This week brings us a ton of information from 6 different loan officers.  I went out and asked six different loan officers to write a few paragraphs addressing the topic What Every Loan Officer Wished Their Home Buyers Knew.

After the mortgage crisis during the past 10 or so years, lending has become tight.  One of the more critical pieces of buying a home is getting financed.  There is a lot that goes it to getting a home loan as our loan officers point out.  But at the end of the day find a mortgage officer that is accessible and knowledgeable to walk you through the process.

What Every Loan Officer Wished Their Home Buyers Knew

Luke Skar, Intlanta Mortgage – Madison

To put it mildly, the mortgage industry is filled with specialized terms and abbreviations that can cause a massive headache. Things like APR, Good Faith Estimate, Lock-In Term, Points (is this a sport too?), etc. all seem to form a type of foreign language. That is why lenders want to explain things in detail and insure that borrowers are doing the right thing.

Along those same lines, there are things that every mortgage originator wished their borrowers knew. Understanding these ideas can actually make the loan process much easier.

• Don’t Hold Out ANYTHING – Mortgage lenders will ask borrowers to provide a wealth of financial information. But for some reason, many borrowers refrain from giving all the details to the lender. A CD passed down from a relative, some old stock investments, or a 401k from a previous job are just a few examples of things that borrowers will forget to tell their lender. Tell your mortgage lender about all your financial details and let the lender decide what needs to be used.
• Call your lender first – It makes sense to speak to a lender before picking out a home. The lender can review all of your information and determine the best loan for your situation. The loan officer can also help you decide on a price range. But more importantly, you should contact your lender before making any financial decisions. This means taking out a new loan, paying off an existing loan, opening or closing a credit card account or anything else that involves your money. Many pre-approved borrowers have disqualified their home loan application by making a bad decision just before they tried to buy a home.
• It takes a LOT of people to close a home loan – As mentioned earlier; the mortgage world is a whole industry unto itself. This is due to the fact that each and every mortgage loan can require the services of a number of professionals. Check out this short list for the people used by a typical purchase loan.
  • Loan officer
  • Real estate agent for the buyer (could be a second agent involved for the seller)
  • Insurance agent for the homeowner’s policy
  • Real estate appraiser
  • Home inspector
  • Pest/termite inspector
  • Title research agent
  • Title closing attorney
  • Local courthouse registrar for property taxes

This list does not include any other people that may be involved on a case by case basis. For instance, one home may need a few minor repairs that require the services of a plumber, electrician, roofer and carpenter. And last but not least there is the moving company and the utility companies that need to provide electrical, water, cable, phone, internet and garbage service for the new place.

Throughout the whole mortgage process, keep this one thing in mind. The mortgage originator is on your side. Although it may seem intrusive or exhausting with the various questions and requests, the mortgage originator is truly trying to do everything in their power to help you get your home loan.

This was written by Luke Skar of Inlanta Mortgage – Madison which serves Wisconsin, Illinois, Minnesota and Florida. Since 1993 Inlanta Mortgage has provided award winning customer service to clients who need to purchase a home or refinance an existing mortgage.

Luke serves as the Social Media Strategist for Inlanta Mortgage. His role is to provide original content for all of their social media profiles as well as generating new leads from his website MadisonMortgageGuys.com NMLS ID #1016

Corey Parker, Annie Mac Mortgage

I have been in the mortgage industry for 14 years now and I can remember a time where there were plenty of homes on the market and rates stayed relatively flat for extended periods of time. This was great for buyers because there was plenty of inventory to choose from and they could take their time on deciding what house to buy knowing the loan terms stayed similar to the initial pre-approval conversation.

Fast forward to 2017 and things have certainly changed.

The real estate market is constantly changing and we are now in a low inventory-extremely competitive market. I see potential buyers looking at homes, falling in love with the home, then want to get pre-approved to purchase the home.

This sometimes causes buyers to miss out on making an offer on the property because the house goes under agreement BEFORE they ever get approved.

I wish borrowers knew to get pre-approved before going to see houses. If you are walking through an open house already approved to purchase you waste no time in submitting your offer- giving you a chance to have your offer accepted. Also, we are in a volatile market where rates are changing daily.

If you were pre approved months ago you could be in shock how the changing in rates can have an affect on your mortgage payment. It is always a great idea to rerun numbers at the time you are making the offer so you know what to expect for a payment with current day interest rates.

Cory brings over 14 years of mortgage experience in finding solutions for clients with all types of borrower profiles. He has held numerous origination positions ranging from direct retail mortgage sales to branch level management and has national mortgage experience in many markets throughout the United States while specializing in the New England area.

A homeowner and real estate investor himself, Cory knows the business from both sides of the transaction.  Call Cory at 860-874-3538

John Marroni, NewFed Mortgage

Breaking the I.C.E.

The mortgage industry has done a tremendous job as taking something as simple as borrowing money and making it extremely complicated.  It is not that complicated.  It is very simple.  You borrow money at simple terms; and you pay it back.  Just like you would with any other type of loan (personal loan, automobile loan, submarine loan, etc.).

When you borrower money for a home, you pledge the loan with the property. That pledge is called a mortgage.  The NOTE you sign are the terms and conditions.

What has made this complicated is determining the likelihood and ability you have to make these monthly payments.

That is where the underwriter comes in.

I call this breaking the I.C.E. (Income, Credit, Equity)

• Income: How much do you make and will it continue?
• Credit: How is your ?
• Equity: How much money are you putting for a down payment?

Once these three are evaluated, the underwriter can determine whether you are APPROVED for a mortgage.

So let’s talk briefly on these three points:

INCOME:  You do not need a job to get a mortgage; however, you do need income.  He underwriter want to see that the income you receive will continue for at least 3 years.

The following are some examples of NON-Employment Qualifying Income:

NON – Employment Qualifying Income

1. Notes receivable
2. Capital Gains / Dividend and interest
3. Royalty payments
4. Trust income
5. Pension / Social Security
6. Survivor and dependent benefit income
7. Long-term disability income
8. Retirement account distributions as income
9. Social Security Supplemental Security Income
10. Foster-care income
11. Alimony, child support or separate maintenance payments
12. Asset Depletion

CREDIT: The underwriter will review your credit history to determine how credit worthy you are.  You do not have to have perfect credit to obtain a mortgage.

The following is an illustration of extreme significant derogatory event wait time:

BANKRUPTCY

….Ch 7 – 2 years discharged (1 year for extenuating circumstances)

….Ch 13 – 2 years discharged for FHA and 1 year for VA loans or extenuating circumstances

FORECLOSURE

Need to wait 3 years for FHA and 2 years for VA (1 year for extenuating circumstances)

SHORT SALE

Need to wait 3 years for FHA and 2 years for VA (1 year for extenuating circumstances)

EQUITY:  This is the amount of money you will use for down payment

If you are a Veteran, the down payment requirement is $0. (You do not need good credit to qualify (580 FICO score)

There are also portfolio lenders in the marketplace that have no money down products (Typically you need to have great credit to qualify)

If you are not a veteran and do not have the greatest credit (580 FICO score), an FHA loan may be the best program.  This program only requires 3.5% down payment; which can be a gift.

John Marroni has an extensive background in Mortgage Lending than spans back over 20 years. He has become a strong influence in the marketplace by always keeping his name top of mind to Customers and the Real Estate Community. John holds a bachelor of Science degree in Engineering from Northeastern University and formerly a partner and owner of New Boston Mortgage for 13 years. John loves to help families increase their net worth as well as finance their American Dream by taking time to educate each client he works with. Call John at 617-680-6495.

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Matthew Teeter, GoldCoast Mortgage

Cover Your Assets.

You have been saving up enough money to purchase real estate, and think you are ready to get started with the home financing process.  Not so fast.  There is a “Buyer Beware” technicality I like to call “Cover Your Assets” that you will want to be cautious of as it continues to turn some home buying dreams into nightmares.

However, these nightmares are a microcosm of a much larger and more profound nightmare.  Before beginning to try to understand, let us please observe a moment of silence in remembrance of all of the people who perished as a result of the unfortunate sequence of events that unfolded on the morning of Tuesday, September 11, 2001….

The September 11 terrorist attacks (also known as 9/11) killed and injured several thousands of innocent people, and caused at least $10 billion in infrastructure and property damage.

They were also the catalyst for the USA PATRIOT Act of Congress to be signed into law by former President George W. Bush promptly on October 26, 2001.  The acronym (USA PATRIOT) stands for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism.

Putting terrorism aside for a moment (and hopefully forever someday), the USA PATRIOT Act further expanded the focus of Anti-Money Laundering (AML) laws dating back to 1970 with the passage of the Banks Records and Foreign Transactions Reporting Act, also known as the Bank Secrecy Act (BSA) of 1970.

All of this has resulted in a new protocol called “Know Your Customer” that now requires banks and lenders to implement and enforce a Customer Identification Programs (CIP) to include certain risk-based procedures.  One such procedure is to verify and document all assets and their sources of funds to be allowed consideration and usage in a real estate transaction.

Here are direct guidelines detailing some basics used in verifying sources of funds from depository accounts for a few common mortgage loan financing programs as follows:

• Fannie Mae and Freddie Mac (Conventional): When bank statements (typically covering the most recent two months) are used, the lender must evaluate large deposits, which are defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan.
• FHA: For recently opened accounts and recent individual deposits of more than 1 percent of the Adjusted Value, the Mortgagee must obtain documentation of the deposits.  The Mortgagee must also verify that no debts were incurred to obtain part, or all, of the Minimum Required Investment (MRI).  For purchase transactions, the Adjusted Value is the lesser of the following:
  • Purchase Price less any inducements to purchase which are certain expenses paid by the seller and/or another Interested Party on behalf of the Borrower and result in a dollar-for-dollar reduction to the purchase price when computing the Adjusted Value of the Property before applying the appropriate Loan-to-Value (LTV) percentage.
  • Property Value.
• VA: Bank statements covering the most recent two months. Large deposits may require a letter of explanation and proof of source with additional documentation at the underwriter’s discretion as follows:
  • Verify liquid assets owned by the Veteran and/or their Spouse that are non-payroll or non-direct deposit(s) needed for total cash to close. Verify any liquid asset(s) that are significant or may have bearing on the overall credit analysis.

Underwriters may still question any large deposits considered to be excessive based on the type, pattern and history of accumulation by potential borrowers as it relates to their qualifying income.  Banks and lenders may also have their own “overlays” that entail additional requirements as well.

As always, consult with your trusted and licensed Mortgage Loan Originator (MLO) early and often to avoid potentially costly pitfalls and cumbersome delays later.  Otherwise, you may risk losing your deposit money and/or having to wait another month or so until your deposited assets are considered seasoned to meet the required most recent two months minimum verification standard.  Happy home financing! 😊

Matthew Teeter is a licensed Mortgage Loan Originator and Trusted Advisor for GoldCoast Mortgage. He has worked as a loan originator, processor, and servicer over the course of his tenured career.

His versatility allows him to bring a well-rounded approach to better assist throughout the process from application through closing. He is also a Notary Public for the Commonwealth of Massachusetts. Matthew can be reached at 978-922-4446.

Kathleen Wentworth, Leader Bank

While securing a loan can seem overwhelming, there are a few things you can do (and a few things you can avoid doing) to make the loan process easier;

Do’s:

• Advise your lender if any information you’ve provided changes. This can include change of address, job, salary, properties owned, etc.
• Keep records of all bank transactions, especially if you transfer large amounts from one account to another.
• Get a homeowners insurance quote as soon as you are under agreement. You will need a policy finalized at least 2 weeks prior to closing.
• Protect your credit scores. You’ll want to stay on top of any little change that may impact your loan.
• Keep a record of all passwords that you set up with the bank for electronic documents. You will need them a few times throughout the process.
• Contact your loan officer if you have any questions or concerns throughout the loan process. We are here to help and make the loan process easier!

Don’t’s:

• Change your job if possible. Switching jobs, becoming self-employed, quitting your job and moving to part-time can all impact your approval.
• Make large deposits or transfers into your bank accounts. All deposits must be sourced and documented. Cash deposits cannot be used to qualify. Speak to your loan officer before making deposits.
• Consolidate credit cards or open any new lines of credit. This includes co-signing for someone else’s loan. All of these can negatively impact your debt-to-income and loan approval.
• Family members, friends, or colleagues pay your down payment without first speaking to your loan officer. This is considered a gift and there are lending guidelines that need to be adhered to.
• Spend the money allotted for your closing costs. It is better to have more funds for closing than the minimum amount. The Loan Estimate you receive is a “estimate” and can adjust prior to closing.
• Procrastinate on providing your loan officer all the necessary documents to complete the process. The process is time sensitive so the earlier the better!

Kathleen Wentworth of Leader Bank has been recognized as a member of the Top 1% of Mortgage Originators of America for 2016 by Mortgage Executive Magazine. With over 15 years of experience, she is considered an expert in the mortgage industry by her peers and many real estate professionals who recommend her services.

Above all else, Kathleen is a caring and compassionate advocate for her clients.  Kathleen can be reached at 617-388-852.

There are some very important items a home buyer should know in preparing to purchase a home.

First, they need to know what they can afford. In order to find out, they need to speak to a lender and go through a pre-approval process. During this process the lender will analyze the credit report, determine the borrower’s income and calculate the debt to income ratios to determine eligibility.

Secondly, home buyers need to be aware of all the costs involved in purchasing a home. In addition to down payment, there are closing costs that will be due at closing. Not only that, but reserves will be collected for real estate taxes and homeowner’s insurance.

These costs can be estimated by the borrower’s lender at the time of pre-approval.

Another area that can pose a big problem is undisclosed debt. The borrower should review the credit report with the lender to make sure that nothing is missing on the report. Also, if other is property is owned but the debt doesn’t show on the credit report, it will discovered prior to close.

The most important thing to remember here is that you should never incur any further debt after the process has started.

The lender will check to be sure there is no new debt just prior to closing. If there is, the home buyer could be disqualified right before closing.

As a mortgage originator, business leader, industry mentor and media source, Bob Rocklein has helped countless people benefit from his extensive mortgage experience and expertise. Bob’s passion for his work and his clients has propelled him from his modest beginnings in the business to several key industry positions.

For those who need a partner in the home financing process, there are few mortgage professionals more qualified than Bob.  Bob can be reached at 877-536-3178.

I would like to thank each and everyone of these loan officers for participating in this article.  I know each and everyone of the participants and if you are looking to secure a home loan, I encourage you to contact anyone of them.

Other Mortgage Resources:

• Bankrate  10 Tips On Getting A Mortgage
• Bill Gassett  Top 10 Mortgage Mistakes
• Joe Boylan  Everything You Need to Know About Mortgages
• Dan Barcelon  How to Get Out Of Debt to Buy a Home
• Kevin Vitali  What Not To Do When Closing on a Home

What Every Loan Officers Wished Their Home Buyers Knew is provided by Kevin Vitali a Massachusetts REALTOR. If you would like to sell your home or buy a new home give me a call at 978-360-0422 and let’s get the process started.

Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford