Will all Investors "Tighten" FHA Guidelines?

ANYONE LOOKING FOR A NEW OR REFINANCE FHA INSURED MORTGAGE NEEDS TO STOP AND READ THIS. BELOW YOU WILL FIND A MEMO POSTED BY FLAGSTAR BANK WITH REGARDS TO M A J O R CHANGES WITH FHA.

 

I WANT TO BE CRYSTAL CLEAR. THESE ARE NOT CHANGES TO FHA GUIDELINES THESE ARE CHANGES TO FLAGSTAR BANK THAT EFFECTS BROKERS AND WAREHOUSE LINES. I ALSO HAVE A VERY AN ADDITIONAL MEMO FROM HOMETOWN MORTGAGE.

I am not chicken little and the last I looked the sky is not falling. I am not trying to create a stir and pass bad information. As a professional mortgage broker I feel that it is my responsibility to keep my business partners, potential partners, clients, and prospects away of major changes that can have a major impact with your mortgage structure. Along with posting here I will also send out a email to my data base to spread the word.

I do not have any information that any other investors will change policy but if this takes the same road that mortgage insurance is taking I highly recommend to all parties to make some purchase or refinance mortgage decisions immediately.  

Thanks for reading. Your comments are greatly appreciated.

Tony Grego - Sagamore Home Mortgage, Indiana Mortgage Broker

"SUBJECT AND EFFECTIVE DATE
Effective Monday, February 18, 2008, Flagstar is instituting several updates to our FHA credit and appraisal standards, as well as instituting new credit score-based pricing improvements and adjustments.
FHA CREDIT UPDATES
The changes are as follows:
Ø All FHA loans will now require a minimum credit score of 550.
Ø Cash-out refinances loans over 85% LTV will now require a minimum 580 credit score, regardless of the Total Scorecard response.
Ø Cash-out refinances for manufactured home loans over 85% LTV will now require an Accept or Approve response from Total Scorecard in addition to the minimum 580 credit score introduced above.
Ø Borrowers currently in Chapter 13 bankruptcy will be limited to a maximum loan-to-value for cash-out refinance transactions of 85%, regardless of the Total Scorecard response.
Ø Borrowers with a previous Chapter 7 bankruptcy who have late payments after the bankruptcy has been discharged will be limited to a maximum loan-to-value for cash-out refinance transactions of 85%, unless an Accept or Approve response is received from the Total Scorecard.
Ø Borrowers with a previous Chapter 7 bankruptcy will not be eligible for FHA financing if the bankruptcy was discharged within the past two years, unless an Accept or Approve response is received from the Total Scorecard.
Ø Borrowers with a previous foreclosure will not be eligible for FHA financing if the foreclosure occurred within the past three years, unless an Accept or Approve response is received from the Total Scorecard.
FHA APPRAISAL UPDATES
Appraisals for all manufactured home loans must use one of Flagstar’s approved national appraisal vendors. Refer to Doc. #4903 – National Appraisal Vendors for a current list.
SUBMISSION/CLOSING POLICY FOR LOANS ORIGINATED UNDER PRIOR GUIDELINES
Loans originated outside of these guidelines MUST be submitted to underwriting no later than Friday, February 22, 2008, and all such loans must be closed and delivered to Flagstar by Monday, March 31, 2008. Correspondent loans do not need to be purchased by March 31st, but they do need to be received by that date.
FHA PRICING CHANGES
New pricing adjustments will be as follows: Credit Score Range Pricing Adjustment
550-579 -1.000
580-600 -0.500
601-659 No adjustment
660-679 +0.125
680+ +0.250
These additional pricing adjustments will not apply to Flagstar to Flagstar streamlined refinances as credit is not run on such loans. If credit is run, underwriters will change credit the score to 999 so no credit-based pricing adjustments are applied.
WAREHOUSE LENDING GUIDELINES
Effective March 8, 2008, Flagstar Bank will not warehouse FHA loans being sold to other investors if the credit score on the loan is below 580, and we will begin imposing a 5% haircut for all DE Delegated FHA loans.
UPDATE TO FHA DE DELEGATED POLICY
All loans not insured by FHA within 60 days of disbursement will be subject to repurchase by the originating lender.
PRECEDENCE OF THIS MEMO
At time of this memo’s release, all necessary changes to fully implement these product updates may not have been completed within Flagstar’s systems. However, this memo takes precedence over system issues. Loans registered and/or locked in contravention of these new guidelines will be deemed invalid.
CONCLUSION
The FHA program descriptions will be revised over the next day or so, until such time as revised guidelines are posted, this memo will supercede any published guidelines to the contrary. For information about other Flagstar products, please refer to the Seller’s Guide available at wholesale.flagstar.com .
Thank you for your continued business."

Indianapolis man found guilty of securities fraud

Folks, do not let this happen to you.

Jason Keigley of Indianapolis was found guilty of swindling money from seniors through a fraudulent investment and mortgage scheme. While working for a mortgage company he also stated his own mortgage company. Big red light here. How would you know? When dealing with a mortgage broker you can check them out with the Secretary of State.

The SOS found that Keigley convinced a Hendricks County couple to invest in his company which was an unregistered security. He told the couple that their was an investment and was in an interest-bearing account. He also brokered a reverse mortgage loan. Keigley could not account for any of the missing funds. The victims home was also hit with a foreclosure due to Keigley's failure to fulfill the obligations of the reverse mortgage.

During the trial (BTW, this "brain surgeon" decided to defend himself), he told the jury that he knows in his heart that he is innocent. "I didn't do anything wrong." I guess he also quoted verses from the Book of Job, insinuating that he sees himself as Job or a man of God. Now the prosecutor (this is my favorite part of the story) countered Keigley's argument with another Bible verse: Matthew 7:15. "Watch out for false prophets. They come to you in sheep's clothing, but inwardly they are ferocious wolves." "He is a sheep in wolves clothing."This is better than an episode  of Law and Order.

Now Keigley did such a great job of defending himself the jury deliberated for all of two hours before finding him guilty. Now he has not been sentenced yet since "Job" here has to wait until he finds out what is happening with other charges in Marion County (Indianapolis).

Consumers and real estate alike. If it sounds to good to be true it probably is. With the tools available you can check out people with just a few clicks. Try it. Go to Google.com right now and type in my name Tony Grego. In fact, click here. Google list 10 sites per page. I am filled with 9 and the other is a cop.

Now I am sure that there is a whole bunch more to this story but the facts are you are the consumer and remember you are in charge. This is one example of things that can happen in your hometown. When getting a new mortgage or refinancing your current mortgage get a professional opinion. With me I never charge a application fee and I am willing to look to see if I can help.

Good luck and be careful.
Tony Grego - Indiana Mortgage Broker
  

 

 

Quote of the Day:
There is no worse lie than a truth misunderstood by those who hear it.
--William James

Meet the Worlds Strongest Man

There was a time when I opt-out of about every email I ever did get. Which is a slap in my face for what I do when soliciting business. Today I only opt out and spam the folks from Nigeria and such about all the money I won. Ya, it has cost me a fortune (right). This has resulted in many more emails. It reminds me going to garage sales. Plenty of stuff and very few gems. Today I found this gem. Now it is not going to sell you a house. I am not going to sell a mortgage. It is has nothing to do with mortgage rates, bad credit, FHA, VA, refinancing, mortgage brokers, etc.

There are inspirational stories that make you smile. And then there are those that leave you in awe. The story of the World’s Strongest Dad is of awe-inspiring variety.

Dick Hoyt is one half of Team Hoyt. The other half is his son, Rick. Rick has been disabled from birth. He can’t walk or talk. In 1972, a group of Tufts University engineers set out to help Rick. They built a computer he could use to write out his thoughts. (You’ll see him typing with it in the beginning of the video.)

His parents learned that Rick loved sports. Rick told his father he wanted to enter a five-mile benefit run. Dick pushed his wheelchair-bound son in the race. Soon they were competing in marathons, triathlons and even the Iron

man. To date, Team Hoyt has run, biked, and swum in 958 events.

 

I hope you get as much out of this as I did.

Tony Grego - Father of two, Indiana Mortgage Broker by day

Meet the Worlds Strongest Man

There was a time when I opt-out of about every email I ever did get. Which is a slap in my face for what I do when soliciting business. Today I only opt out and spam the folks from Nigeria and such about all the money I won. Ya, it has cost me a fortune (right). This has resulted in many more emails. It reminds me going to garage sales. Plenty of stuff and very few gems. Today I found this gem. Now it is not going to sell you a house. I am not going to sell a mortgage. It is has nothing to do with mortgage rates, bad credit, FHA, VA, refinancing, mortgage brokers, etc.

There are inspirational stories that make you smile. And then there are those that leave you in awe. The story of the World’s Strongest Dad is of awe-inspiring variety.

Dick Hoyt is one half of Team Hoyt. The other half is his son, Rick. Rick has been disabled from birth. He can’t walk or talk. In 1972, a group of Tufts University engineers set out to help Rick. They built a computer he could use to write out his thoughts. (You’ll see him typing with it in the beginning of the video.)

His parents learned that Rick loved sports. Rick told his father he wanted to enter a five-mile benefit run. Dick pushed his wheelchair-bound son in the race. Soon they were competing in marathons, triathlons and even the Iron

man. To date, Team Hoyt has run, biked, and swum in 958 events.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I hope you get as much out of this as I did.

Tony Grego - Father of two, Indiana Mortgage Broker by day

Ask the Experts - So What do you want to see?

OK, since I am a blogging veteran (31 days, and BTW only 25 days to spring) it is time to put this baby in second gear. Later today I have a "net head" coming over to review my web site. Currently it is a "cookie cutter" out of the box site (if you need some help on a referral email me. For $9.95 a month it is the best deal going). YES, I love giving away referrals.

While I prefer to give things away this time I need some help. Actually help me to help you. If I can not provide benefit I would not expect you to visit my site/blog/office/family/etc. Please answer these questions. I hope to get some insight to how I can better serve my business partners, my clients, and my prospects:

• Why did you click on this blog?
  
• Many folks use plenty of pictures on blogs. Some plain text. What do prefer?
  
• If a video was on a blog would you watch it? 
  
• What would you like to get from reading a blog?
  
• Why would you click on a Mortgage Broker's Web Site?
  
• What would you like to find when you click on a Mortgage Broker's Web Site?
  
• What do you currently hate about clicking on a Mortgage Broker's Web Site?
  
• If your an agent would you like to be able to put your listings on a Mortgage Broker's Web Site?
  
• If your an home/commercial appraiser, home inspector, home stager, title company, field notary, etc. would you want to see a free listing of your services on a Mortgage Brokers Web Site?
  
• Would you like to see a live video feed on a Mortgage Broker's Web Site?
  
• Would you like to see video's about the loan process on a Mortgage Broker's Web Site?
  
• Would do you think about a "live video" of a first time home buyers seminar on a Mortgage Broker's Web Site?
  

On a scale of 1 - 10 with 10 being the best please tell me how you feel about the following items I see on most Mortgage Broker's Web Site

• Rates
  
• Application
  
• 3rd party advertisements (agents and related services)
  
• Lots of different mortgage calculators
  
• News Feeds
  
• Meet my Team
  
• Plenty of small print?
  

Folks, I would hope that professionals and consumers alike answer these questions. After the thread dies (I may post a few times) I will post the results and to be sure you do not miss them will send a personal email.

Thanks in advance for your help

Tony Grego - Indiana Mortgage Broker

 

Quote of the Day:
Commerce is the great civilizer. We exchange ideas when we exchange fabrics.
--Robert Green Ingersoll

Indiana Investment Watch - Investor Basic Training

We all work for the day when we can buy a home. After months, years, and in some cases, tens of years Happy Hoosier Families have saved for that day. So what happens? You figure out you need two things. One is a good real estate agent that listens and understands your needs and unless you save enough money you will also need a mortgage broker that does the same. Now with real estate you have agents and brokers and with mortgages you have brokers and lenders. While this is going to make a great post some day (but not today) you need to get some direction on what to look for.

Now I will let one of my colleagues address the real estate agent/broker thing. Let me dive into the Broker/Lender thing. Actually, since I know many of you are going out looking to buy homes and obtain a mortgage this weekend let me do the "readers digest" part for today. While everyone will tell you what they are going to accomplish not many will give you a copy of this list.

Todd Rokita, Indiana Secretary of State has posted on a this web site Top 10 Red Flags for Mortgage Brokers. Like anything it is a guide (and a pretty good one) With a mortgage it is not what you know it is what you don't know.

Many of us Hoosiers have followed similar guidelines in the past. Go to show why, for the most part, we will be OK with the Indiana Real Estate Crisis. But still you need to be very aware when shopping for a mortgage.

 

Top 10 Red Flag List for Mortgage Brokers

1. Shifting the closing date. The borrower's mortgage closing date can shift if the borrower does not have a written commitment from the lender. Homebuyers can find themselves in a default situation if they quit paying their existing mortgage based on an oral promise that the new loan will be closing quickly.
2. Offer a "free" refinance. Sometimes mortgage brokers will promise "free" refinances of a mortgage in the event mortgage rates drop further from the borrower's present mortgage interest rate. Every real estate closing has costs. While a mortgage broker may agree not to charge a fee, other closing costs may still arise. If such an offer is made, the borrower should get the offer signed and dated in writing.
3. Total reliance on the loan broker. The lender and the loan broker play different roles in the mortgage transaction. They are usually different, unrelated business entities. The borrower should know the lender's identity and receive a copy of the "locked loan rate commitment" from the lender in writing.
4. "Pre-approved" and "pre-qualified." These are marketing terms, not legal ones. The only legally binding mortgage loan commitment must be in writing from the lender and must contain specific terms, such as the mortgage loan dollar amount, the mortgage interest rate and the date the mortgage loan commitment expires.
5. Offer for a "free" real estate appraisal. Mortgage brokers may offer a "free" real estate appraisal under the condition that the borrower closes on a mortgage loan through their company. Borrowers should be prepared to pay for the appraisal if they decide to take their loan business elsewhere.
6. Falsified income. An unscrupulous loan broker may encourage the borrowers to falsify their income on the mortgage application. This is fraud. A buyer should never present false information. If buyers can't document their sources of income, they may be trying to purchase a property that is beyond their means.
7. Equity Stripping. This practice occurs when unscrupulous loan brokers may convince the borrower to continually refinance. All of the closing costs can be included in the total amount borrowed, resulting in the loan broker receiving a new commission and additional fees for closing each new loan.
8. Over-appraised residential real estate. This occurs when an unscrupulous loan broker, real estate appraiser and/or real estate agent collude to get a property appraised at a value grossly above its market value.
9. Undisclosed pre-payment penalties, balloon payments and rate and terms switched at closing. Loan terms are required to be disclosed early in the process. However, terms do change throughout the process. It is up to the borrower to stay on top of term changes that the borrower does not find acceptable.
10. Post-closing squeeze for more fees. The HUD-1 Settlement Statement must list all fees paid at the closing table or paid outside of closing. Anyone who calls the borrower after closing and tries to collect additional undisclosed fees is acting illegally. The borrower should also contact the Secretary of State's office to report such attempts.

!!!!!URGENT!!!!!URGENT!!!!!URGENT!!!!!URGENT!!!!!!URGENT!!!!!URGENT!!!!!URGENT!!!!!URGENT!!!!!

NO PICTURES, NO GRAPHICS, NO WITTY QUOTES, JUST AN URGENT CALL TO ACTION................................

 

OK, I really need am trying to make a point. You know we have been talking for a couple weeks taking place with PMI in March. The telephone call just came in. Investors are jumping the gun and have issued Monday as the cutoff for deal submissions. While I have heard from just one this is always the tip of the iceberg. Here are the Freddie Mac details with new fees and LTV ratio limits:

• FREDDIE MAC ANNOUNCED THIS WEEK THAT IT'S EXPANDING ITS USE OF RISK-BASED PRICING AND INCREASING FEES
  
• UNLESS YOU ARE AT LEAST A 700 MID CREDIT SCORE YOU WILL NOT QUALIFY FOR A LOAN-TO-VALUE OVER 97%
  
• IF YOUR MID-SCORE IS BELOW A 740 ON OR AFTER JUNE 1ST, A NEW DELIVERY FEE OF 30 BASIS POINTS WILL BE ADDED IF YOUR LOAN-TO-VALUE IS OVER 80%
  
• "ALT 97" MORTGAGES WITH "AFFORADABLE SECONDS." ARE NO LONGER AN ACCEPTABLE SOURCE OF BORROWER FUNDS
  
• NEW RULES WILL REQUIRE HIGHER DOWN PAYMENTS IF YOUR MARKET IS IDENTIFIED AS "DECLINING MARKET."
  
• FIRST-TIME HOME BUYERS APLYING FOR A LOAN THROUGH FREDDIE MAC'S "HOME POSSIBLE" PROGRAM WILL BE REQUIRED TO TAKE HOMEOWNER EDUCATION CLASSES, ALL HOME POSSIBLE MORTGAGES WITH A LTV OR TOTAL LOAN-TO-VALUE (TLTV) RATIO GREATER THAN 97 PERCENT MUST HAVE AN INDICATOR SCORE OF 700 OR BETTER.
  
• PMI GROUP INC. HAS ANNOUNCED THAT AS OF MARCH 1, IT WILL STOP ISURING "ABOVE 97" LOANS IN WHICH BORROWERS MAKDE DOWN PAYMNETS OF LESS THAN 3 PERCENT AND COMPETITOR MGIC INVESTMENT CORP. IS DISCONTINUING COVERAGE OF LOANS WITH DOWN PAYMENTS OF LESS THAN 5 PERCENT IN 30 MARKETS WHERE PRICES ARE FALLING.
  
• MORTGAGE INSURANCE WILL BE ELIMINATED FOR ALL EXPANDED APPROVAL LEVELS OVER 80%
  

We as real estate agents and mortgage brokers must react now! This is our call to action. The simple facts are by this time next week, thousands of potential homebuyers WILL NOT QUALIFY! This applies to marginal, good, and great credit.

If your in Indiana and need help. Call or email me. I have cleared my schedule in efforts to help. We are going to run out of time before we run out of people we need to help.

 

Sorry, Blogger doesn't support file uploads

Please:

1) Change to a different blog provider, then;

2) Save the draft

3) Change to HTML view, then back to the view you were on.

Your files will be ready to upload then.

Happy Selling!
Tony Grego - Indiana Mortgage Broker

 

 

Quote of the Day:
At the working man's house hunger looks in but dares not enter.
--Benjamin Franklin

Mortgages that Matter the Most

Tony Grego here! Proud founder of "Mortgages that Matter the Most" This new group can be found at MORTGAGE MATTERS.  The intent of this group is to help folks get a better understanding of mortgages along with the challenges many of us are facing today.

• Are you a  consumer in the market ready to buy or refinance your home? This is the place to learn everything you need.
  
• Need a to talk to a professional real estate agent, mortgage broker, home stager, appraiser, home inspector, title company or anyone related to our  profession? You will soon find them here.
  
• Having problems making your mortgage payments? I will post articles that will help.
  
• Moving to a new area? Post a question and lets get you the information you need.
  
• What about loan programs and assistance programs? We'll post them also.
  

Folks that know me will tell you that I am here to help. I want to build this group to help all of us. Working together we will all prosper while Helping folks with Mortgages that Matter the Most. Please come back to visit and post often.

 

Thanks for reading my blog.

Tony Grego - Indiana Mortgage Broker

Mortgages that Matter the Most

Tony Grego here! Proud founder of "Mortgages that Matter the Most" This new group can be found at MORTGAGE MATTERS.  The intent of this group is to help folks get a better understanding of mortgages along with the challenges many of us are facing today.

• Are you a  consumer in the market ready to buy or refinance your home? This is the place to learn everything you need.
  
• Need a to talk to a professional real estate agent, mortgage broker, home stager, appraiser, home inspector, title company or anyone related to our  profession? You will soon find them here.
  
• Having problems making your mortgage payments? I will post articles that will help.
  
• Moving to a new area? Post a question and lets get you the information you need.
  
• What about loan programs and assistance programs? We'll post them also.
  

Folks that know me will tell you that I am here to help. I want to build this group to help all of us. Working together we will all prosper while Helping folks with Mortgages that Matter the Most. Please come back to visit and post often.

Helping Hoosier Households

I am the proud founder of "Helping Hoosier Households" This new group can be found at HELPING HOOSIERS.  Hoosiers helping Hoosiers is what this group is all about.

• Are you a  consumer in the market ready to buy or refinance your home? This is the place to learn everything you need.
  
• Need a to talk to a professional real estate agent, mortgage broker, home stager, appraiser, home inspector, title company or anyone related to our profession? You will soon find them here.
  
• Having problems making your mortgage payments? I will post articles that will help.
  
• Moving to Indiana? Post a question and lets get you the information you need.
  
• What about loan programs and assistance programs for Hoosiers? We'll post them also.

Folks that know me will tell you that I am here to help. I want to build this group to help all of us. Working together we will all prosper while Helping Hoosiers with their Households.

Please come back to visit and post often.

 

Happy Selling!
Tony Grego - Indiana Mortgage Broker

 

 

 

Quote of the Day:
At times the whole world seems to be in conspiracy to importune you with emphatic trifles.
--Ralph Waldo Emerson

Mortgage Basics - So, what is a Reverse Mortgage?

So, the bank is going to pay me instead of me paying the bank? In one word, YEP! This is a type of loan were your home equity is turned into cash.

If your a "boomer" that may be short on savings to retire and your mortgage payments are sucking you dry you might have another option. A Reverse Mortgage.

I am not saying that this is the answer for you. As in every mortgage we have advantages and disadvantages. But lets take a look at the process.

A reverse mortgage is exactly that. Instead of a monthly mortgage payment the bank pays you. Now of course you have to qualify. You didn't think the bank was just going to give you money did you? To qualify here are a couple of things:

• You need to be 62 or older. In the case of two people on the mortgage, the age is based on the youngest of the two.
  
• You can get a lump sum of cash.
  
• You can get monthly payments or a line of credit that you can tap into when you need it.
  
• The payment does not usually affect social security or Medicare but we need to check.
  
• Your credit score DOES NOT matter with a reverse mortgage.
  
• You do not have to have assets to get a reverse mortgage.
  
• You will still be responsible for property taxes, homeowners insurance and any repairs on the home.
  
• The amount you can borrow depends on your are, the current interest rate, and the appraised value of your home.
  
• The rule of thumb here is the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
  

Now who can benefit the most with a reverse mortgage? The older you are, the more likely you are to benefit from a reverse mortgage to AARP. First, you'll probably have built up more equity in your home. And since lenders calculate the payout based on your age and your expected lifespan. Reverse mortgage are most beneficial if you own your home or have a small amount left to pay on the original mortgage that can be paid off at closing with the proceeds for from the reverse loan, according to HUD. Also reverse mortgages are also best for people who want to remain in their home for the long-term. If you're looking to move in two or three years, a reverse mortgage may not be right for you.

Weigh the Downsides

Like all mortgages there will be fees (don't get me started with the no-closing costs stuff). There is an origination fee, appraisal fee, title fee, escrow fee, recording fee, a monthly servicing fee and an ongoing mortgage insurance premium. The fees will range between 3 - 5%. They can be included in your loan balance, if there is enough equity available.

Remember - a reverse mortgage is a loan with rising debt and falling equity. So, if you get a lot of cash over the years, there will be little, if any, left over for your heirs according to AARP.

Do your Homework. Call or email me with questions

While reverse mortgages are only about one percent of the mortgage market. They are on the rise. In fact, not a day goes by when I do not get a email from a "new company" pushing reverse mortgages. This only tells me that a bunch of people are going to make bad decisions and get taken advantage. Please don't let this happen to you. While there are plenty of good brokers and bankers that can help. Do not get scammed. The Reverse Mortgage market is ripe for things like this to happen.

Now there are a lot of nuance you need to look at before doing this. In fact, you are required to get counseling before buying this product. These can be done on line and I do have a list if you need on. Also be careful of lenders that will try to get you to buy different products like long term care insurance or annuities.

This is a great product for the right client and the right situation. If you have any questions contact me and lets see if it is the right product for your mortgage needs.

Happy Selling! (I always sign this way)
Tony Grego - Indiana Mortgage Broker

 

Quote of the Day:
If it doesn't matter who wins, then how come they keep score?
--Vincent Lombardi

WOW, It is 5:34! - A Lesson in Time Management

Don't know about everyone reading this but at the beginning of the year I had to sit down and do some real soul searching. While I have been in the finance business for over 27 years I have only been involved with mortgages for the last 2 1/2 (yea, I know, great timing).

What did I discover?

1. I like being a mortgage broker
2. I like to help folks get their 1st mortgage along with investor and second homes
3. I like to help refinance folks to save money
4. I like helping people
5. I like making a difference
6. I like spending more time with my family
7. I have lousy time management skills.

Let's get into that last on. If I had a day like this in December you would not be reading this blog. Now it is not because I did not sign up until January 23rd. It is because I would have "sold myself" why I did not need to write it.

The best thing I have learned from joining AR is discipline. Committing to something and doing it. Every morning I get up (try to beat the boys out of bed). Go to "MY" room (you know the one were you go and want to be alone). Write my daily affirmations and put a game plan together for the day. Part of today's game plan was to write a blog. Now while I am not doing the subject I originally planned, I just do not have the time to do it justice, I am still writing a blog.

I do this to show commitment to my business, my family, and my self. While 2008 is going to be great. It is, really! I just need to attacked it with a whole different view. Just throwing in my two cents.

Now this is begging the question. Why are you in the business? Now you do not have to answer here. Just, as they say, food for thought.

Happy Selling!

Tony Grego - Indiana Mortgage Broker

 

 

Quote of the Day:
Every man alone is sincere. At the entrance of a second person, hypocrisy begins.
--Ralph Waldo Emerson

Step Six - Close on Your Mortgage

 

It is finally here. The big day. We get the CTC, Clear to Close. So were's the money? Here's how it goes

1. Everyone takes a deep breath. It's downhill from here.
2. The Investor turns the package to their closing department. The job here is to dot all of the "i's" and cross all the "t's." Time frame is investor specific. Some the same day and some others can be up to 3-4 days after CTC is issued.
3. Title insurance, homeowners insurance, flood insurance (if needed) along with the rest of the insurances and anything else they can come up with are put in the investors name (wow, people  still think that there are still "no closing cost mortgages.")
4. Balance of documents are reviewed and in the case of Indiana the "package" is sent to the title office.
5. Title office prepares the HUD-1 (fancy name for a settlement statement) and forwards to the mortgage broker for review.
6. Mortgage broker approves, notifies the title company and a final is sent to the investor for final approval.
7. Clients are scheduled for close along with providing a list of items needed at close including a CASHIERS CHECK (for the record, do not bring cash or a personal check. We done everything right so far. Don't mess it up now) for down payment and closing cost.
8. The clients then meet at the closing office or mobile depending on the situation. It could be the clients home, McDonald's, highway rest stops, etc.
9. Everyone signs all required documents. OK again with the oblivious, if everyone has to sign, everyone has to be present.
10. With a purchase funds (the money) are dispersed at the closing (table funding - now they are not going to pass a bag of cash across the table so don't even ask that one. Wired funds or certified checks)
11. If you did a refinance. The funds are dispersed three business days after closing (another one of those Federal Laws. Remember the Marcus Welby episode?)

For the clients that is about it. They get to enjoy their new home and their new mortgage. For the real estate agents and the mortgage broker our job has just begun. Come on, you know were I am going with this one.

IT'S ABOUT

REFERRALS!

If you did a good job it is your time to shine and find some more business. If you had some problems make an apology and find some more business. If you had a bunch of problems apology a whole bunch and get some more business.

Just don't forget to get some more business. Referrals are the name of the game. Go get some.

What that in mind, who do you know right now that might be able to use my services? Come on, you have to know someone. By now you know a whole bunch more about me than you did a week ago. You know I am a professional and will get the job done. So help me help you. Let's figure a way out to do some business. Thanks for reading and commenting on my series.

Happy Selling!
Tony Grego - Indiana Mortgage Broker 
 
 

 

Quote of the Day:
Forgiveness is not an occasional act: it is a permanent attitude.
--Dr. Martin Luther King

Step Five - Submit Documents for Final Approval

 

Hey Folks! Thanks again for following on. I do want to apologize for a error I just noticed. Saturday's blog should have been step three (that's how I labeled it) but I wrote about step four. I was messing with the munchkins all day long just missed it. Again, I'm sorry. The good thing that while it is two separate steps, they could have be combined. So I guess a few goods things did come out of it. One, less to read for the same information and two, one less post I have to write. (While I really love this I am a little more than amazed on the time factor).

So now lets fast forward.............................................Step Five - Submit Documents for Final Approval

While in many ways this is the easiest part (at least when you get down to faxing, scanning, and emailing) but it may be the most critical part of the entire process. You see, up until now we have structured the new mortgage with values, income, assets, etc. that have been (for the most part) an educated guess. By the way, when you hear that a deal died in underwriting, unless the house appraisal or fraud is a issue, this is the reason.

Lets say during the initial interview the client stated they made $4,000 a month and had $15,000 in a 401k. OK, you being the good loan officer you are put it on the 1003, get the approval, send it to underwriting and they they loan gets denied for income ratios. Now the "bad" comes out in the loan officer, gets excited, calls/emails the underwriter, the underwriter's boss, the AE, the AE's boss, the loan officer's boss, and the owner of the company stating that the underwriter made a mistake and needs to approval the mortgage because you promised to closed that day. Sound familiar?

Now your office is not going to get anything done because of those "horrible underwriters" and the Investor is going to waste many hours to "get to the bottom" of this deal.

So now, time goes by and your boss gets the phone call. Some time goes by and your boss comes in and proceeds to tell you that the mortgage is dead because the client did not make $4k a month, pay stubs shows $3,625 and the client took a $8k loan against the 401K and has payments of $350 a month.

If you take nothing but this from my process basics, TAKE THIS. Verify, verify, verify, everything you send to underwriting. You ever hear "you only get one chance at making a first impression?" Lets go back to that first date I talked about. I am not saying that looks and dress are everything (on look at my earlier video blog will prove this) but it does help. These investors and underwriters are very busy and have strict guidelines to follow. Do yourself and them a favor (yea, it will get your mortgage application approved). Follow them. While every lender has their own process for submitting a deal to underwriting and yes, they are all different and two, they do not make any sense to you. FOLLOW THE GUIDELINE AND CHECKLIST. Don't forget you is King here and unless you want to lend the money for the mortgage yourself, follow the rules. Make a great first impression!

If you use just a couple of investors and the underwriters like the way you submit a file what do you think will happen after you put the  first couple into that investor? Exactly, your getting it now. The underwriter will jump to your file and find a way to get it done.

I have also heard that you should never do anything half-fast (wow, look at me and all these quotes today). So do it right or hire a processor to do it for you.

Remember, you are helping your client with the largest financial decision and process they will ever go through. You owe it to your client, your company, your investor, your self, and your family to check and double check before you submit the documents for final approval.

Now after you send in the docs. You will get a stipulation report from the investor. The better the package you submit for approval the fewer stips you will have to fill. When you get the stips use the same philosophy that you use with your client. "Don't fight' em, write' em (boy I am filled with' em today?). If you need to, call or email for clarification, just fill them quick and get the mortgage closed.  

Happy Selling!
Tony Grego - Indiana Mortgage Broker 
 
Quote of the Day:
A new study shows that licking the sweat off a frog can cure depression. The down side is, the minute you stop licking, the frog gets depressed again.
--Jay Leno

Mortgage Basics - Step Two, Pre-Approval

Step Two - Pre-Approval (up to 48 hours)

Utilizing information from our meeting I will order a credit report, title work, appraisal pre-comps, and mortgage payoffs (if needed). After a review of the information I will determine the options available, contact end investors and obtain a pre-approval.

Ok, we are well on our way. The "first date" is over and now the 48-hour rule applies (you know never call the first date until 48-hours). Well anyway, let me get back to topic. The client leaves and feels good about the meeting and is eager to get a new mortgage. The loan officer feels good about the meeting and is confident that his clients will get a great new mortgage. So what happens now?

What I do here at Sagamore Home Mortgage is complete the standard 1003 mortgage application. It is important to note that this will be uploaded to Desktop Underwriter program for approval. The electronic underwriter "reads" the application with a program called "total scorecard."
EVERYBODY TAKE A REAL IMPORTANT NOTE HERE.
1. ELECTRONIC
2. TOTAL

This is were most deals will die. If everything is not impute correctly you may not get the results you are looking to get. THIS IS WERE THE DEAL STARTS TO FALL APART. Now when you run the results and do not get what you need you can make a few changes. Another important note here is that if you change the application more than three or four times the mortgage will get "locked out." You got it, more problems.

Folks, your not dealing with a pair a shoes here! Your dealing with your home. When you do not use a professional like me your bound to have problems. OK, enough self-indulgence.

Now lets say you use a professional like me, you will get the results that you are looking to get with your new mortgage.

It gets easy from this point. A professional loan officer like myself prepares and presents your written proposal. I will go into more detail with your written proposal tomorrow.

Sounds easy? It is when we all work together. So when you need get a new or refinance mortgage here in Indiana you can see why you need to contact me (ok, just a little more self-indulgence).

Happy Selling (and financing)!
Tony Grego - Indiana Mortgage Broker

 

 

Quote of the Day:
A verbal contract isn’t worth the paper it’s written on.
--Samuel Goldwyn

Mortgage Basics - "Urgent Breaking News" "Time is Almost UP!"

 

While I know I did post this last week, as you prepare for this weekend, consumers and real estate agents alike need to remember that the clock is ticking...... Time IS running out. If you need 100% financing or your credit scores are below 575 you need to buy/lock/submit to underwriting NOW.Investors are jammed! We only have about 10 business days left. So don't be left out and lets get'r done.

Mortgage Guaranty Insurance Corporation (MGIC), one of the nations top provider of mortgage insurance announces major policy changes.

Effective March 3, 2008 MGIC is revamping credit score guidelines that will have MAJOR implications with new and refinanced mortgages.

Current guidelines allow mortgage insurance (PMI) for consumers with a minimum LOW credit score of 575. Please note that while mid-credit scores are used to qualify for a mortgage, PMI is based on the LOW credit score (regardless of income). Starting on or after March 3, 2008 the minimum LOW credit score will be 620.

Along with a rise in scores the maximum loan-to-value (LTV) will be capped at 95% leaving thousands of potential homeowners unable to obtain 100% financing that has been available in the past. LTV's over 95% will now require a low credit score of 680.

The news for declining markets and expanded markets is even grimmer.  For a complete report of all of the changes please drop me a email or call and I will forward you a copy of the report.

Now more than ever it is important to get your contracts written and applications submitted. I will be available weekends and night to help you process.

Tony Grego - Indiana Mortgage Broker

 

 

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Mortgage Basics - So How About that Interview?

Yesterday I posted my six easy steps to getting a mortgage. First I do want to thank everyone for looking and the great comments that I received. The intent of my next few posts will look at each step and I will share how to make it a smooth, seamless process. If you have any specific questions I can help with just drop a comment or email. Now, back to the show!

Step One - Interview (about an hour)
We meet (telephone or in-person) about your mortgage needs. I will go into details about different programs like conforming, FHA, VA, or mortgages for credit programs. We will then plot a direction to help, collect some personal information. Give you a list of required documents and answer any of your questions.

While most initial interviews are down on the telephone or email. I still have many clients that drop by my office. So, what is it all about? Ever been on a blind date? If you answered yes, the beginning of the interview is just like that. Lots of mystery and a weird feeling in your tummy and wondering how the rest of the night was going to pan out.

After the interview a sale is going to happen. Either the client is going to sell the loan officer that they do not need their services or a good loan officer will listen to the clients needs and work on a proposal to help with those needs.

What does the client need to provide:

• A summary of needs and goals
• Information on home value, mortgage balance, employment, verifiable liquid assets (401k, CD's, money market, savings), and a general idea of credit history

What does the loan officer need to provide:

• Information about themselves and company
• Mortgage options to help the client
• An open ear to "hear what the client needs"

This should take about 25 - 40 minutes. At the end both parties need to decide to go forward. Now let's all be honest here. When the client starts the "I want to think about it," "I need to check with XYZ," "send me some information," "I need to pray on it," etc. we all know that these are a no (you just don't want to say it). A good loan officer will then have to "dig" a little harder and present something that the client finds of value.

After an agreement to proceed is made by both the client and the loan officer the client needs to provide credit information and set an appointment to meet (person or telephone - this is almost impossible to do via email) and review the proposal and furnish documentation needed to get a mortgage.

See, that is not that hard. Did you hear the key? Yes, (you guys are really smart) the key is communication and everyone working together for a better financial position.

Happy Selling! (and buying and refinancing)
Tony Grego - Indiana Mortgage Broker

Quote of the Day:
Misery is optional.
--Abraham Lincoln

Mortgage Basics - So How Does the Process Work?

Looking at the news not a day will go by without reading something about the mortgage business. One question I never see is about the loan process itself.

What are the steps a consumer needs to take to get a mortgage?

While it can take all forms and styles getting a mortgage with Sagamore Home Mortgage and myself, Tony Grego is pretty easy here in Indiana.

Step One - Interview (about an hour)

We have an initial meeting about your mortgage needs. During this meeting I will take notes on what your looking for with your mortgage. I will go into details about different programs like conforming, FHA, VA, or mortgages for credit programs. If you like what you here I will collect some personal information. Give you a list of items we will need and answer any of your questions.

Step Two - Pre-Approval (up to 48 hours)

I will gather information needed to get you pre-approved for your mortgage. I will order a credit report, title work on the home, appraisal pre-comps, and mortgage payoffs if needed. After a review of the information I will determine the options available, contact end investors to obtain a pre-approval.

Step Three - Present Pre-Approval (about an hour)

A proposal will be completed giving at least two mortgage options (I like to give three or four when possible). You will always be provided with a credit and mortgage analysis that most closely fits your mortgage needs we discussed in our initial meeting. This will provide you with solutions that will best fit those needs. Now I am also going to remind you that all of the above work has been provide with absolutely no cost or obligation to the consumer. So you know I am going to put my best "foot" forward to earn your business.

Step Four - Consumer agreement, Collect documents, Set Appraisal (1/2 hr)

Once we agree on the right proposal for your mortgage needs we will sign all required forms, collect required documents, and set a time and date for appraisal. Due to current trends, most appraisers are now requiring COD payment. Most cases this is your only out of pocket expense for your new mortgage.

Step Five - Submit Documents for Final Approval (48 - 72 hours)

I will then submit everything to get your loan approved. The investor will then send me a final approval or stipulations to obtain final approval.

Step Six - Close on your mortgage (about an hour)

Once final approval is obtained I have investors that will close within the same day while some may require up to 48 hours. If you are purchasing a home the funds will be dispersed the same day and re-finance will take three business days to fund.

Seems pretty easy doesn't? It really is not that hard. The keys is everyone working together, communication, and submitting a complete package. I have had loans closed in as little as three days. So if you need some help or someone is dragging their feet drop me a email and maybe I can help.

Happy Selling!
Tony Grego - Indiana Mortgage Broker

Quote of the Day:
Life is hard. It’s even harder if you’re stupid.
--Anonymous

Job Description for the Hardest Job in the World

Job Description 

POSITION :
Mom, Mommy, Mama, Ma
Dad, Daddy, Dada, Pa, Pop
JOB DESCRIPTION :
Long term, team players needed, for challenging
Permanent work in an
Often chaotic environment.
Candidates must possess excellent communication  
And organizational skills and be willing to work
Variable hours, which will include evenings and weekends
And frequent 24 hour shifts on call.
Some overnight travel required, including trips to  
Primitive camping sites on rainy weekends and

Endless sports tournaments in far away cities!  
Travel expenses not reimbursed.
Extensive courier duties also required.
RESPONSIBILITIES :
The rest of your life.
Must be willing to be hated, at least temporarily,
Until someone needs $5.
Must be willing to bite tongue repeatedly.  
Also, must possess the physical stamina of a
Pack mule
And be able to go from zero to 60 mph in three seconds flat
In case, this time, the screams from  
The backyard are not someone just crying wolf.
Must be willing to face stimulating technical challenges,
Such as small gadget repair, mysteriously sluggish toilets  
And stuck zippers.
Must screen phone calls, maintain calendars and
Coordinate production of multiple homework projects.
Must have ability to plan and organize social gatherings  
For clients of all ages and mental outlooks.
Must be willing to be indispensable one minute,
An embarrassment the next.
Must handle assembly and product safety testing of a  
Half million cheap, plastic toys, and battery operated devices.
Must always hope for the best but be prepared for the worst.
Must assume final, complete accountability for  
The quality of the end product.
Responsibilities also include floor maintenance and
Janitorial work throughout the facility.
POSSIBILITY FOR ADVANCEMENT & PROMOTION :
None.
Your job is to remain in the same position for years, without complaining, constantly retraining and updating your skills,
So that those in your charge can ultimately surpass you
PREVIOUS EXPERIENCE :
None required unfortunately.
On-the-job training offered on a continually exhausting basis.

WAGES AND COMPENSATION :
Get this!   You pay them!
Offering frequent raises and bonuses.
A balloon payment is due when they turn 18 because
Of the assumption that college will help them  
Become financially independent.
When you die, you give them whatever is left.
The oddest thing about this reverse-salary scheme is that
You actually enjoy it and wish you could only do more. 
BENEFITS :
While no health or dental insurance, no pension,
No tuition reimbursement, no paid holidays and
No stock options are offered;  
This job supplies limitless opportunities for personal growth, unconditional love,
And free hugs and kisses for life if you play your cards right.

Forward this on to all the PARENTS you know, in appreciation for everything they do on a daily basis,  
Letting them know they are appreciated
For the fabulous job they do...
Or forward with love
To anyone thinking of applying for the job.

** AND A FOOTNOTE

THERE IS NO RETIREMENT -- EVER!!! **

If you are fortunate enough you will become grandparents!

Mortgage Basics - So What is PMI?

To follow up on an earlier blog about mortgage insurance changes I wanted to explain just want MI is?

Called many things:

• Mortgage Insurance
• PMI
• Mortgage Insurance Premium

When a potential homeowner obtain a new mortgage or refinances a current mortgage and your loan-to-value is above 80% of the appraised value, conforming mortgages (these are the mortgages with all of the good rates and terms) will be required.

Now I am not going into all of the details of how to "get around" PMI for your mortgage (if you like drop me a email and I will go into detail) in the end you are still getting mortgage insurance. In a nutshell, PMI is insuring the investor (the bank) in the event the consumer (you)  does not pay and the home mortgage falls into foreclosure. PMI will pay the investor the difference between the 80% value and the balance on the mortgage. The benefit for the consumer is that you are not required to put 20% down.

Folks, you need to be very careful here. I have heard loan officers tell clients that PMI will pay off the mortgage if the spouse dies. This is just not true. PMI protects the end investor only. PMI may be removed with a current mortgage when a new appraisal reaches 78% or less. It is also important to note that the investor does not have to release the PMI from the mortgage. Again, drop me a email and I will go into detail. 

Due to recent mortgage losses the companies that provide PMI are changing the rules as soon as three weeks from now. This will make getting a mortgage harder and more expensive.

If you in the market to buy or refinance your mortgage, you need to do this now. While Indiana home prices have settled it may be harder to get the mortgage you want or you may have to put a larger down payment. 

Mortgage Basics - Today Just Make The Right Decision

Well, its Sunday morning. Hope it is going well for you? For me, like most Sundays, it is a day of decision. How did it start?

• Central Indiana had a big drop in temperature last night. While we enjoyed a 50 degree day on Saturday it is now single digits with a crisp 30 - 40 mile an hour wind. While I would have LIKED (get ready to hear that word a bunch this blog) to stay in bed, I made the DECISION (another word of note) to write this blog.
• While writing this blog I would have LIKED to finish without any KB's (kid breaks), Anthony Jr. (the one on the right of my picture) just came to my office crying because he could not find his bunny watch. Well, it is 20 minutes later, I made the DECISION to help find the watch. BTW, no luck. If anyone has immediate access to a "Bunny Watch" for a 3-year old please give me a call.
• My wife would have LIKED to sleep in a little. She made the DECISION to get up and cook a breakfast for the little guys (always a Sunday treat).

We would LIKE to lounge around with sweats today but we made the DECISION to get ready and head out to church.

• After church I would LIKE to take my little guys to see a movie but I made the DECISION to attend a few open homes.
• Later today I would LIKE to kick back and watch the Pro-Bowl but I will make the DECISION to do some follow up emails and plan my week.
• Today, like everyday I come across many thing I LIKE to do but I must follow the DECISION I make to get the things done that I need to do.

With all of that said you're thinking "how does this effect me and why am I still reading this?" There are many things everyone would LIKE to do today but for all of the consumers reading this and all of the real estate agents getting ready to present the open homes you planned all week. Today is the day to make the DECISION to get some business done.

Folks, the market is as low as it is going to get (while most can still buy something). Current changes in lending IS tightening up credit, what most qualified to get a few months ago less and less are qualifying to get today. Read my blogs. MI changes in March will put thousands more OUT OF THE MARKET.

So we would all LIKE to wait and wait. Today, it's everyone's best interest to make the DECISION to buy something.

If you need any help at all, I am available via cell at 317-714-8080 or email at tgrego@sagamoremtg.com. NOW IS THE TIME!

Happy Buying and Selling!
Tony Grego - Indiana Mortgage Broker

 

Quote of the Day:
Too many people miss the silver lining because they’re expecting gold.
--Maurice Setter

Mortgage Basics - "Urgent Breaking News"

Mortgage Guaranty Insurance Corporation (MGIC), one of the nations top provider of mortgage insurance announces major policy changes.

Effective March 3, 2009 MGIC is revamping credit score guidelines that will have a MAJOR effect with new and refinanced mortgages.

Current guidelines allow mortgage insurance (PMI) for consumers with a minimum LOW credit score of 575. Please note that while mid-credit scores are used to qualify for a mortgage, PMI is based on the LOW credit score (regardless of income). Starting on or after March 3, 2008 the minimum LOW credit score will be 620.

Along with a raise in scores the maximum loan-to-value (LTV) will be capped at 95% leaving thousands of potential homeowners unable 100% financing that has been available in the past. LTV's over 95% will now require a low credit score of 680.

The news for declining markets and expanded markets is even grimmer.  For a complete report of all of the changes please drop me a email or call and I will forward you a copy of the report.

Now more than ever it is important to get your contracts written and applications submitted. I will be available weekends and night to help you process.

Tony Grego - Indiana Mortgage Broker

 

Quote of the Day:
Honk off, bozo.
--Eno, The Duplex

Mortgage Basics - Let's Talk Value (LTV)!

Hope everyone has been enjoying my mortgage basic tips this week? With all of focus on mortgage rates and weather it is the right time to get a new mortgage to buy a house or is it the time to re-finance your current mortgage I feel that the basics can help with your decision.

Whatever you may hear in the news, the Indiana housing market is very good. 2008 will be a great year to buy that new home. For folks that enjoy (or have just purchased) it may be the right time to re-finance (I have redone mortgages that were taken out just a few months ago). So by now I am sure that you have learned a bunch about credit, scores, rates, and debt ratio. Let's end Friday with a bang and talk about a little thing vs. a big long blog (hey look, LTV again).

Simply stated loan-to-value (or LTV) while simple to explain is one of the most important factors in your loan process. Remember that the big three things that investors are:

• Credit Score
• Debt-To-Income (DTI)
• Loan-To-Value (LTV)

LTV is used to determine the limits within your housing and debt ratios and where they must fall for you to be approved. LTV also determines whether you must pay Private Mortgage Insurance (PMI and a subject of a future Blog) and if you have to use escrow accounts.

Just remember that the higher the LTV, the higher your rate. When purchasing a home it will also be the determining factor with your down payment. No way around this one!

Your loan-to-value is simply the amount you are borrowing divided by the value of property you are purchasing or refinancing. This give you a simple ratio. For example, a house valued at $100,000 which you intend to purchase with an $80,000 loan (and a $20,000 down payment of your own cash) is said to have an LTV of 80% - That is, the loan represents 80% of the value of the house.

The value of your property is the appraised value (appraisals, Hmm... sounds like another blog post)OR the amount you pay for the property (the market value), whichever is lower. In the initial stages of qualification and approval, your property's value is understood to be an estimate. It will be confirm by a professional appraiser.

So that is it in a nutshell. Or is it? No (didn't see that one coming, did you). Many areas of the country (the bad news Indiana is starting to be effected) by an industry term called "declining value." Due to losses, investors are doing everything they can to minimize risk. It would be like lending two friends $100. One of your friends has a good job, always pays his bills and forgets his wallet. Chances are if you have it you will loan it to them. Your other friend never has money, as far as you can tell does not pays his bills and still owes you $100 from 2-months ago. Chances are you will not do it at all or offer a lesser amount. Declining value is the investor offering a lessor amount. Investors are taking solid, well backed, appraisals and slashing them 5 - 10%. So what this means to you is that you may have to pay a higher rate or PMI, come up with more money to close, or not qualify at all. This has NOTHING to do with your CREDIT, your DTI, or even the HOME VALUE. Once tagged a declining market the rules have changed again. O, by the way, most of the markets are NOT declining they are just tagged that way. It helps the Investor.

So this weekend just go out and do something. Buy a house. Decide to refinance. Call me and I will give you some options.

Tony Grego - Indiana Mortgage Broker

Mortgage Basics - What Do You Mean DTI Is Not For My New TV?

 

STATED OR NOT STATED, that is the question... Remember back in ancient times (2007) when a client did not qualify for a loan due to income it was not a problem. Most investors promoted stated income mortgages. What did that mean? Now I am not making this up. This is how the programs worked and were pushed by Account Executives all over the country. The norm for qualifying ratios is 31/43 (I will get back to this later). Stated loans allowed the client to put down an income without documentation. What this meant is that seniors, on a fixed income like social security, that was getting $2,000 a month could put what they needed to get to the ratios the investor wanted. $4, $5, $6K a month was not uncommon to see. Cashiers at a fast-food restaurant making just over minimum wage now became "Shift Managers" making $80,000 a year and if the ratios still were high we would put them in a Pay Option Arm (now that sounds fancy. Guess I will have to write a post about them soon) that would give them a 1% mortgage for the first year and just raise by a little bit to 9% the following year. With all of the money lost by stated loans I am amazed at times that mortgages are still written today.

Stated income mortgages in there pure sense makes sense. Originally designed for the self-employed (the back bone of our nation) to limit the amount of documentation they would need to provide to obtain financing (due to favorable tax laws most self-employed tax returns would not support the 31/43 rule and as long as home value and credit scores were good the client would not have to provide supporting income documentation. Stated mortgages just got out of control.

Now lets get back to the TV stuff. Because of the craziness of the last five years I have discovered that most consumers don't know the difference between DTI and DVI. Let me break it down:

DTI = Debt to Income - This is you income vs your bills.
DVI = Digital Visual Interface - This connector passes an uncompressed video signal from HDTV receivers and other source devices to your plasma display. You will find DVI connections on most 2004 HD plasma monitors and integrated HD plasma TVs, as well as some high-end DVD players, newer PCs, and HD satellite receivers. See what you lean with my blog. All this time you thought it was just about a mortgage.

So now your thinking "OK, now I know my DTI give me a mortgage!." Before you come into a broker like me let me give you a little more ammunition. By now you know that I like naming things. We call this one "Tony's key to DTI" no, to boring. How about "Dang, Tony Informs?" Get it? DTI.

Ok, part of the interview process is to ask how much you make, right? For this example lets say you make $10 a hour and work a 50-hour week and your have a 401k deduction of $35 a week and your paid every Friday. You tell me $350 a week. Right? No. Lets do some math:

40-hrs x $10 = $400 + 10-hrs x $15 (time and a half) = $150 for a gross pay of $550. You got it! When you figure your income it is in pre-tax dollars. Now you going to tell me that you get social security and they don't take taxes. More good news. Just take your social security amount from your yearly reward statement and add 25% to that number. If your award is $2,000, your grossed up income is $2,000 + 25% = $2,500.

OK, so you still with me? You sure? If not take a deep breath and read it again. Folks, this is really, really important. Real Estate folks, ever get a pre-qualification letter from a broker just to find out you do not have a deal a few weeks later? This is a big reason why. DTI was not calculated right.

Now that were comfortable with your income (if your following that is the "I" part of DTI. Lets work on the "D" part which is the debt. To figure debt start with a fresh credit report:

1. List all debts. What your are looking for is the minimum monthly payment and the number of months remaining on the debt
   (more good news, if a debt has less than 10 payments left you can eliminate that payment from DTI. One exception is a car lease (it is assumed that if the lease comes due you will be getting a replacement debt).
2. Verify that all debts are yours. Lets say that you co-signed for a car loan (being a former car dude I refer to that industry a bunch) but you are not making the payments. You will need to provide canceled checks for 12-months from the other party showing that they have been paying the debt. You then can exclude that debt from your DTI
3. Check for any student loans not in repayment. If so, you will need to contact the student loan company to find the estimated payment out of deferral (they will send you a copy) if you do not do this you normally have to use a factor of 2% of the loan for a monthly payment.
4. Check collection and judgments. If any payments arrangements have been made you will need to factor this amount. 

OK, lets go back to our client making $550 a week. When you take the $550 x 52 weeks divided by 12 months our client makes $2,383 a month. For this demonstration lets say that our client has a $250 car payment, $100 in credit card payments and has a collection they have been paying $50 a month. Let's see here, a little quick math, his debts are $400 a month. Wow, they make $2,400 a month and only have $400 a month in bills, this is a no brainier. don't get so excited, were not done yet.

Were forgetting the new mortgage. Lets say the client is looking for a $80k mortgage at 6%. Now we have to add $480 to the $400 right? This is going to be a piece of cake. No again. Need to include a little thing called property taxes, homeowners insurance, and mortgage insurance. Let's call it $120 a month. Well we must be done now. Right? Lets get back to that.

Remember those numbers 31/43 and I said I would get back to them? Well I hope you did not forget because I didn't. The 31 is the threshold percentage for the new mortgage payment while the 43 is the threshold percentage for the total of all debts. Lets see how we came out.

Our monthly income is $2,383 the mortgage PITI (principal, interest, taxes, and insurance - everyone assumes what it means) $600 and monthly bills are $400. So that makes the bottom DTI of $600 divided by $2,383 or 25% and the top DTI is $1,000 divided by $2,383 or 35.3%. So were good. Right? NO, NO, NO. Remember about 3,500 key strokes ago (3,543 if you want to be exact) were our client is having $35 a week going to 401K? I thought so. This also has to get factored. Now $35 a week x 52 weeks divided by 12 is $152. So now our income goes from $2,383 a month to $2,231. What does this do to our percentages? Our top number is now $600 divided by $2,232 or 27%, OK so far and the bottom is $1,000 divided by $2,232 or 45%. "Houston, we have a problem." Now the deal is not "dead" it is just not the automatic deal we had a few paragraphs ago. It is easier and we have a better chance getting the DTI through underwriting if we figure it correct  the first time. Not after you get stiped for additional income.

I cannot stress how important DTI is in today's underwriting world. Most homes in foreclosure today are due to stated income or high DTI.

This is just another reason to work with a professional mortgage broker. A professional has been trained and know what to look for. How crushing it is to find the house, jump through all of the hoops, get your hopes up all to be taken away because your broker did not spend enough time to evaluate your DTI. Folks you hired a real estate agent to help you get a house. Make sure you hire the right mortgage professional to be sure that you can pay for it.

Happy Selling and Buying!
Tony Grego - Indiana Mortgage Broker

 

Quote of the Day:
That's right. 'Tain't yours, and 'tain't mine.
--Mark Twain
(when friend said that a certain rich man's money was "tainted")

Mortgage Tips - What's the Deal With Credit Scores?

OK, the search is over! After months of searching for homes and interviewing mortgage brokers you find the perfect deal.

Finally, that home you have been planning on buying is in your sight. Over the last year you made sure that you’ve paid your bills on time. In fact, when you bought that new convertible a year ago the salesman said your scores were over 680! This is good, right?

Along with that new car you wanted to be sure that your new home looked perfect so you took advantage of all of those credit card offers you got in the mail. Now you’re getting excited. You have the right house, the right price, the right car, the right furniture only to get a call from your Loan Officer. What happened?

They tell you that they would love to get you a mortgage but your scores are too low. You’re now a 575. Now you freak out. You can't understand. Just last year you were over a 680 when you bought your car. How could my scores have dropped? I got all those new credit cards! What happened? Let’s take a look.

What is a Credit ScoreWell, there are three major credit bureaus - Trans Union, Equifax and Experian. Each has its own method for calculating your credit score. Scores range from 300 - 900 depending on the bureau. The higher the number, the better your score is perceived. Creditors see the number as an indicator that an individual will repay a loan. Typically, scores are determined by the following factors:

Your history of late payments
Balances owed
Length of Credit History
New Credit
Number of Credit Inquires

Now in the example above you can see what happened. The client took on a large amount of new debt in a short amount of time. When you do this you lower your scores. So what should they have done? Let’s take a look at something I call "Keeping Score:"

Let’s say your score is 100.

Out of that 100:
35% is based on your credit history. It is highly weighed against the amount of late payments. Your score will get "hit" less after two years and the late payments will fall off after 7 years. Also a bankruptcy, foreclosure, repossession, collection, and judgment will have a negative effect on your score.

30% is based on your Debt Ratio. The credit bureaus do collect employment and income information and your debt-to-income will have an affect on your score. (A more detailed blog on the DTI ratio will be published at a later date. Make sure you come back. It's important)

15% Credit Length - In a nutshell, how long have you had your credit.

10% Credit Type, Mortgage, Automotive, Installment, Revolving (credit card). High number of revolving credit hurts your score.

10% # of Inquiries (When credit is pulled for a major installment such as a Mortgage or Vehicle your score should not be affected in a negative way if the credit pulls are done within 10-days)

So with the example I presented (it is a real story. Names and places have been eliminated to protect the innocent. Come on, it's a little funny). While the client had good credit, by adding the car and all the credit card debt the effect was a 105 point dip in credit score. All this happened while paying their bills on time. Folks, do not be surprised! Real estate agents, get credit early to help structure your deal. Call me if you’re in my market and I will give you a FREE, yes FREE financial analysis that will help qualify your buyers. If you have been reading my blog you know I know what I am talking about.

So now that you been to Tony's 101 of credit scoring how do you improve your scores?

PAY YOUR BILLS ON TIME (what a novel idea). Delinquent payments and collections have a major negative impact on your score.

Keep balances low on credit cards and other "revolving credit." Example department store charge cards.

Apply for and open new credit accounts only as needed. Don't open accounts just of the sake of it - it probably won't raise your score.

Pay off debt rather than transferring it around. Also, don't close unused cards as a short-term strategy to raise your score. Owning the same amount but having fewer open accounts may actually lower your score.

Correct any errors that appear on your credit report when brought to your attention. (Be careful of companies that say they can get rid of your bad credit. Negative items can not be legally removed. PERIOD.) I will also have a future post on this. Wow, you need to be sure to subscribe to my blog. I am going to give you so much education over the next few months that you’re going to make a fortune!

Review your credit report regularly so you know what is being reported. It won't affect your score to request and check your own credit report. (BTW, when you’re my client I set up a annual meeting so we can do this. Guess how much it cost? You guessed -- FREE AGAIN! Starting to wonder why you’re not doing business with me?

If you don't do anything else, do this right now: (don't wait, your already on the Internet), go to http://www.optoutprescreen.com/. This is another FREE service (notice I have a thing about giving away things). What is does is take your information out of the data bases for credit offers. You will not longer get all that junk mail and since you will be less of a credit risk (and that is a good thing) your score can rise from 5 to 50+ points in as little as two weeks. Yes, it really does work!
"OK, I'm starting to listen. How long does it take to rebuild scores?"

The answer: Not long at all! If you take the necessary steps, you can begin increasing your scores right away. I've seen dramatic changes take place within as little as 6 - 12 months.
The first step is to eliminate all derogatory accounts - another reason debt consolidation loans are so beneficial!

Second, make sure that once an account is paid, the credit bureaus reflect the payment.
Third, begin rebuilding credit by making your mortgage payments and car payments on time. Set up automatic withdrawal if possible to avoid late payments. Remember - you have 30-days to make a payment on time before it's considered late on a credit bureau.

After you get your report and find errors you need to contact the credit bureaus. It will not go away until you do something:

Trans Union2 Baldwin PlaceP.O. Box 2000Chester, PA 19022http://www.transunion.com/
EquifaxP.O. Box 740241Atlanta, GA 30374http://www.equifax.com/
ExperianCall 888-397-3742http://www.experian.com/

This is the end of the story. Yes, the story I told above was true. While it took some creative work (including taking some furniture back) I was able to get the client approved and they were able to get the home they deserved and wanted.

Happy Selling!
Tony Grego - Indiana Mortgage Broker

Quote of the Day:Life is an onion. You peel it off one layer at a time, and sometimes you weep.--Carl Sandburg

Mortgage Tips - What's Your Rate?

Ever ask a mortgage broker for a rate only to hear the phone go quiet on the other end?
Besides the purchase price of your home, you mortgage interest rate is the most important factor determining how much your monthly payments will be.

You would think that when you call a mortgage company that they would at least know the rates, right? Well the answer is YES and NO. But what usually happens is something like this:
All of a sudden you (the client or real estate agent) gets a barrage of questions from home value, loan amount, job info, credit info and it goes on and on and on. (Sound familiar yet?) You have to think to yourself, "all I wanted was a rate, not tell my life story." By the time the loan officer get done with all the questions your head is spinning and your not even sure why you called.

It really boils down to two different questions: The first question is what are the rates? You can find these anywhere (including on the right side of my blog). Published rates tend to be for borrowers with:

740+ Credit Score
80% Loan to Value
Can prove income with a debt ratio under 30%
Can prove liquid assets for at least 12 months PITI
Has a proven Credit History of paying bills on time.

You got it! This applies to about 5% of the population. Now the second question gets a little more complicated. What's my rate?

While any "good" loan officer should be able to give a "some idea," it is a guess. Think of your rate like a snowflake (I'm serious here) While from a distance they all look alike but when you look closer they are all different. Of course loan officers know the "lowest" rates (we can see them on the right side of my blog) we just don't know if you qualify and need to ask some questions. This is were the fun starts. To find out what "your" rate us broker guys need some more information. I have come up with a list of 9 things that are needed to narrow down the rate:

Property Type
Property Use
Income and Asset documentation
Loan Type
Loan Amount
Loan Purpose
Middle FICO (credit score). Need to use caution here. Not all credit bureaus are alike. Free reports do not tend to match mortgage enhanced reports. This will be a topic of a future blog.
Appraised Value or Purchase Price (whichever is lower)
Zip Code

Confused yet? Don't worry, you're not alone (including the loan officer). So what do you do now? and what's my rate?

In the long run a client will chose a real estate agent due to trust. Your client needs to chose a mortgage broker the same way. Building relationships and trust will help ensure that you get the best rate and terms you qualify to get.
While I hope this help take the "edge" between real estate agent and loan officer if you have any questions please leave a comment, drop me a email, or the old fashion way. Call me, I will answer.

Happy Selling!
Tony Grego - Indiana Mortgage Broker