We’re talking costs for any mistake, even a minor one that may have no bearing on the efficacy of the loan, making lenders even more conservative in lending.  It’s impacting the willingness of lenders to take the risk even to some who would otherwise qualify for their dream to obtain a home.  The regulatory environment is failing the very borrowers policymakers set out to protect – young families, thriving generations of new Americans, first time homebuyers; all the while driving up rental costs and homeownership lags and rental demand soars.

Lenders must have clearer guidance on the rules and a better understanding of what will constitute an enforcement action.  We have made some progress working with regulators on issues such as rep and warrant, FHA defect taxonomy and the supplemental ratio, but it’s not nearly enough.

Some regulators appear to have an enforcement-first strategy, instead of providing clear rules and guidance – particularly regarding unfair, deceptive, or abusive acts or practices – UDAAP actions – which expose lenders to “regulation by enforcement action.”  Lenders are being subjected to zero-tolerance policies, but don’t have the necessary guidance to comply with some regulations.  Refusal to clarify the rules in writing by the CFPB leaves lenders in a position for massive penalties for minor mistakes.

The CFPB should be applauded for granting an enforcement delay on the TILA/RESPA Integration Disclosure rule (TRID).  With the number of stakeholders involved in home buying procedures, there will undoubtedly be problems.  In particular, the borrower could be affected in many ways should a closing date get pushed back (consider the cost of month-to-month rent or not having a place to go at all).  Industry stake holders – lenders, borrowers, vendors, sellers, title companies, etc., – need time to work through the initial issues before severe penalties compound the problem.

The mortgage lending industry has acknowledged and taken accountability for the role we played in actions that led to the meltdown.  Lenders have paid hundreds of billions in settlements. We’ve also made tremendous change in controls, compliance, and to improve the consumer experience.  Now it’s time policymakers – the vast network at the federal and state level – account for their role in the recovery.  It’s time to acknowledge the flaws in policy, corrections needed to the rules, and the impacts of going too far.

And it starts at the top.  Our President has only given two key housing speeches in his presidency, both in Phoenix. These were focused on enforcement, accountability, and dealing with foreclosure relief and refinance programs. There has been no public focus to promote new opportunities for homeownership and no program, other than the short-lived first-time homebuyer tax credit program, there has been a void in creating confidence in the housing market.

Unlike past Presidents in both parties – there has been no focus on homeownership as an opportunity. No discussion about unbanked, thin file, demographics and how that affects opportunities. No attempt to publicly build confidence in consumers’ views about homeownership.

Unless we call this what it is – a crisis – and focus on the critical role that our national leaders can play, there is no hope of traction. I worry deeply that this Administration may leave office having done less to advance homeownership than any previous administration in memory.  And the clock is running out.  There’s little time left before the next Presidential election to do anything more than public discussion, but the President can and should play a major role.

Let’s fix what needs to be fixed. Let’s change the dialogue of distrust to a dialogue of confidence. Let’s fix the rules to allow for innovative, sustainable, safe lending. Let’s end the relentless enforcement regimes. Give us the confidence to provide access to credit to more qualified borrowers at the lower and middle income levels. Reignite the economic engine of the real estate market.


Top 100 Loan Officer 2015

Mortgages Unlimited’s Loan Officer Joe Metzler, out of their St. Paul, MN Office, has been recognized as one of the Top 100 Loan Officers in the Nation by Origination News, coming in at number 98. Read the list at http://tinyurl.com/ljqqkbj

Top Loan Officers 2015This is another is an ongoing set of accomplishments for Mr. Metzler, as he was also recently named the Minnesota Mortgage Associations 2014 Loan Officer of the Year.  Joe Metzler has been a top producing Loan Officer for Mortgages Unlimited since 2000, and has over 20-years industry experience.  Joe has received other awards in recent years in recognition of his outstanding service and dedication to the mortgage industry, including:
  • 2011 – Top 40 Most Influential Mortgage Professions to Watch (NMPM)
  • 2010 – Top 150 Loan Officers in the Nation by Dollar Volume (Origination News)

Joe Metzler is a certified MMS (Minnesota Mortgage Specialist). Less than 1% of Mortgage Loan Officers in Minnesota have completed the requirements to earn this designation. This is just one of many ways that shows Joe’s dedication to his career.  His track record is exceptional by any standard. He believes in doing the job right the first time and providing a service you can depend on.

If you’d like to have Joe as your Loan Officer, he is licensed in MN, WI, and SD. He can be reached at (651) 552-3681, or you can apply on his web site


Advantages of a Mortgage Professional vs Application Clerk

Advantages of a Mortgage Professional vs Application Clerk

Buying a home is an expensive proposition, and usually the largest single financial transaction of the average persons life.  Not all mortgage loan officers are created equal.  It is important to understand the advantages of a true licensed mortgage professional,  versus an unlicensed application clerk.

A deserved premium is always given to those Loan Officers who have deep knowledge and understanding of the dynamics of mortgage financing and loan programs. They are an asset for different kinds of clients because of their life experiences, loan experiences, wisdom, and resourcefulness.

Most people simply contact their bank, and whomever answers the phone is who they entrust with the mortgage.  Why?  The next biggest group of people use whomever their Real Estate Agent suggests.  Why do you blindly trust these people?

Licensed versus Unlicensed

If I asked you if you preferred to work with a licensed or unlicensed Loan Officer, the answer is pretty simple. Just about everyone would say a licensed person. Yet the vast majority of Loan Officers do NOT have an individual Loan Officer License.  Depending on where they work, they are not ever required to have a license.

licenseIf they work at a bank, credit union, or mortgage company owned by a bank or credit union, no licensed required. If they work at a mortgage broker, or other non-bank owned lender, a license IS required.

But just because a licensed is not required, does not prevent someone from getting a license. If they really cared about you, and being the best they could be, they would show it by obtaining a license. This proves to clients they have met the requirements for background checks, schooling, passing testing, and continuing education.

How to Check for a License

All Loan Officers must have a tracking number, known as an NMLS number (Nationwide Mortgage Licensing System and Registry).  This is NOT a license number!

nmls

To verify a Loan Officer is Licensed, not simply registered, go to the NMLS Web Site at www.NMLSconsumerAccess.org.  Type in the Loan Officers name or NMLS number.

Towards the bottom of the page, it will say State Licenses/Registrations, or Federal Registration.

If it says: Federal Registration, and Federal National Mortgage Originator. This means the person is NOT Licensed

If it says: State Licenses/Registration, then lists one or more states, this means the person IS Licensed.

Who to Choose?

I am not saying that the person who is simply registered and NOT licensed is a bad person. I am not saying they don’t have experience. I am not saying that a person with a license is a good person…

But what I am saying, is someone who has taken the time to pass the required background checks, taken the schooling required, pass the required state and federal tests, and receives mandatory continuing education each year show you the consumer that they are true professionals. If the person you are working with doesn’t have a license, ask they why? An answer of “I don’t need one” is a poor answer.

Clients enjoy a peaceful mind knowing that an important aspect of their lives is in the hands of a highly professional Loan Officer. This draws the line between application clerks and real professionals.

In the context of service, respectfulness, dedication, and commitment to helping others, I am choosing a Licensed Professional, regardless of the industry!

———-

Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and provides Home Mortgage Loans in MN, WI, and SD.

He can be reached at (651) 552-3681


3% down payment mortgage loans back

Minneapolis, MN:  Fannie Mae and Freddie Mac have recently announced they are bringing back 3% down payment options.ff

Currently, most conventional conforming loans require a minimum down payment of 5%, while FHA Loans still allows for just a 3.50% down payment.

FHA VS CONFORMING CONVENTIONAL Loans

FHA used to be the low down payment champion, but changes to the program made after the housing market meltdown have really taken a lot of steam out of the program.  The two biggest changes being the huge increase in the cost of FHA mortgage insurance, and that with a small down payment, the homeowner would have FHA mortgage insurance for the life of the loan!

If you have good credit, and could come up with a little more down payment, a conforming conventional loan would be much better.

CONFORMING CONVENTIONAL NOT ALWAYS BETTER

There are many differences between the two programs.

FHA loans are more liberal in terms of lower credit scores, and weaker borrower profiles.  It also has a shorter waiting period after major negative events, like a foreclosure or bankruptcy. FHA interest rates are pretty much the same for everyone. But you pay for this with the high cost of mortgage insurance.

Conventional loans are almost always better if you have good credit scores, but can be nearly as costly for those with weaker credit. Conventional mortgage interest rates and mortgage insurance costs both climb significantly as your credit scores go down.

NEW 3% DOWN PAYMENT MORTGAGE GUIDELINES

Understand, Fannie Mae and Freddie Mac DO NOT DO LOANS. They buy loans from lenders after the fact. Therefore lenders can, and very often do, add additional rules and restrictions to the guidelines of what Fannie and Freddie say they will buy.  Always check with your mortgage lender for your specific qualifications:

Fannie Mae Rules:
 ⇒ Effective Date: December 13, 2014
⇒ One person must be a first time homebuyer
⇒ MyCommumity Mortgage Purchase Transactions — must undergo prepurchase housing counseling
⇒ Standard purchase and limited cash out refinances of existing Fannie Mae loans.
⇒ Fixed rate loans only — no adjustable
⇒ No high balance loans
Freddie Mac Rules:

⇒ Effective Date: March 23, 2015.
⇒ Called Home Possible Advantage Program
⇒ Manually underwritten mortgages–660 minimum score purchase/680 refinances with maximum 43% back ratio.
⇒ Owner occupied purchase and no cash out refinances.
⇒ Maximum income limitations for all mortgages.
⇒ Fixed rate loans only — no adjustable


Home sales, listings down for November 2014

Home sales, listings down for November 2014

While still touting a housing market recovery, area real estate associations are mindful that the market is still recovering, with the fits and starts that all that entails.

Data for November bear this out, with the area Associations of Realtors reporting November decreases in pending sales, closed sales and new listings.

Pending sales, or the number of signed purchase agreements, fell 7.5 percent in November compared with last year. New listings decreased 12.8 percent. November closed sales ended down 17 percent to 3,213 sales, versus last year’s 3,873 sales.

The median sales price rose 5.1 percent to $205,000, marking 33 consecutive months of year-over-year median price gains. However, this figure was down from an October median of $209,000.

As has been the case in recent years, the year-on-year uptick in prices indicates fewer distressed properties on the market; these properties, foreclosures and short sales, are where the home sells for less than is owed on the mortgage, and typically drag down median prices.

Minnesota mortgage ratesThe Minneapolis, St Paul, Twin Cities housing market is clearly continuing the process of recovery. Sales prices are up, but on fewer overall sales. Fewer distressed sales (foreclosures and short-sales) are certainly a welcome sign for homeowners and Realtors alike.

The Minneapolis Association of Realtors cited increased condo activity for the rise in prices. The median price of new construction condominium sales rose 65.2 percent in November to a new high of $366,242, it said.

Mortgage interest rates continue to hold just slightly above historic lows, making homes very affordable.  You can check current MN, WI, and SD interest rates here.


Underwaters homes dramatically lower

Minneapolis, MN: Since the real estate market collapse, many home owners found themselves owning much more than their home was worth on the fair market. This created many problems, from the inability to sell and move, foreclosure from the inability to sell, and a hard time refinancing because of the lower value.

Homes for sale - real estate - MinnesotaThe housing market has been slowly climbing up the ladder, and according to a report from Zillow, the share of homes underwater has now dropped to under 20%

The same report stated that the underwater rate is currently about 19.4% of all homes. This is an improvement of about 3.9 million homes going back above water in 2013.  This is down from about 27.5%  of all homes underwater in late 2012.

As values increase, millions of people who may have had a pent up demand to move, but couldn’t, now suddenly find themselves once again above water.  More people are likely above water than actually realize, as many people rely on county tax statements for their value estimates. But tax value and fair market value, or what you could actually sell the home for, are many times two dramatically different numbers.

I advise anyone thinking of selling, to contact a local Real Estate Agent to get a fair market assessment of their home, and to contact a mortgage broker in their area to see what they would qualify for in a new home, or to see about refinancing.

The market is expected to slowly continue the climb towards a more balanced market, with the report estimating the negative equity of homes nationwide to drop even further, to just 17.2% by the end of 2014.


Mortgage Loan Approval – Things NOT to do

Applying for a home loan can be a stressful time, but doesn’t need to be if you follow certain rules that can unexpectedly trip up your mortgage loan approval.

Some of these tips will be obvious, while others won’t – but all of them are items that regularly cause underwriting headaches. Avoiding these mistakes will help lead to a smooth stress free home loan closing.

images124Dos and Donts of a Smooth Home Loan Approval

  • DO continue to live at your current home.
  • DO continue to make your home loan payments or rent payments on time
  • DO continue to use your credit as normal (but see don’t items)
  • DO keep working at your current job.
  • DO keep your same insurance company.
  • DO stay current on all your existing accounts.
  • DO keep credit card balances low (below 25% of available credit is perfect)
  • DO call your home loan expert if you have any questions.

DON’T  do any of these items within 90-days of application or until after closing

  • DON’T apply for ANY new credit. No cars, no furniture, no credit cards, no cell phones, no boats, no new loans of any kind
  • DON’T buy any furniture ON CREDIT after you’ve found your dream home
  • DON’T close any credit card accounts,  or consolidate your debt onto one or two credit cards.
  • DON’T pay off any loans or credit cards without discussing it with your Loan Officer.
  • DON’T change bank accounts
  • DON’T move money around from one account to another.
  • DON’T pay off collection and charge offs accounts without a discussion with your home loan expert.
  • DON’T amend your tax returns
For a Refinance
  • DON’T start any home improvement projects, or don’t bother applying until any current project is finished

The biggest item left is simply this… ALWAYS tell your Loan Officer EVERYTHING. Not thinking it is important, or even straight up lying, is only going to cause trouble down the line.  You’d be surprised at the checks underwriting does during the process, and the things that are “discovered”. Mention everything it to your licensed Loan Officer right away so they can help you determine the best way to achieve your home loan goals, and avoid any unnecessary delays or surprises during the process.

 


Getting a mortgage loan after paying cash for a home

In today’s market, it is pretty common to pay cash for a home in the Twin Cities area. Maybe because you needed to act fast and didn’t have time to get a loan, or maybe because of the condition on the home, the house wouldn’t qualify for traditional financing.

Regardless of the reason, I speak with a lot of customer who pay cash for a home, then want to take a standard mortgage loan out against it right away. You may be able to take cash out, but there are rules to understand.

Cash out refinanceCash back after buying with cash rules

While each lender may be slightly different, here is the common Freddie Mac rules for getting cash back.

Primary Residence and Second Homes Only:

If you’ve owned the home MORE than 6 months.  Normal cash out refinance rules apply.

If you’ve owned the home LESS than 6 months,  then ALL of the following requirements must be met to get the loan:

  • The executed HUD-1 Settlement Statement from the purchase transaction must evidence that no financing secured by the subject property was used to purchase the subject property.
  • The Borrower must be reflected as the owner of the subject property on the preliminary title report and there must be no liens on the subject property.
  • Source of funds used to purchase the subject property must be fully documented.
  • If funds were borrowed to purchase subject property, those funds must be repaid and reflected on the HUD-1 Settlement Statement for the refinance transaction.
  • The amount of the cashout refinance Mortgage must not exceed the sum of the original purchase price and related Closing Costs, Financing Costs and Prepaids/Escrows as documented by the HUD-1 Settlement Statement for the purchase transaction.
  • There must have been no affiliation or relationship between the buyer and seller of the purchase transaction.
  • The cashout refinance Mortgage must comply with the applicable Loan-to-Value ratio limits and all other Freddie Mac requirements


Stop worring about inquiries on your credit report

Inquiries on your credit report

Plan on getting a home loan soon? Worried about qualifying for a mortgage? Need to get pre-approved to buy a home in Minnesota or Wisconsin? Think your credit score will go down?

For 99% of the people, 99% of the time, you don’t need to sweat a lender pulling your credit report!


Minneapolis Weak and bad credit loans down since 2007

Minneapolis, MN:  Not much of a shocker here, but weak, and bad credit loans are down dramatically since the lending correction of 2007.   Part of the reason for the housing collapse was an immense community desire to allow everyone to have a home. Clearly, that experiment failed miserably. Simply put,  not everyone who wants a home loan deserves a loan, regardless of what liberal community activists say.

Mortgage loans written today, have some of the highest “quality” seen in underwriting history. New mortgage regulations pretend to provide important protections to borrowers, but have also lead to a permanent increase in the cost of originating loans to all borrowers, and a dramatic decrease in loans to those with poor credit.

deniedBetween 2007 and 2012

  • Home buyers with credit scores higher than 780 declined by 30 percent
  • Home buyers with credit scores between 620 and 680 declined by 90 percent
  • Home buyer with credit scores below 620 were virtually non-existent

Loans harder to get with no incentive

 

All loans are much more difficult to originate, process, and underwrite.  But small loan amounts, and especially small loan amounts combined with credit challenges require a huge amount of time and effort that loan officers can no longer be compensated correctly to work on.

In the past the loan officer and their company were rewarded and compensated for their extra efforts with problem clients. Today, loan officer walk away from them because there simply is no reward or incentive to help challenging clients.

Simply put, if you worked on a project for 10-hours, and got paid the exact same amount as you do on a 1-hour project, would anyone ever work on the 10-hour projects anymore?  Of course not… The government and community activists may disagree, but Loan Officers and lenders are in this business to make a living, not work for free.