There have been some recent positive changes in the
FNMA and FHLMC higher limit conforming loans that
are in effect at least through December 31, 2008.
**The interest rates and fees for the loans between
$417,000 and $697,500 (in San Diego) are now much
closer to the traditional conforming rates and fees.
**There now is an option to refinance and take cashout
to a maximum of $100,000 (based on loan-to-value
guidelines). Initially, they would not allow this or
even allow the payoff of a second loan through a
refinance on this program.
**Loans can now go to 80% of the value of the property
in certain circumstances. At the beginning, 75% was
the maximum.
You may recall that when the Economic Stimulus Bill
first became law, FNMA and FHLMC had the ability to
purchase loans above the standard $417,000 limit for
a single-family property.
The maximum that went into effect was now $729,750,
based on a county's median home price. In San Diego,
the computation created a limit of $697,500.
The initial guidelines were very conservative. Since
FNMA and FHLMC were now taking on the risk of higher
loan amounts that the private sector used to absorb,
there was a reluctance to open the floodgates.
They have had a couple of months now to assess how well
their guidelines were working. I think it was fair to
say that because their guidelines were so restrictive
that they did not receive as many new loans as they
may have been anticipating.
There is no question that this element of the Stimulus
Bill failed to produce much stimulus.
With these new changes, however, many borrowers are now
going to get the opportunity to purchase homes with
significantly lower interest rates and fees.
Many borrowers are going to be able to refinance from
an adjustable rate loan to a fixed rate loan and have
predictable payments going forward.
Many borrowers will be able to refinance their loans
which were fixed for the first 3 or 5 years and not
have to face the resets of those loans to possible
higher interest rates or have them become adjustable
rates.
Many borrowers will now have a chance to improve the
terms of their loans, which started as jumbo loans,
by refinancing them to terms that are very close to the
traditional conforming rates and fees.
Now is the time to put a strategy in place. If you, (or
anyone you know), has a loan below $697,500 in San Diego,
investigate your possibilities. Rates may be attractive
enough right now to want to take action.
If rates are not quite where they need to be right now,
we can agree on a game plan going forward.
Remember, all we can count on right now is that these
temporary conforming limits will be in place through
the end of the year. There are no guarantees (or even
any indications at this time) that this time limit will
be extended.
We are finally getting to see some of the possibilities
promised by the Stimulus Bill. Don't procrastinate and
miss out on any opportunities that this may present.
Wednesday, May 21, 2008
Wednesday, May 7, 2008
The Top Four Factors In The Mortgage Process
In a survey conducted with mortgage borrowers, there were
four factors that were determined as the most important.
In order of importance, they were:
1. Communication
2. Integrity
3. A Smooth and Complete Process
4. Competitive Products and Rates
Let's take a look at each of these and how they fit
together to help you have the best possible experience
in obtaining your new home loan.
COMMUNICATION
It has often been said that most people can deal with
what needs to be done, if they are only told what the
rules are.
In the mortgage lending field, it is so important to know
what to expect, how the process works and the details of
the specific proposals that you are asked to consider.
Your mortgage originator should be able to tell you
the steps and timing of their application process. From the
initial interview or submission of the loan application,
you should understand the time line for obtaining the
credit report, appraisal, escrow and title paperwork,
verifications of income and asset and for the submission
of the loan file for approval.
From there, you should know the turn-around time on a
submitted file in the lender's underwriting process. If
the file has been put together well and is complete, there
should not be many conditions to be satisfied on the loan
approval prior to the lender preparing the final loan documents.
Once the loan documents are signed and returned
to the lender, you will need to know how long it takes for
the lender to do their final quality control and to authorize
the funding of the loan to complete the transaction.
In addition to these procedural and timing expectations, your
mortgage originator should also be able to explain how their
process ties together with the escrow company, the title
company, your home inspector and termite clearance, and the
appraiser.
They also need to be mindful of the specifics of your contract,
so that they can meet any deadlines that have been agreed
upon by you and the seller. In California, there is a common
clause in the contract that calls for the buyer to
remove their financing contingency within 17 days of the
seller's acceptance. It is imperative that you have a
mortgage originator who gets the paperwork started quickly,
who puts a quality loan package together and gets a loan
approval that has few conditions.
When you are asked to remove your financing contingency and
put your earnest money deposit at risk, you want to be as
sure as you possibly can that there is not something to
prevent you from obtaining your home loan.
And, of course, you need a mortgage originator who can
listen, who can understand what is important to you, who
understands your risk tolerances and time horizons, so that
the loan programs that are presented to you are suitable
matches for your qualifications and needs.
It takes an experienced professional to present options to
you that are clear and thorough. You want someone who can
speak in language that you understand and makes sure that
you are comfortable with the final recommendations. You
will also want to have someone who can point out the positives
of various loan programs, and any negatives as well, so that
you can make an informed decision.
INTEGRITY
There are so many opportunities in the mortgage industry
for a person of low integrity to make a handsome living
and not serve their clients well.
As we saw, above, a person who wants to distort some
timelines, some facts, some attributes of loan programs - and
we haven't yet talked about rates and fees - to draw a
borrower to them has plenty of chances.
The best advice I can give is modeled after Ronald Reagan's
statement of "Trust, but verify".
If a mortgage originator makes representations, find out
how you can get some additional information to support the
statements. You can request a copy of the credit report,
a confirmation from an escrow officer or appraiser that
things were done in the timely manner promised, or a copy
of the final loan approval that outlines all of the conditions
of the loan approval. There are ways that you
can be more assured that your loan request is on track to
be completed as proposed and in the time frame that you
expect.
In my opinion, integrity and communciation go hand-in-hand.
If you have your mortgage originator go through the steps
of the application process and the escrow process and the
details of the various mortgage programs, you will get an
excellent idea of the integrity of the person with whom
you are dealing.
If the mortgage originator is unskilled, they may honestly
answer "I don't know, but I will find out". If they try
to bluff their way through an answer, you will probably be
able to detect irregularities in what they have said, and
that may point to an integrity issue.
If you are trying to understand details and you keep getting
vague answers in return, that may also point to an integrity
issue. It may be an unwillingness to give you the correct
information that is not favorable to their outcome.
If you find that a particular loan program is being touted
that does not seem to be suitable to you, you need to
understand whether that is the only solution that they have.
If there are additional choices, the presentation of an
unsuitable product may point to an integrity issue.
In my opinion, the more transparent the mortgage originator
is regarding how the process works, how the programs work,
how much you are paying in fees and who receives those, and
the willingness to admit if you have better choices else-
where goes a long way to proving their integrity.
Be sure to ask around about the person you are working with,
or to ask for referrals and testimonials from happy clients
and real estate agents. A person who has been originating
loans for a long time, and who has happy repeat and referral
clients says a lot about them being a "straight shooter".
A SMOOTH AND COMPLETE PROCESS
We've already alluded to this, especially in the Communication
section, but a skilled mortgage originator knows how to put a
package together and how to anticipate foreseeable problems.
It all starts with the loan application and collection of
supporting paperwork. I still prefer to interview my clients
whenever possible, and meeting them in person is the best
way to get things started.
In an efficient one hour meeting we can go through the data
gathering and really probe as to what is important to my client.
Knowing this information allows me to brainstorm
solutions to their individual situation and to strategize
about making their home ownership dreams come true.
I have developed systems that allow me to make a comprehen-
sive request for supporting paperwork that fits their
profile. It could be paystubs, W-2 forms, tax returns,
bank statements, brokerage statements, retirement account
information, divorce or bankruptcy paperwork, or explanatory
letters regarding special situations. Getting all of this
information up-front, rather than going back repeatedly to
the borrower for yet another piece of paper, is integral
to a smooth process.
There are situations that arise that are not foreseeable,
and we all need to make allowances for that possibility.
This has been even more true in the last year as the
mortgage industry tries to get back to more conservative
underwriting of loan files. However, there are many
obstacles that need to be recognized and discussed and
strategized over.
A smooth process is also a result of knowledge, experience,
skill, communication and integrity.
COMPETITIVE PRODUCTS AND RATES
Interestingly, this is not at the top of the list.
I think it is interesting because so many borrowers call
up for information and the only thing that they are interested
in is "What are your rates?"
Accepting a direct answer to that question is naive on the
borrower's part. There are so many factors that go into
determining the right program for a borrower, and the
interest rate and fees to be quoted, that the information
provided is not appropriate or possibly a deliberate lie.
In order to do a good job for our clients, and to treat
them properly, we need to remember an old adage: Prescription
without diagnosis is malpractice. Simply put, if we don't
ask the proper questions and just offer a "one size fits all"
solution, we are not doing the best thing for our clients.
We should know if the new property is going to be their
home and how long they intend to own it.
Are they salaried or self-employed?
Do they qualify by proving all of their income, or do we need
to consider stated-income alternatives?
What are the credit scores?
What is the purchase price, how much down payment, and is any
of it coming from a gift?
In addition to the new housing debts, how much do they owe in
other obligations?
These are some of the questions that are important to know
the answers to so that a proper loan program and accurate
interest rate and fee quote can be presented.
I know that I have lost the opportunity to help a lot of borrowers
because when they shop rates and fees only, the
person that tells them the lowest numbers will get the
opportunity to do the business.
The mortgage originators who deliberately deceive a borrower
to get the loan application process started with them know
that there will be a point where the borrower will continue
with them despite what the final terms are. And the final
terms are almost never the low quoted rates produced at the
beginning.
The pain of starting a new application process with someone
new and the time that it takes will jeopardize most purchase
transactions. And the deceptive originators know this. And
the borrowers usually fold. And the borrowers develop the
thought that all mortgage originators are the same, so what
difference does it make?
Nothing could be further from the truth.
The survey answers provide a solid basis for anyone shopping
for a new home loan.
The progams and rates need to be competitive, but they will
rarely be the lowest. Getting the lowest rates is more good
fortune that by scientific design.
If the process is not smooth and complete, it will leave you
with a bad feeling- possibly forever.
If you are working with someone without integrity, there is
no basis for anything else working well.
And if communication is poor or non-existent, you can expect
nothing but problems in all areas of the transaction.
Getting a home loan is a big decision. You have a lot to
lose if you don't try to maximize these four factors when
you decide with whom you want to work.
four factors that were determined as the most important.
In order of importance, they were:
1. Communication
2. Integrity
3. A Smooth and Complete Process
4. Competitive Products and Rates
Let's take a look at each of these and how they fit
together to help you have the best possible experience
in obtaining your new home loan.
COMMUNICATION
It has often been said that most people can deal with
what needs to be done, if they are only told what the
rules are.
In the mortgage lending field, it is so important to know
what to expect, how the process works and the details of
the specific proposals that you are asked to consider.
Your mortgage originator should be able to tell you
the steps and timing of their application process. From the
initial interview or submission of the loan application,
you should understand the time line for obtaining the
credit report, appraisal, escrow and title paperwork,
verifications of income and asset and for the submission
of the loan file for approval.
From there, you should know the turn-around time on a
submitted file in the lender's underwriting process. If
the file has been put together well and is complete, there
should not be many conditions to be satisfied on the loan
approval prior to the lender preparing the final loan documents.
Once the loan documents are signed and returned
to the lender, you will need to know how long it takes for
the lender to do their final quality control and to authorize
the funding of the loan to complete the transaction.
In addition to these procedural and timing expectations, your
mortgage originator should also be able to explain how their
process ties together with the escrow company, the title
company, your home inspector and termite clearance, and the
appraiser.
They also need to be mindful of the specifics of your contract,
so that they can meet any deadlines that have been agreed
upon by you and the seller. In California, there is a common
clause in the contract that calls for the buyer to
remove their financing contingency within 17 days of the
seller's acceptance. It is imperative that you have a
mortgage originator who gets the paperwork started quickly,
who puts a quality loan package together and gets a loan
approval that has few conditions.
When you are asked to remove your financing contingency and
put your earnest money deposit at risk, you want to be as
sure as you possibly can that there is not something to
prevent you from obtaining your home loan.
And, of course, you need a mortgage originator who can
listen, who can understand what is important to you, who
understands your risk tolerances and time horizons, so that
the loan programs that are presented to you are suitable
matches for your qualifications and needs.
It takes an experienced professional to present options to
you that are clear and thorough. You want someone who can
speak in language that you understand and makes sure that
you are comfortable with the final recommendations. You
will also want to have someone who can point out the positives
of various loan programs, and any negatives as well, so that
you can make an informed decision.
INTEGRITY
There are so many opportunities in the mortgage industry
for a person of low integrity to make a handsome living
and not serve their clients well.
As we saw, above, a person who wants to distort some
timelines, some facts, some attributes of loan programs - and
we haven't yet talked about rates and fees - to draw a
borrower to them has plenty of chances.
The best advice I can give is modeled after Ronald Reagan's
statement of "Trust, but verify".
If a mortgage originator makes representations, find out
how you can get some additional information to support the
statements. You can request a copy of the credit report,
a confirmation from an escrow officer or appraiser that
things were done in the timely manner promised, or a copy
of the final loan approval that outlines all of the conditions
of the loan approval. There are ways that you
can be more assured that your loan request is on track to
be completed as proposed and in the time frame that you
expect.
In my opinion, integrity and communciation go hand-in-hand.
If you have your mortgage originator go through the steps
of the application process and the escrow process and the
details of the various mortgage programs, you will get an
excellent idea of the integrity of the person with whom
you are dealing.
If the mortgage originator is unskilled, they may honestly
answer "I don't know, but I will find out". If they try
to bluff their way through an answer, you will probably be
able to detect irregularities in what they have said, and
that may point to an integrity issue.
If you are trying to understand details and you keep getting
vague answers in return, that may also point to an integrity
issue. It may be an unwillingness to give you the correct
information that is not favorable to their outcome.
If you find that a particular loan program is being touted
that does not seem to be suitable to you, you need to
understand whether that is the only solution that they have.
If there are additional choices, the presentation of an
unsuitable product may point to an integrity issue.
In my opinion, the more transparent the mortgage originator
is regarding how the process works, how the programs work,
how much you are paying in fees and who receives those, and
the willingness to admit if you have better choices else-
where goes a long way to proving their integrity.
Be sure to ask around about the person you are working with,
or to ask for referrals and testimonials from happy clients
and real estate agents. A person who has been originating
loans for a long time, and who has happy repeat and referral
clients says a lot about them being a "straight shooter".
A SMOOTH AND COMPLETE PROCESS
We've already alluded to this, especially in the Communication
section, but a skilled mortgage originator knows how to put a
package together and how to anticipate foreseeable problems.
It all starts with the loan application and collection of
supporting paperwork. I still prefer to interview my clients
whenever possible, and meeting them in person is the best
way to get things started.
In an efficient one hour meeting we can go through the data
gathering and really probe as to what is important to my client.
Knowing this information allows me to brainstorm
solutions to their individual situation and to strategize
about making their home ownership dreams come true.
I have developed systems that allow me to make a comprehen-
sive request for supporting paperwork that fits their
profile. It could be paystubs, W-2 forms, tax returns,
bank statements, brokerage statements, retirement account
information, divorce or bankruptcy paperwork, or explanatory
letters regarding special situations. Getting all of this
information up-front, rather than going back repeatedly to
the borrower for yet another piece of paper, is integral
to a smooth process.
There are situations that arise that are not foreseeable,
and we all need to make allowances for that possibility.
This has been even more true in the last year as the
mortgage industry tries to get back to more conservative
underwriting of loan files. However, there are many
obstacles that need to be recognized and discussed and
strategized over.
A smooth process is also a result of knowledge, experience,
skill, communication and integrity.
COMPETITIVE PRODUCTS AND RATES
Interestingly, this is not at the top of the list.
I think it is interesting because so many borrowers call
up for information and the only thing that they are interested
in is "What are your rates?"
Accepting a direct answer to that question is naive on the
borrower's part. There are so many factors that go into
determining the right program for a borrower, and the
interest rate and fees to be quoted, that the information
provided is not appropriate or possibly a deliberate lie.
In order to do a good job for our clients, and to treat
them properly, we need to remember an old adage: Prescription
without diagnosis is malpractice. Simply put, if we don't
ask the proper questions and just offer a "one size fits all"
solution, we are not doing the best thing for our clients.
We should know if the new property is going to be their
home and how long they intend to own it.
Are they salaried or self-employed?
Do they qualify by proving all of their income, or do we need
to consider stated-income alternatives?
What are the credit scores?
What is the purchase price, how much down payment, and is any
of it coming from a gift?
In addition to the new housing debts, how much do they owe in
other obligations?
These are some of the questions that are important to know
the answers to so that a proper loan program and accurate
interest rate and fee quote can be presented.
I know that I have lost the opportunity to help a lot of borrowers
because when they shop rates and fees only, the
person that tells them the lowest numbers will get the
opportunity to do the business.
The mortgage originators who deliberately deceive a borrower
to get the loan application process started with them know
that there will be a point where the borrower will continue
with them despite what the final terms are. And the final
terms are almost never the low quoted rates produced at the
beginning.
The pain of starting a new application process with someone
new and the time that it takes will jeopardize most purchase
transactions. And the deceptive originators know this. And
the borrowers usually fold. And the borrowers develop the
thought that all mortgage originators are the same, so what
difference does it make?
Nothing could be further from the truth.
The survey answers provide a solid basis for anyone shopping
for a new home loan.
The progams and rates need to be competitive, but they will
rarely be the lowest. Getting the lowest rates is more good
fortune that by scientific design.
If the process is not smooth and complete, it will leave you
with a bad feeling- possibly forever.
If you are working with someone without integrity, there is
no basis for anything else working well.
And if communication is poor or non-existent, you can expect
nothing but problems in all areas of the transaction.
Getting a home loan is a big decision. You have a lot to
lose if you don't try to maximize these four factors when
you decide with whom you want to work.
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