Monthly Archive: May 2012

May 23

Attend Your Closing

Recently had another closing when one of the sellers did not attend.    The closing attorney was kind enough to have the deed and closing statement prepared a day in advance so the missing seller could come by and sign off.  At the real closing the next day the seller made a $5 change to the closing figures! FIVE DOLLARS!!!

What a pain in the neck stuff like this is when the lender is trying to meet all of the federal regulations regarding the closing.  The closing was delayed because of the seller and then one of them decided they had something more important to do at the time they choose, we showed up on time.  What could possibly be more important than closing a half million dollar deal?  Couldn’t get a baby sitter? Had to water the lawn? I never did catch the conflict; it was glossed over by the attending side of the couple.  But it didn’t make sense to anyone that was in attendance.

If you lose money because you do not attend the closing there is no one to blame but yourself.  This little incident could easily have caused everything to go back to the underwriter.  It took the seller six months to find a buyer, another month to get to the closing table, it was not a surprise.

Compare the stacks.  How much was the stack worth that the missing seller had to attend to compared to the stack of money the buyer and I brought to the closing table, $50 versus $500,000? That doesn’t sound right does it?

A change to the figures could have required a change to the closing statement, thus requiring the missing spouse’s signature on the new numbers, therefore no closing that day.  The closing attorney accommodated the problem by issuing a refund check for the $5.

I have no idea why so many buyers and sellers are trying to not attend the closing.  It has happened to me more times this year than the previous 20 years combined; I would say that is a major change.

Ramifications

Could be many problems if the closing is delayed because one of the parties does not attend.  A closing late on a Friday afternoon might require rolling over to the following Monday.  That might require switching dates on movers, three extra days of interest on the seller’s mortgage.  Or how about this one, the buyer walks!  I have seen it happen for a lot less.

Attend your closing!

May 15

4 Ways to Derail a Loan Application

Everyone has heard horror stories about loan applications taking forever and what appears to be endless requests for additional documents.  What you have not heard about is the source of most of the problems.  Over the years I have noticed there are a couple of reasons that pop up again and again. 

I have broken down the four main reasons that can slow down or derail a loan application.

The first cause is missing documents.  All loan applications for a home mortgage must include documents that support the information contained on the application form.  For a well-qualified borrower the support documents are minimal and fairly standard. Most home buyers have copies of everything we need to process a mortgage.  But if we are not provided copies by the borrower we must get them from another source, that requires sending out requests, waiting for the mail and cooperation from a third party that is not a part of the transaction.  If you do not give us a bank statement we must get it from your bank, good luck speeding up that process.

The second reason is missing pages from the support docs that are supplied.  This one drives everyone crazy.  We need the entire document.  A good example of the most common missing page is the last page of the bank statement.  It often says, “This page left blank intentionally.”  For some reason that statement causes borrowers to leave it out, but we do not know it is blank if you don’t give us a copy.  If the first page says page 1 of 5 we need all 5 pages.  If the borrower leaves off page 5 then we can’t use the other 4 pages either.  Then we must ask for the missing page, meanwhile if the cutoff date on the statement you furnish indicates another statement has been sent, we need the new one. 

Any little side trip that slows down the process might cause one or more of the documents we already have to expire.  Everything in the loan file must be current. If it takes six weeks to process the loan and the original bank statement was 3 weeks old when we got it, we’ll probably need two more bank statements before closing.     

Other common examples of frequently missing pages are schedules in tax returns.  This one is clunky because you must read the entire tax return to see if anything is missing.  That is easier said than done, try it sometime, shuffle up your return and take out a random page without looking at it.  Now look at the other pages and figure out what is missing.  If you want to slow down the loan processing leave out a page or two from your tax return.    

The third thing that slows down the process is conflicts between the information in the application and what is contained on the support documents.  All of the information contained in the loan application must be verified by cross checking it against the information on the support documents.  For example, if the borrower says they earn $15 per hour and that matches the figures on the pay stub everything is hunky dory.  But if the pay check shows $10 an hour that raises a red flag and slows down the process.

Not loan ago a fellow told me he earned $22 an hour, his pay stub clearly showed a pay rate of $16 an hour and his tax return from the previous year indicated a $12 an hour pay rate.  All three rates could be correct if he received raises or a promotion.  But we need to document the correct figures.

I have been given bank statements that show a different address than where the home buyer says they live, I have been given the wrong social security number.  Lord help the guy that gave me the wrong birth date for his wife!  The list is endless.

You’ll love this one; a guy told me he was single with no kids.  His tax return was filed jointly with his wife and listed 2 children.  Opps, something doesn’t match up.  How fast do you think that will move through the system?   He was separated but not yet divorced. 

The fourth reason is closely related to #3, misrepresentations.  The first three can be honest mistakes, this one is an outright attempt to commit a crime.  It can come in many flavors.  Recently a lady told me she had been on the same job for 3 years, turns out only 3 months, oopsie.  We do verify this stuff you know.  When I questioned her about the discrepancy she said she thought 3 years sounded better.  Really?  I can’t count the number of times people have told me they have enough money for the down payment when they don’t.  That one is always good for a laugh.

We must verify everything you tell us, EVERYTHING!  All of the data must match.  Close only works in horseshoes and hand grenades.    

Here is how to streamline and speed up the process.  Gather everything before filling out the application and use the numbers from the support documents to complete the app.  If the most recent bank statement shows an ending balance of $9,400.12 put that figure in the loan application, not $10,000.  That way the bank statement matches the loan application and it speeds up the process.  What if you really have $10,000 because of a recent deposit that isn’t on the statement?  So what?  It doesn’t matter unless you need the extra $600. 

Most buyers apply for a mortgage and then gather support documents.  By following my suggestion and reversing the process it is possible to cut out weeks from the process.  They are called support documents because they are supposed to support what is in the loan application.  If you use the actual figures from the support documents to fill out the loan application they match 100%.  

 

May 10

KHC Funds Down Payment Assistance Programs

I noticed earlier this week that KHC had funded two of the more popular down payment assistance programs.  Check Available Funds.

The Regular DAP must be repaid over a ten-year period at 6%.  It is provided in the form of a second mortgage loan up to $6,000, and can be used to purchase a home up to a price of $243,500. This DAP is NOT restricted to first-time home buyers.  Home buyers that recently sold a home but do not have enough funds to purchase another can use this program!

Home-DAP goes up to $4,500 and does not require repayment, it is forgiven over five years.  The ceiling price for homes when this program is being used is $195,700. 

Okay, here is how both programs can be used for maximum benefit.  The buyer can borrow the entire down payment and have the seller pay all of the closing cost and pre-paids. It is possible to purchase a home with less than $100.  The only reason any money may be needed is because the down payment could be an odd number and the DAP’s are made in $100 increments.  

May 09

CreditXpert™ Rides Again

Had a guy call me this morning, said he had been turned down by two loan officers from other mortgage companies because of his credit report.  When I asked why they turned down his loan request he said it was because of a bankruptcy and a low credit score.  The bankruptcy was five years ago, not a reason to decline a mortgage.

He told me his credit score was low, below 580, but when I asked if they gave him a copy of the credit report he said neither had bothered to pull one.  Okay, how do you know the credit score was my next question.  Answer, one of the online free credit reports. Bad, bad, bad, not a true credit score.

We pulled a real credit report and the score was actually 635, only a couple of points below the threshold but the problem had nothing to do with late payments or other negative entries.  In fact, his payment history was absolutely perfect after the BK.  I could see the reason for the low score was two credit cards cranked to the limit, one was $150 above the limit.

We ran CreditXpert and it confirmed my assessment but gave exact numbers to reduce the balance, what a program!  Half an hour later he had an approval letter based on paying down the credit cards.

May 08

Power of Attorney for Real Estate Closing

A Realtor asked me this morning how to get a Power of Attorney for one of their clients in an upcoming closing.  A POA is a document that allows an individual to sign legal documents on behalf of another individual.  An example would be a wife signing the deed or mortgage on behalf of her husband or vice versa.

The sellers are closing on the sale of their home and turning right around and buying another home an hour later.  It isn’t like the closings are a surprise, it takes a long time and a lot of effort to sell one home and purchase another. 

In the past twenty plus years I have only seen a POA used in a real estate closing a hand full of times, maybe two or three out of a couple of thousand.  It doesn’t happen very often, and really should only be used in an emergency or under extreme circumstances.   

Yet the subject has been brought up more times in the last six months than in the previous twenty years combined.   Both buyers and sellers have approached me about not attending closings.  Where is this coming from?  I had one buyer simply refuse to attend the closing, they are retired, no job conflicts, just didn’t want to come to the closing.  

Now come on, tell me what could possibly be more important than making sure the closing goes down as expected?  I don’t understand. 

Loan applications are becoming just as tricky these days. Another guy told me he couldn’t afford to take off work to drop by my office to sign a loan application on a $150,000 mortgage.  Does he not realize how that sounds?  My budget is running so close I can’t take off work for an hour – lend me $150,000 please.

Perspective

Buying a home is a very long term commitment, something that should not be taken lightly.  Most buyers spend more time looking at homes than they do planning the transaction, the exact opposite of what they should do.  When it comes to the closing I require an original signature on my note, not a POA.

If you are selling a $200,000 home, how much do you need to be earning per hour on your job to make it more important than attending a closing?  Even if the lender allowed it, if I were the buyer I would want to see the seller sign the deed that gives me title to the house.

Reality – It takes almost the same amount of time to sign a POA in front of the closing attorney as it does to attend the closing.  If you have the POA prepared by an attorney other than the closing attorney it may not be approved by the closing attorney, highly possible if the one preparing it is not a real estate closing specialist.  If that happened it would actually take longer than attending the closing. 

This is the largest financial transaction most people have in a lifetime, you need to attend the closing if at all possible.

 

May 07

Collections on a Credit Report

9am this morning, a lady filled out an application on my web site and I received the notification by email.  Her credit report listed multiple collection accounts and a judgment for nearly $1,000.  Four of the collections were sizable medical bills and a couple of small ones from utility companies.  She acknowledged the judgment and the utilities but said the medical bills should have been covered by insurance.  She was not aware they were in her credit file.

She said her tax refund was due any day and as soon as it arrived she would pay off the judgment and the utilities, in the meantime would contact her insurance company and get to the bottom of the medical bills.  Regardless, she would do whatever is needed to clean up the mess so she could buy a home.  I bet she will follow through on her promise to herself, I was just helping out, she wasn’t promising me.

Contrast, around 11am a gentleman called me saying he was ready to buy a home, asked if I remembered speaking with him last year.  Not really, but I pulled up my notes and it was two and a half years ago, not last year.   Back then he had a total of 14 collections on his credit report and I asked if he had taken care of them.  He acted surprised by my question and asked what they were.

When we last spoke I suggested he begin by paying off the smallest collection first because it was only $25.  So I asked if he had paid it as we discussed. Nope, how about the next one that was only $40? Nope, none, nada, zip, hadn’t paid off a single one.  Combined, all the collections totaled $9,000 but he hasn’t paid a single dollar towards any of them.

He is further away from buying a home today than he was back then; underwriting guidelines have tightened up since then.  If he had followed my suggestions he could be moving in a few weeks.

The wrong way to handle collections is to dispute them.  It is what it is, and disputing accurate information on your credit report just because it is negative in nature is fraud if the purpose is to get a loan.  Besides, having open disputes on a credit report can get a loan application declined.  Underwriters do not like loose ends.  Key point, have you ever tried to remove a dispute from a credit report?  You must dispute the dispute, HAHAHAHA!!  Don’t do this!

Can you offer less than owed on a collection?  Absolutely, but it doesn’t look good if you are trying to borrow money at the same time.  Asking one lender to take less than owed on a $1,000 account doesn’t look good to the lender you are asking $150,000 from.  But one is for a house and the other one was dinner and blue jeans.  It doesn’t matter, it doesn’t look good. 

Pay them off?  Where to start?  Start with the smallest amount that reported or updated their info most recently.  A $25 collection that reported or updated their status last week will cost more points on your credit score than a $2,500 collection that hasn’t been updated in a couple of years.  

Check out the related info on the page, CreditXpert™.

 

 

May 05

CreditXpert™ – New Page Added

There is a new page added to the Buyer’s Section – CreditXpert™ .  It explains how the service helps our clients save thousands of dollars by fine-tuning the structure of the debts listed in a credit report.

This service is provided by CBCInnovis, the company that assembles our credit reports. 

Traditional credit repair companies advise borrowers to dispute accurate information that is negative in nature and that is illegal.  CreditXpert™ does not make suggestions that are dishonest. There is a big difference between lying about what is contained in a report and structuring the content in a positive manner.

This is a major innovation. It will only make suggestions that are 100% legal, and it is provided by the same company that compiled the original credit report, straight from the horse’s mouth. 

Sorry about the horse reference, it is Derby Day after all.

CreditXpert™ will help most home buyers achieve the next best credit position above their existing credit score. This can save a fortune in closing cost and or interest.  Both of these are related to the credit score. 

It can also be the difference between a loan application being approved or declined. All automated underwriting software weighs the entire contents of an application including the credit report.  The more the contents of the credit report matches the approval matrix of the AUS the more likely the application will be approved and the better the terms of the loan will be.  

Check out the New Page.

 

May 04

Rate Watch 5/4/12

Interest rates have remained steady for the past two weeks, unusually steady! Today I posted a slight improvement on the conventional 30 and 15 year rates, how much lower can they go? 

The jobs report released this morning showed an employment increase of 115,000 new jobs added in April, about 55,000 less than expected.  The unemployment figures also improved slightly. Personally, I do not believe these reports, a decline in unemployment claims is not an indication of new jobs created, simply that benefits have run out.  Mortgage bonds reacted favorably to the news, interest rates decrease when the price of mortgage backed securities increase.

I have watched interest rates for a few decades and it seems like Friday is usually an uptick day, not down.  That makes sense, some money managers sell paper on Friday just in case we get tangled up in a war over the weekend.  Those Canadians have been very quiet lately…  

 

To take advantage of the low interest rates visit my online application site or print and use this simple form to get started. If you prefer we can do it over the phone, call my direct line during normal office hours, (502) 753-4127.