Tag Archive: real estate

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.

Jul 23

Sub-Prime Mortgages

Sub-Prime Will Return

The overall condition of the economy is creating an environment that will hasten the return of the sub-prime mortgage.  I was never an advocate of the sub-prime industry but it served a need.  That need is stronger today than ever before.  I predict sub-prime mortgages will return soon.  They may be called something different, may be touted as new and improved, but a rose is a rose.

There are many factors that will push my prediction forward.  Unemployment is very high with disposable income being the lowest it has been in modern time.   This is causing many homeowners to defer maintenance on their home opting instead to put food on the table.

Home inspectors are being super critical as their industry matures, causing many pending transactions to implode.  Not long ago the National Association of Realtors reported the highest fall out ratio since they have been keeping stats.   The number of real estate listings reported as a pending sale then changed back to an active listing is where that bit of information comes from.

Buyers and sellers are both more difficult than I have ever witnessed prior to the last couple of years.  Prior to last year I never had a buyer and seller disagree on a day and time for closing the deal.  This year it has been difficult to get both sides on the same page on any subject, let alone a closing date.  I mentioned in an earlier post that people searching for information on Power of Attorney or POA is the number one subject people are looking for when they visit this site.  They  just don’t want to attend the closing!

Another factor is the middle ground on credit scores seem to be disappearing.   I see either very high or very low credit scores, not much in the middle.  This is a personal observation; I haven’t read anything that supports this.  You would expect a general distribution, a third low, a third in the middle and finally a third on the top.  Not what I see these days, either very high above the top credit tier or very low below the minimum threshold.  Last week I saw several above 800 or in the high 700’s and an equal number in the low 500’s dipping into the high 400’s with none in the mid 600’s.

Finally, the wreckage caused by foreclosures and loan modifications will linger for at least a decade.   The buzz topic has been short sales, but in reality they are a very tiny slice of the pie.  They are a symptom of the times but I don’t think they are as serious to the overall market as the other factors mentioned above.

All of the dynamics mentioned here have one result, stress.   Sellers want to sell and buyers really want to buy but never has it been as stressful even back in the days of very high interest rates.

As the gap widens the mortgage industry will figure out a way to serve the demand that is having trouble moving above the minimum credit score threshold.   That segment of the buyer pool is the only one that is expanding.  The market conditions are not pushing people upwards, only down.   Individuals that have never been late on credit obligations are suddenly finding themselves below the credit thresholds.

The Solution

I don’t have an answer to the overall problem, but I see lots of opportunity.  A few people are doing very well, but most are not.  What I know for sure is the market has changed.  People have changed.  Those that are moving forward have a chance to improve greatly, interest rates are low and prices are good.  It has never been a better time to buy in the last 50 years.

Part of the solution to get things moving is going to be the return of some of the aspects of the sub-prime industry.  I am not calling for a movement, just predicting this is going to happen.

Jul 15

Power of Attorney AKA POA

What is a Power of Attorney?

A Power of Attorney is a written document authorizing one individual, referred to as the Attorney in Fact to act on behalf of another regarding legal matters like signing a contract, deed or other instruments.  The signature of the Attorney in Fact is binding on the part of the individual that conveyed the POA.  There are different forms of POA’s, they can be general and all inclusive or specific for a single transaction.  They must be notarized to be binding.

In theory, when an Attorney in Fact signs on behalf of another it is the same as if the individual signed for them self.  Obviously a POA is a very unique document and requires attention to detail not only in content but in form as well because the agreement signed using one is binding on the party that is not signing on their own behalf.   If a mistake is made it could be a binding error.

When to Use a POA

You should not use a POA unless absolutely necessary.  If a contract or document is important enough to require a signature it should be signed by the individual that is bound by the terms of the agreement.  There are times when this is not possible, that is when one should be used.  For example, an individual that is in the military and is stationed overseas would not be able to attend a real estate closing back home, a POA would be required if the closing is to proceed.

Other examples of when a POA is appropriate would be for an individual that is senile or incapacitated by illness or injury to the point they are not able to conduct their affairs.  In events like these it may be necessary to obtain a court order appointing a relative Attorney in Fact or some other legal capacity.  Another example, in the event of relocation where one spouse moves in advance while the other remains behind to complete the sale of their home.  There are many circumstances when using a POA is appropriate.

When Not to Use a POA

A power of Attorney should only be used if you can absolutely not be present for signing the agreement.  I am not an expert in legal matters, only those regarding the real estate mortgage process.  In the past year I have had more buyers and sellers inquire about using a POA than in the previous 20 years combined.  This is very strange.

In every case this year the request to not attend a closing was not because of distance but simply because they individual did not want to attend the closing.  It doesn’t matter what you would rather do, nothing is more important financially than a real estate closing.   Think about it, if you earn $20 an hour compared to buying or selling a $150,000 house, which is more important?  Take a long lunch hour or use a sick day and attend in person.

One lady that was selling a home told me she just didn’t want to be in the same room as the buyers.  Okay, I can understand that, but there are other ways to accomplish non-contact.  Recently I had a buyer in one room the sellers in another room and the Realtors wanted a little privacy for a chat so we put them in yet another room.  That was a first for me.  I have put many divorcing couples in separate rooms but never used three rooms until then.

Using a POA for Real Estate is NOT Automatic

Lenders do not want the buyer or seller to use a POA.  Especially when it comes to the buyer signing the note and mortgage, most lenders want an original signature of the person that is borrowing the money.  Do not assume that you can use a POA as a buyer or seller.  This is something that should be reviewed and approved long before arriving at the closing.

The actual POA document should be reviewed in advance by the closing attorney or Title Company that is going to officiate the closing.  In addition to this step it should also be pre-approved by the lender long before setting a closing date.  Power of Attorneys are custom documents, no two are exactly alike.  There are different types, some are general in nature while others are specifically designed for a single transaction.  A POA for a real estate transaction should be very specific, spelling out who, what, when, where and how.

Obviously, if an attorney is acting on behalf of a title company they will be very picky about the content of a POA.

Who Can Act as Your Attorney in Fact?

The best individual to act as your Attorney in Fact would be your spouse.  Next would be a very close blood relative, a parent or sibling.  Anyone you appoint that agrees to accept the responsibility is allowed as long as they do not have a financial interest in the transaction.  For example, a seller should not act on behalf of the buyer regardless of the relationship.

What about your Realtor?  This is another bad choice because they are receiving a commission from the sale.  It happens, but it is not a good choice and may not be allowed by the lender or closing attorney.

How about a friend or co-worker?  These are not as good as a close relative but are better than the Realtor.  Keep in mind if something goes wrong you are stuck with the consequences.  Is that really something you want to put on the shoulders of a close friend?

Helpful Hints for Using a POA

If you must use a POA have it prepared by the attorney that will close the deal.  This would eliminate the document being rejected by the closing attorney over form or format.   If this is not possible have it prepared and signed well in advance and provide the closing attorney a copy as early as possible, do not wait until the day of closing!

If it is not possible to attend the closing the documents may be sent overnight to the absent party, they can sign in front of a notary and returned to the closing attorney.

I hope this information is helpful.  If you have questions just give me a call, my direct line is (502) 753-4127.  If you found this information interesting please share it with others.

Jul 09

Searches Leading to The Hub

From POA to Me

Behind the scenes this web site tracks where my traffic originates and creates a list that shows what search terms brought them here.  Thousands of terms and phrases are on the list but a few dominate the top.  A few of the leaders are amusing, some are flattering (specifically looking for me) and a couple are disturbing.

Number one on the list and a winner by a long shot is Power of Attorney or POA.  It shows up more than twice as often as any other search, strange because I advise people not to use a POA if it is avoidable. 

The other words and phrases that head the list remain fairly constant over time with the top three staying the same month after month.  Searches for me personally slip back and forth between the fourth and fifth slots, rotating with the one that I find disturbing, Mortgage Fraud.  People actually search for “How to commit mortgage fraud.”  Good grief!

Here is the top five for the previous 12 months:

1.  Power of Attorney or POA

2.  Creditxpert

3.  Down Payment Assistance Kentucky

4.  Jim Simms

5.  Mortgage Fraud or How to commit mortgage fraud

Some of the phrases about fraud were alarming; many were questions beginning with “how to” while others were obviously worried about crimes they already committed.  

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