Tag Archive: application

Oct 04

Mortgage Helpful Hint #3

No New Debt!

This mistake can cost $50,000 or get the loan declined!!! Read Carefully!

Be very careful during the mortgage processing period.  Do not take on any new debt without first chatting with your loan officer.  And DO NOT CLOSE ANY ACCOUNTS, doing this can drop your credit score below the threshold or make the interest rate on the mortgage increase!!!

The mortgage underwriter is REQUIRED to do a soft pull of your credit report on midnight the night before you close on the loan.  Any new debts may cause the deal to crash and burn!!!

 We often see people buying new furniture for their new home, do this AFTER you close the mortgage on the house, not before.  Even if it is something advertised as no payment for 6 months, etc.  It is still a debt!!  

The same is true for a new car, boat or airplane.  Yes, I have seen that one too.   Do not buy anything that requires debt without chatting about it with the loan officer BEFORE doing it! 

I have seen many home buyers make this mistake.  Any new debt during the processing period might change the status from approved to decline, no one wants to see that happen.

Just slightly increasing the balance on a credit card can have a negative impact on your credit score and or debt ratio.  That could easily cost $50,000 in EXTRA interest because if your credit scores go down the interest rate will go up!  Don’t let a $50 impulse purchase cost a year’s pay.

The mortgage lender is taking a snap shot of the entire process, if you change something the picture changes.

Maxing out a credit card is a common mistake people make while applying for a mortgage.

 

KEEP THE BALANCES WHERE THEY ARE NOW OR LOWER! 

If you have a credit card with a $400 limit and you let the balance go above $300 your scores will come crashing down.  75% is the magic number, if you get any closer than that to the limit, you are getting close to lower credit scores.  The best move is to keep the balances at or below where they were when the loan officer pulled your credit report. 

If you pay off a debt – keep copies of the transaction.  Don’t forget the lender must show where the money came from to pay it off.  See Helpful Hint #2 about moving money around.

Oct 02

Mortgage Helpful Hint #1

Mortgage Pre-Approval Stage

A Pre-Approval Letter is worthless if it isn’t backed up with the proper support documents!

Making a mistake during this stage can be time consuming and very costly because home inspections, termite inspections and appraisals are expensive. 

Take the time to gather all of the support documents needed to properly decision the pre-approval.  Underwriters are not allowed to clear loans to close without support documentation in the file. This issue delays the process more than all other issues combined and makes it very stressful for the borrower. I address this on the front end which eliminates most of the stress!

 Everything Takes Time

Every line on every document must be reviewed by 3 people before the loan can close so it takes time to get a document processed.  The faster you submit the support documents the faster it will move along.  The closing timeline will push back at least one day if something is missing.  If multiple items are missing it pushes back the time line until after the last item is submitted and reviewed by all 3 people.  ONE missing document is almost as bad as no documents at all. 

Here is a list of what is needed to properly decision most loans:

 1. W2’s & Federal Tax Returns for the most recent 2 years for everyone on the loan, 3 years if using a KHC Mortgage.

2. Pay Stubs covering 1 month.

3. Most recent two months of (bank) statements for any account you intend to list on the application. We need all of the pages, not just the summary page. If the statement says Page 1 of 5 on the first page we need all 5 pages, even if the last one is blank. Hint: do not leave off any accounts, the automated system counts funds even if not used as down payment, so include retirement, 401k, IRA’s etc.

4. A copy of the sales contract if you already have one, if you are selling a home we will also need a copy of the contract on the one you are selling.

 Self Employed – For borrowers that are self employed or own more than 25% of the company they work for we will need all of the items above plus:

 1.Year-to-date earnings

2. Two years corporate tax returns

3. Year-to-Date Corporate Profit & Loss

 Divorce – If anyone that is going to be on the loan is paying or receiving child support or

alimony we will need a copy of the divorce decree and property settlement agreement.

 Bankruptcy – If anyone that is going to be on the loan has filed bankruptcy within the

previous 7 years we will need:

 • Discharge of bankruptcy

• Schedule of creditors (secured or unsecured)

• Detailed explanation from the borrower (I help with this)

 

Fax the Support Documents to: (502) 753-4727 (No cover sheet needed).

Or scan and email them to: JSimms @ cmcloans.com

My goal in sharing these Helpful Hints is to make your experience as pleasant as possible. Doing it the right way from the beginning is only way to make this happen.  One missing page on one document stops the process, take time to gather all of the pages on the front end.

Sep 09

Mortgage Update – Sept 9 2012

Sorry, haven’t posted in a long time, been crushed at work.  Long days, even weekends in the office trying to get ahead of the game.  The local real estate market has improved a little but not as much as we would like to see.  However, last month we posted an all-time company funding record for a single month!

Most of my closed transactions last month were purchase transactions instead of refi’s.  I believe part of the spike in closings can be explained by two things, less competition and the fact that we hired some very good staff that was laid off by other lenders.

It has been a learning period, the mortgage industry continues to change and the timeline to close a loan has increased for many lenders, even us.  Our timeline has stretched about an extra week, better than most lenders that are taking 45 to 90 days to close one.

Something odd, I have been approached a couple of times a week for the last quarter by recruiters, something that hasn’t been the case for a couple of years.  Sounds like other lenders do not have the necessary staffing requirements to move the pipeline.  Too bad for them, we increased the number of people over the last two years while other lenders laid off.   We picked up some real talent that were let go because of downsizing or going out of business entirely.

Mortgage Turn Times Slowing Down

 

What is causing the slowdown?

I have already mentioned the lack of staff that is plaguing other lenders.

In addition, the mandatory SAR’s initiative is clogging the system. Volume is up, so are closing conditions.  SAR stands for Suspicious Activity Report.  Until last week these reports were voluntary, now they are mandatory.  They are causing the underwriters to be super careful.   When an underwriter reviews the loan application they post-closing conditions, items that must be addressed prior to the closing.

I am receiving almost DOUBLE the number of closing conditions that must be cleared before closing!  Think about this for a moment, I am focused like never before on doing the absolute best application possible and receiving twice the number of conditions.  What?

Items that would not have been a big issue in the past are derailing loan applications.  DE underwriters will not sign off on anything that is questionable, PERIOD!

They are not willing to risk losing their DE Certification over a missing page on a bank statement or something equally silly.

Helpful Hints

The primary purpose of this web site is to offer helpful information to anyone that is buying or selling a home including the Realtors that represent them.  I have started collecting a list of helpful hints that I email to my clients when they apply for a loan.  I will begin to post a copy here and create pages in the Buyer’s section that elaborate and address as many issues as possible.

 

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%.  

 

Apr 11

Mortgage Application Support Documents – New Page Added

We just added a new page to help home buyers with the support documents that are needed to process a mortgage loan.  Being prepared eliminates most of the stress with the home buying and financing process.  Knowing what to expect helps the buyer and makes the process much simpler.

The single largest delay in processing a mortgage application is trying to obtain missing documents or pages that are missing from the documents.  This checklist will help eliminate the problem for the buyer that wants a Quick and Easy Process.

 

May 01

5 Ways to Commit Mortgage Fraud

Catchy title huh?  This article is not a how to guide, it is a candid commentary on some of the widespread crimes perpetrated by homebuyers during the financing phase of their real estate transaction.  I worded it this way because most of the people that commit these crimes are in denial.  They know it is wrong to misrepresent anything in order to be approved for a mortgage loan but do it anyway. There are two reasons they take the risk; 1) the desire to own a home is compelling  2) the industry implies it is okay to do it, wink, wink. 

It is NOT okay, you could loose the home, go to jail for a very long time, be fined an outrageous sum, or worse, all three!  Yet these things happen somewhere every single working day.  

  1. Credit Repair – There is an entire industry built on charging people to dispute accurate information on credit reports that is negative in nature.  It is wrong to do so! 
  2. Misrepresenting Funds to Close – Most common is on FHA loans, calling a loan a gift.
  3. Income – This one may be the craziest, misrepresenting income, up or down in order to qualify.  
  4. Work Around – Asking the loan officer to help circumvent anything.
  5. Occupancy – There is nothing ambiguous about “Owner Occupied” it either is or isn’t.

  Let’s look deeper at each of these. 

 Credit repair in the traditional sense is simply fraud.  The credit repair industry tells people to dispute anything that is negative on their credit report.  If you lie about something in order to qualify for a mortgage loan it is wrong, period!  That is what a dispute is if the negative information is accurate, a lie.  It is not the same as pleading not guilty in court regardless of what the repair people say.  One is a plea, the other is bank fraud.

 The really bad thing about this one is everything is in writing which makes it easy to prove malice.  The same government that audits mortgage companies and loan applications is the same government that audits the bank that has a copy of your checking account.  The last sentence also applies to the rest of the list.

 The credit repair industry quotes one federal law that protects consumers from inaccurate information in their credit file.  While it is true this law places the burden on the creditor to make sure the information is correct, it was never intended to be used to misrepresent credit worthiness.  Everyone knows if you dispute everything negative a certain number of disputes will not be answered by the creditor.  That is what fuels the credit repair industry. 

 It does not matter who tells you this is legal, lying about anything in order to get a loan is fraud and there is no statute of limitations on fraud.  If your Realtor® or loan officer tells you it is okay, you are working with the wrong person. 

 The second item on our list is about misrepresenting the source of funds to be used at closing for down payment or closing cost.  A very large number of first time homebuyers are guilty of this one.  FHA allows a borrower to use gift funds for the entire amount needed at closing.  A gift is a gift, a loan is a loan.  There is a warning on the bottom of the FHA Gift Letter that makes if very clear any misrepresentation on the form is a federal crime, this applies to everyone.  

 That is just one example; I have had borrowers try all kinds of crazy things from cash advances on credit cards to taking out personal loans. 

 Next on the list is misrepresenting income.  You may believe this refers only to inflating your income, not true.  Some special loan programs are for moderate to low income borrowers.  I have received loan applications where the individual stated a lower income than what they actually earning.

 Another very common statement I hear goes something like this, “I am good for the loan because I have a lot more income than what is on my tax return.”   My standard response when I hear this, “You want to put in writing that you cheat on your taxes?” 

 Item 4 on the list usually pops up when there is an issue with something in the loan application.  The borrower will ask the loan officer how to get around the problem.  Structuring the application properly from the beginning is one thing, trying to circumvent a guideline is something entirely different.  This one is not easy to explain, laying the cards on the table is okay, trying to hide something or making it appear different isn’t. 

 The biggest question for the borrower on this item is: if the loan officer is willing to lie to his or her employer in order to close a loan, what are they willing to do to you during the loan process?

 Last but not least, owner occupied vs. investment property.  Most investors know interest rates and points are higher on investment property than on owner occupied homes.  The standard Fannie/Freddie mortgage form states clearly in section 6 that the borrower will take possession of the property within 60 days of signing the mortgage.  It also says it will be occupied as a principal residence for at least one year following possession.

 In the past week I have had two people inquire about financing a second home in Louisville.  Okay, we are not known as a huge market for second homes, it’s possible but not common.  Turns out both of them wanted to buy a home to rent to a relative; this is an investment property, not owner occupied.  Before any loan officers out there bust my chops, I know FHA allows non-occupying co-borrowers.  That is not what these characters wanted to do.  They did not want their relatives on the deed.

 Another guy a few months ago wanted to buy a home for his girlfriend; again he did not want her on the deed.  I thought it was funny he was willing to borrow money but did not feel strong enough about the relationship to put her on the deed.   

 Contrary to what you may read about the mortgage industry, the rules are very liberal.  The minimum threshold for credit scores are very low, the maximum debt load for monthly payment is very high.  The best way to view the mortgage guidelines is they protect you a lot more than they do the lenders.  A default on your home is 100% for you, it is only a fraction for the lender.

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