Tag Archive: Closing the Deal

Oct 27

Mortgage Helpful Hint #8

 

You and Your Money are Both Needed at the Closing.

 

If everyone that is signing the note and mortgage live in the town where the closing is taking place then they need to attend the closing.  One of the most common questions asked by both buyers and sellers is how do I get a Power of Attorney for the closing? You don’t. 

We do not want a signatures by Power of Attorney (POA) on the note and mortgage, original signatures only!!!  The only exceptions are out-of-town work assignments.  If you are in the military stationed overseas that would be a valid issue.  If you just don’t want to attend the closing that isn’t good enough.

All of us have worked very hard to get to this point so the closing isn’t a surprise.  You must attend the closing in person even if it requires taking off from work.  If you have small children get a baby sitter.  We love kids too but you are signing some very important documents, pay attention.  The $20 of missed work or paying a baby sitter pales in comparison to messing up the closing on a mortgage.  It deserves your undivided attention for about 30 minutes to an hour.  Redrawing all of the mortgage documents can take days, do not let this happen to you.

If your money is in out-of-town bank account it can take a few days for the money to arrive once you start the process.  A large deposit from an out-of-town institution to your local bank account might cause your local bank to freeze your account until the funds have cleared.  This will stop everything, don’t wait until the very last-minute to assemble the cash needed at closing.

But remember, don’t move money around without my help, all funds must be sourced.  There are right ways and wrong ways to move money, let’s keep your stress level low by doing it correctly the first time.  

 You and your money are both needed at the closing!!!

Please send a link to this page to any of your friends and family that are planning to buy or refinance a home.  They’ll be glad you did.

 

Oct 24

Mortgage Helpful Hint #7

Clear-to-Close

The mortgage part of the transaction CAN NOT CLOSE until the underwriter has signed off on everything and changed the status from processing to Clear-to-Close!

Here is How it Works

Step 1.  Prequal Application.

Step 2.  Flips to a real deal once a property is under contract and we have the support documents.

Step 3.  Loan officer and processor gather and package all of the needed support documents, title report and appraisal then submit to underwriting.

Step 4.  The underwriter reviews everything in the file and approves the loan subject to clearing ALL of the conditions.

Step 5.  All loan applications approved by an underwriter have conditions that must be cleared before closing, get a new pay stub, fix the typo, have the borrower explain the deposit, etc.  An endless list!!!  They take time to address…

Step 6.  Gather all the conditions from Step 5 and submit to the underwriter.

Step 7.  Underwriter reviews the conditions and changes the status to Clear-to-Close.

Step 8.  A closing date is set and a closing package is sent to the closing attorney.

Step 9.   The closing attorney prepares all of the documents needed at closing, including the closing statement which contains the final number you will need at closing.

Step 10. CLOSING!!!!

 It is easy to see that all of these steps take time to complete.  And Steps 5, 6 & 7 might be repeated a couple of times.  For example, if the underwriter asks for a new bank statement and the one we receive contains cash deposits then something else is needed, source the deposits.     

 

The single biggest glitch is getting support documents from the borrower.  Once it is known that a document is required and requested from the borrower, every day that we do not get the necessary form is one day the timeline is pushed back. 

 

Every document in the file must be the most recent version prior to the closing date.  If you get paid every Friday and on Monday we request last Friday’s pay stub and you do not send it over until the following Friday then a week is added to the timeline and we’ll need another pay stub in addition to the one you sent.  If you think this drives you crazy, try sitting in my chair for a week.  If you don’t send it then we don’t have it!

We get outdated bank statements with pages missing, or tax returns with missing schedules.  I’ve had people fax me blank pages, guess what, I can’t tell who sent them if they are blank.  Take your time and help me help you.  I know your job and family are important, so is buying a home.   

Important!

Home Buyers Back Themselves Into Corners!!

If you set a closing date prior to the status being changed to Clear-to-Close then you are backing yourself into a corner.  We will do everything we can to deliver on time but EVERY STEP must be completed BEFORE we can close.  A Target Date is not set in concrete until we are Clear-to-Close.

 

The best strategy is to give yourself plenty of time, get everything finished then set a closing after it is Clear-to-Close.  No one does this but it is the only path that won’t raise your level of stress.

Please forward this email to any of your friends and family that may be planning to buy or refinance a home.  They’ll be glad you did.

 

Oct 23

Mortgage Helpful Hint #6

Cash to Close

 We have already covered in Helpful Hint #2 that EVERY PENNY used at the closing must be sourced (show where it comes from).  Be ready for this well in advance. 

 If you show up at closing with a check drawn off of an account we have not verified then we can not close!

 We cannot accept CASH at closing, I had a guy show up with a briefcase full of cash once, did not close, took weeks to fix before he could close. 

The check you bring to closing must be drawn off YOUR account from funds we have sourced, made payable to yourself for the exact amount needed at closing.  It is okay if you bring too much, the closing attorney will refund the difference at closing.  It is not okay to be short on funds at closing.

 There are a couple of exceptions to checks allowable only from your account.  If you are selling a home right before buying another home is one exception.   Do not deposit the check you receive from the first closing unless there is plenty of time for it to clear (a week or more).  If you deposit more than $5,000 in your account there is a very good chance your bank will freeze your account until the check clears and they receive the funds from the other bank.  Your bank will not certify funds until they have them from the other bank.  Under this circumstance you should bring the net proceeds check from the first closing to our closing.

 BUT DO NOT assume the closing attorney preparing your deed and mortgage will accept an escrow check from another closing attorney they do not know.  If you intend to bring a third-party check to closing and endorse it over then we need to clear that PRIOR to our closing.  

 Another exception is when the buyer is receiving a gift from a blood relative, that check can be from the donor’s account.  But don’t wait until the last-minute, this is something that should be covered very early in the process.  If the donor proves funds from one account but writes the check from another…BOOM! Your closing will explode.

 Every Penny must be sourced if you are using a mortgage to finance the purchase.  Do you think I care if your money is buried in a fruit jar under your neighbor’s house?  Absolutely NOT.  These are Federal Regulations, not my rules.  All I am trying to do is help you get from where you are to where you want to go without stepping in a mess.  Call me before moving money around, not after.  I can’t fix something that is already messed up.   

Please link this page to any of your friends or family that are planning to buy or refinance a home.  They’ll be glad you did.

Oct 17

Mortgage Helpful Hint #5

Do Not Change Jobs

Okay this one sounds silly but it happens often enough I included it on the list.  Remember we are taking a snapshot of your position, your ENTIRE POSITION,  financial, employment, credit, etc.

 ANYTHING that changes has the possibility of changing the picture. 

 Probationary periods on a new job can train wreck a real estate mortgage transaction.  So could a lower pay scale, or different type of job, etc.  ANY change, even one for the better should be discussed BEFORE doing it.

 My goal in sharing these Helpful Hints is to make your experience as pleasant as possible. 

Oct 16

Mortgage Helpful Hint #4

Stay Home During Mortgage Processing

Last month I had 5 mortgage closings delayed because the buyer went out of town the week before the closing.  Four of them did not return until the day of the scheduled closing!!

The underwriter is going to review everything right before the closing even if the loan was approved a week or two before.  They will ask for SOMETHING. 

You can’t furnish what she/he asks for if you are mountain climbing in Bora Bora. 

If you go on vacation the week before closing and run up the balance on a credit card you loan might be in jeopardy and may not close.  See Helpful Hint #3 on New Debt.

If your job requires travel then you are probably better prepared for this Hint than most buyers, do not quit your job just to stay in town!

The mortgage industry is going through a period of extreme scrutiny.  This means a mortgage loan cannot close with loose ends, every “T” must be crossed, etc.  I suspect it is a stressful time for many home buyers causing them to have a desire to flee.  

If you follow the recommendations on this site the stress level will drop.  If you leave town with loose ends in your mortgage application the stress level will increase ruining the vacation.  Wait until after the deal is closed, then relax on a much deserved break.  

My goal in sharing these Helpful Hints is to make your experience as pleasant as possible.  If you want to finance a home in Kentucky and want be pre-approved the online application the quickest way to get started.  It is free, will give you access to all of the information you need, we even pay for the credit report.  No application fee, no cost or obligation to be pre-approved for your next mortgage.  The link to the online application is below my photo.

If you have friends that are planning to buy or refinance a home be sure to tell them about the Helpful Hints.  They’ll be glad you did.      

Oct 14

Mortgage Secrets ASAP

Changes to the Mortgage Hub

A very large percentage of home purchase transactions in our area fall apart during the escrow period and never close.  Often the problem is during the mortgage application process.  I am trying to help buyers and sellers prevent this from happening to their transaction.

There are four main reasons for this problem:

  1. Buyers not being fully preapproved for financing before making an offer.
  2. Issues with the appraisal.
  3. Condition of the property.
  4. Unrealistic expectations of the parties.

If we study all four of these problems it is easy to see they could be avoided with a little advanced planning, research or effort.  That is the reason I post the behind the curtain information on this site, to help anyone that is trying to buy or sell a home.  I want you to be able to get access to the information you need as quickly as possible. I think you will enjoy the new speed of the page downloads.        

Mortgage Hub Traffic

The number of people visiting this website has increased a great deal over the past six months requiring some major changes to the site.  I moved the site to a newer, faster server, made many changes to the lay out and streamlined the down load process.  The result has increased the download speed to 5 times faster.  It went from a low “C” page speed rating from GTmetrix to an “A” rating and I am still tweaking the little things. 

The work going on in the background is to make your experience at the Mortgage Hub as beneficial as possible.  There are many secrets about arranging a mortgage on this site.  The ongoing Helpful Hints series is a treasure trove of valuable points that will help make the process go smoothly.   Combine these with the Do’s & Don’ts page and the loan application process will be a snap.

My secure online application site is here if you need help with a mortgage loan in Kentucky.  

Aug 05

Power of Attorney Epidemic

POAs in Louisville Kentucky

Just for fun I searched the Jefferson County Clerk’s online database to see how many Power of Attorney documents there are in the public record.  Okay, I can’t count that high, but it is easy to get an idea by searching for a particular time period.  This is how I searched, first, selected to search by Party Name but left the name boxes blank, selected date(s) to search and in the Doc Type box scrolled down to POA.

If you are searching a large time line there are five listings per page, so just add 5 for every click on the Next Page link.  I looked at a recent random week, Monday to Friday and drum roll, there were 214 document tabs.  Each document will have at least two names, so the 214 listings probably represents 107 Power of Attorneys.  It is possible for one individual to name more than one Attorney-in-Fact but most do not.  Now that I think about it, naming more than one individual and requiring both to sign is a good safety measure.

Let’s go with 107 POAs filed in one week.  That means that slightly over 21 people per day signed away some of their rights to another individual.  Many of these were elderly individuals handing over their assets to the care of a child.  Some of them will be ripped off by their own children.  Ask any bank teller, adult children frequently steal money from their parents, it is a dirty little banking secret.  Why don’t you see it in the news every day?  Because the parents refuse to prosecute their children.

That Mushroom Cloud is not a Nuke, it’s POAs

I have been writing about this a lot lately because almost every deal I close one side or the other tries to use a Power of Attorney instead of attending the closing themselves.  It is a very strange phenomenon, why the explosion of POAs this year?  Something has shifted, I have been asked about using a POA more times in the last six months than the previous 20 years combined!

I do not want the mortgage and note signed with a POA, period. With all of the trouble in the last couple of years with the validity of mortgage documents no lender in their right mind wants the borrower to skip signing the note.  That is crazy!

What I think is going on is a combination of several factors that have never coincided in the recent past if ever.  A decrease in property values in some areas, a decrease in the number of qualified buyers, cash flow problems on both sides all add stress to a real estate transaction. Add to that a very high unemployment rate and some people that have jobs are simply scared to miss even an hour of work for something as important as buying a home.

Jun 23

Overpriced Listings

Twice this week I ran across buyers that were attempting to purchase properties that were obviously overpriced. Declining property values have been a growing problem for everyone in the industry for the last few years.  Issues with appraisals run neck-and-neck with problems regarding the condition of the properties. 

The reduction in property values created an almost cottage industry called short sales.  Short sales have been around for as long as there have been mortgages but they have never been as main stream as they are today.  Lenders and the real estate industry were not prepared for the magnitude of the problem.  They have been playing catch up from the very beginning.  

A short sale is what happens when the value of the property is less than the balance of the mortgage and the seller asks the lender to accept less than is owed so the property can be sold.   Explaining this to a seller is not an easy task for a Realtor.  The idea that real estate is the best investment because “They don’t make any more of it” is hard wired in to all of us. 

Not all overpriced listings are an attempt to avoid a short sale, in fact most are simply an indication of greed.  The seller just wants more than the property is worth.

The rules for lending are very specific regarding the value of the real estate being pledged for a mortgage.  The lender must use the lower of the sale price or appraised value when computing the loan-to-value for the mortgage.  This doesn’t mean the buyer cannot pay more for the property than it will appraise for, it simply means they cannot use the inflated price for calculating the size of the mortgage.

How Mortgage Amounts Are Calculated

Let’s assume a property priced at $110,000 but will appraise for only $100,000.  On a standard conventional fixed rate mortgage the minimum down payment is 5%.  Okay, that is the flip side of saying the maximum loan amount is 95%.  But the definition is 95% of the sale price or the appraised value whichever is less.  If the property only appraised for $100,000 then the maximum mortgage is $95,000.  The buyer could still purchase the property for $110,000 but the amount needed for down payment would be the difference between that figure and the maximum loan amount which works out to be $15,000.  

If the property had appraised for $110,000 then the required down payment in our example would have been $5,500, a far cry from $15,000.  This is the primary reason most properties that are priced above the market value will not be sold at the inflated price. 

Some Realtors Will Take a Listing at Any Price

Listings are inventory and the more inventory a Realtor has the more inquiries they will receive from buyers.  Some Realtors will list a home at any price while others will not.  It is a numbers game for those who choose to ignore the comparable sales.  If a buyer calls about a Realtor’s overpriced listing the agent may be able to sell them another home that is not overpriced.  Although there is nothing illegal about taking an overpriced listing it doesn’t help the owner of the property or the marketplace only the Realtor taking the listing.  

The seller is hoping for a miracle, somehow their property will sell for a significant amount above what similar properties are selling for.  Even if they are lucky enough to find a buyer that loves the property a problem will occur when the buyer applies for a mortgage.  Okay, the seller hopes a cash buyer will step up that doesn’t need a mortgage.  Possible, but cash buyers think they are special because they are paying all cash and therefore deserve a bargain, not compatible with the seller’s plan.   

What Can a Buyer Do?

This article began because a couple of buyers asked what to do because they found a property they liked but the price was significantly above the market value.  There is actually a fair solution when you receive a counter offer from the seller that is higher than what you believe is the actual value.  Accept the seller’s counter offer provided the seller or the listing Realtor pays the buyer’s lender for the appraisal upfront.  

Oh man!  Can I kick a hornet’s nest or what?  Ask the seller’s Realtor to pay for the buyer’s appraisal?  You must admit that is out of the box thinking.  Leave it up to the selling side, let them decide who is going to pay it, or maybe they split the cost, it doesn’t matter to the buyer.  This little maneuver will at least initiate a serious dialogue between the seller and the listing Realtor about the true value of the property.

I had to toss the listing Realtor into the mix because the problem never would have surfaced in the first place if they had not listed the property for more than it was worth.    

The clause would also indicate that in the event the property does not appraise for the agreed upon price the seller will have the option to lower the price to the appraised value or release the buyer from the contract.  This solution protects both sides; the buyer is not forking out money for the appraisal on an overpriced property yet both parties have the possibility of discovering how much the property will appraise for.  Win, win.   

Please share this article with others if you like out of the box thinking.

 

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!