Tag Archive: mortgage

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We get outdated bank statements with pages missing, or tax returns with missing schedules.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.  

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 03

Mortgage Helpful Hint #2

Mortgage Application and Cash Deposits

I would take cash in a brown paper bag, but the Feds won’t allow that in a real estate transaction involving a mortgage.  I want this to be as easy for you as possible so this Helpful Hint tries to unravel the mystery behind sourcing funds needed to close the deal.

We must verify were EVERY PENNY comes from used to close a transaction.

Money used for Down Payment, Closing Costs and setting up the Escrow Account MUST be sourced.  It cannot fall from the sky!

Do not deposit anything in your bank accounts without support documentation!!!

NO CASH DEPOSITS  

Cash is very difficult to source!  So are transfers from one account to another if we do not have copies of both accounts.  Every online transfer must show the money being taken from one account and going into the other.  Try NOT to have a bunch of transfers back and forth, the less activity the easier it is to sort out and understand.  If you can’t explain it to me then I can’t explain it to the underwriter…

Best practice is discuss it before doing it, call me BEFORE making a deposit that doesn’t come from regular payroll deposits.  Most banking transactions are very easy to document on the front end, not so much after they completed, especially if they documented incorrectly.

Keep copies of everything.  Checks, bank statements, pay stubs, deposit slips, anything that involves money, keep a copy!  Get a file folder or large envelope and keep everything like this in one place.  The underwriter is going to ask for a copy of SOMETHING.

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

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.

 

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.

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