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What Is A Loan Approval? By Debbie Rood You need to know more about a buyer than the fact they want to buy your home. Financing has always been an issue. This type of knowledge is now vital following the recent meltdown in the industry. I know there is a lot of confusion about what it means to be approved for a mortgage. Even realtors can be baffled. More than once I have been told by an agent that a buyer is already approved for financing only to discover later they have not even applied for a loan. How can this happen?
To my knowledge, none of the realtors that have told me that were intentionally lying to me. They were simply misinformed. An informed buyer will search for financing before looking at homes for sale. This is were it gets confusing. Consumers believe that loan officers know their business. Some do and some don’t. They are like any other profession. The transaction may not go as planned if our buyers are unlucky enough to hook up with one of the bad eggs or if they do not fully understand the process.
Unfortunately, the buyers believe they are approved for a loan and are out shopping for a home. There are a few ways this can happen. The loan officer lied to the buyer is one answer. That may happen but I prefer to think it is rare. I prefer to believe it is a break down in communication.
The buyer calls a lender and gives some basic information over the phone. They provide enough to pull a credit report and perhaps run an automated underwriting decision. The loan officer tells the buyer that everything looks great. It is not unusual for the buyer to receive a letter saying they are pre-qualified. Neither of these are the same as a loan commitment. If this is the first time our buyer has bought a home, they have never seen a pre-qualified letter or a commitment letter.
Pre-qualified implies the lender may make a loan under a given set of circumstances. A commitment letter is a contract from the lender promising to make the loan; it may also contain some conditions. The loan may not close unless all of the conditions are cleared.
To a consumer as well as many realtors they mean the same thing. My industry slants towards the positive side, it is necessary to maintain some tiny bit of sanity. And very often everything works out in the end, not very smoothly, but still a closed transaction. It is not the same as the pilot that walks away from a crash landing, that incident is usually covered
I am not aware of insurance that will cover time and money lost by a seller because the buyer’s loan falls apart. It can be a huge and expensive mistake. The seller may have bought another home, arranged for movers and a dozen other things preparing to move. I have seen agents take a property off the market because they thought it was sold.
So how do you protect yourself if you are selling a home? It is very simple really. Have your realtor contact the buyers’ lender and get the facts in writing. I actually believe the lender should contact the sellers’ realtor and obtain a copy of the executed sales contract to compare to the one provided by the buyer or buyers’ agent. That is what I would do if I was a loan officer, but I have never had one contact me. Wonder if simple checks and balances like this would impact loan fraud?
Sorry, back to protecting yourself. The best protection is being well informed. After reading this you should understand the big difference between being pre-qualified and approved, one is a guess and the other is a contract.
The lender is not allowed to give you a copy of the commitment, disclose any terms or give you any information that could be used against the buyer during negotiations with you. They can tell you if the buyer has applied for a loan and the status of the application. A simple phone call may save the day.
Debbie Rood is a Realtor in Louisville, Kentucky Derby City USA. She is a residential real estate specialist. She publishes many articles on real estate and financing on her web site www.debbierood.com/
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Qualifying for mortgage AFTER unemployment ends My wife andamp; myself, victims of Michigan economy, moved to Georgia and returned to the workforce in June 2010 after periods of unemployment. Myself-16 months straight, my wife-6 months out of the previous 24. We we told by several lenders that we had to work at new positions for six months to qualify for a mortgage. Quite a shock as we have no debts/loans and our credit scores range 795-820.
Does anyone know specifically when and where these regulations came into effect and where is the doc... VOE My husband recently quit his previous job (assumedly on good terms) to go work for the competition for better pay, perks, etc. We have to move because the new job is too far to drive daily. The loan officer is insisting on a VOE. Unfortunately the previous employer is quite ridiculous and vengeful and will now not sign the VOE form. Is there any way around this as we have provided paystubs and W2's showing he worked there for the past 2 years?? refi or pay more each month We currently owe 233,000 on our home at a rate of 5.5% and are 6 years into a 30 year mortgage. (Original loan was for 260,000) I've been paying an extra $200 each month towards principal to pay it off a bit sooner. Am I better off refinancing to a slightly lower rate (~4.5%) or should I simply continue to pay more each month on what we have? Who is entitled to the earnest money? My husband and I decided to buy our first home a couple months ago. After looking for a while we found one. Since we were pre-approved for a mortgage it was fairly easy getting the ball rolling. The sellers accepted our offer, (which included them paying for a termite inspection) and we set a closing date. In that time frame my husband lost his job and had to seek new employment. This changed our loan approval and the deal fell through. Now the seller is wanting the earnest money, money for the ... any investor friendly broker licensed in Geogrgia looking for cash out refi for 2 houses which are paid no mortgage...looking for cash out refi....
thank you
[Email deleted as per forum rules. Thanks.] PMI - Conventional vs FHA We bought our house last September and as we were planning to put down 10% we learned we have to pay PMI. We told the Bank of America mortgage agent that we were planning to pay it off as soon as possible. We have been making double payments in hopes to get rid of our PMI. He told us that the best thing for us is the 30 year Fixed with PMI.
However, our mortgage is listed as 30 Years Conv w/PMI on our online account page and our HUD statement states that we have an FHA loan and we were charg... PMI with 20% down?? I have a credit score of 802 but last years income was lower than normal. I don't qualify for a traditional mortgage for the house that I want I'm about 40k short but my father is willing to cosign. I was told I can only get an FHA loan because he is a 'non occupant' and we are still required to pay pmi even though we are putting down 20%...Any way around this?? refinance We have 124,000 left on a 30 year mortgage. Currently 22 years left to pay. We pay biweekly (and pay 200 extra a month) the rate is 5.75. So it has dropped the amount dramatically through the years. Should we refinance at a 15 year, 3.8 interest rate or just keep paying the extra on the original loan. We would pay the same extra 200 on the new loan amount also. The closing costs might be around 3,000. Not sure yet. Am I just fooling myself into thinking lower rate will get it paid off qui... Should we refinance? Current: 27 yrs left on 30 yr fixed at 6.625% andamp; we pay $200/mo extra on a $773.18 Pandamp;I note. Home value $162K, owe $109,800. Ficos are 736/781. Offer: 30 yrs 5%, so not 2 points difference. We would be depleting large part of savings for closing. I say recoup that by lessening our non matched 401K deposits for 6 mo. We are disciplined and would go back to that for sure. Husband thinks not worth it. Plan on being in this home for life.
Thanks! owner or not Hi my ex wants me to sign the quitdeed under my legal name but I did on 2005 that this means im legally owner
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Proposed RESPA Reform
Mortgage brokers may have some intrusive rules from HUD to deal with.
When I read the news on HUD?s proposed reform of the Real Estate Settlement and Procedures Act (RESPA) I was skeptical. Cathy from Sequim challenged me to read the 96-page federal register document so we could all figure out what?s going on. I am here to tell you that there is one very good change coming out of this proposal. In fact, it?s so good that I am borderline hopeful that this change might do what legislation is suppose to do and what HUD forgot to do when they signed the original version of RESPA in 1974. But first, the changes that will have many, but not all mortgage brokers screaming bloody murder:
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Neocon-omics
How much can the Fed and the U.S. government do in the face of declining housing prices?
That?s been my worry since I saw the housing bubble peak in 2005. Historically, declines in housing prices take 3-4 years to bottom, which means we still should be at least half a year away. But after that, the economy doesn?t rebound instantly. It yo-yos for a bit - essentially running horizontal.
Fannie Mae and Freddie Mac have entered into cooperation agreements with New York?s attorney general to only purchase loans that meet a new home valuation protection code, the state announced. The code is effected on Jan. 1, 2009. Under the new code, mortgage brokers and loan originators are prohibited from choosing or communicating with appraisers.
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Choosing Second-best
How to leverage your second choice into seller concessions and a better deal.
So, rather than competing for the best house and paying top dollar, you can use it as leverage to get a lower price and seller concessions on a home that could be even more ideal for you ? after you do a little work.
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Price Depression
A forecast for more housing price depression.
My theory is that housing prices will continue to wilt as long as large levels of foreclosures and new home inventories run high. These are not traditional homeowners, and are motivated to slash prices, thus continuing to depress prices.
You should try to get pre-approved by a lender prior to shopping for a home. A pre-approval is a strong marketing tool when making an offer that may contain many a number of seller concessions. Telling a seller that you are already approved for a loan makes the acceptance of a low offer or one where he may be paying the closing costs much more palatable.
US News and World Report implies (hopes?) we may be nearing a bottom in housing prices but with a mountain of resets coming in the next few months, it?s difficult to see how a bottom can be seen or even predicted.
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Strike One
A look at role of mortgage insurance in FHA loans.
Regarding the second point: By not raising the loan limits they fail in one of the 11 ways they can help. I believe they will fail in almost all, but let us have hope. To be specific as to why I support this: FHA is not a government gimme. It is a government guarantee the mortgage will be paid or the lender compensated for losses. The program pays positive cash flow to the government in that there is a type of mortgage insurance fee charged the borrower. It is reasonable and more than pays for the reimbursements made to the lenders that suffer a default.
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Who's To Blame
Mortgage brokers share the blame with the rest of the industry in the current real estate mess.
Who is not to blame for the mortgage mess? Take one step back. As lenders, money was flowing from the spigot like there was no tomorrow. As mortgage brokers, there was money to be made by cranking the faucet, and it was a foot race to see who could get to the sink first. As agents, we sang the ?Houses are expensive, but money is cheap? refrain until we were blue in the face. And, as for the consumer, it really doesn?t matter in the final analysis whether they were motivated by necessity, opportunity or unadulterated greed. We all helped make this bed in which we now must lie.
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Trying To Move
Hard to move when you're house loses value.
I will continue to work from Los Angeles while we work on selling our house, which unfortunately is bad timing as housing prices have taken a bit of a dive around here. Once we have things settled over here, we?ll pack our things and move up to Seattle.
What else can you say to such a ridiculous report, such obvious sensationalism? The sad thing is, many people will read this wild hyperbole and imagine that the TV station?s salacious report has a ?point? to it.
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Home Buyers Returning This Fall
This blogger says lower mortgage rates will drive buyers to the residential real estate market soon.
Ten days ago after the Fed calmed the markets' credit panic with a 1/2 point cut in the Discount rate, I postulated that home buyers will come back this fall when the Fed finally drops the Fed Funds rate, and mortgage rates drop. It's now almost certain to happen. Here are the parameters in play now:
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Lead Scrub Rates
A look at the cost of a lead for a mortgage broker.
Joel has a good interview with Dave Wengel of TargusInfo around Mortgage lead scrub rates. Specifically that lendingtree and lowermybills have a 15% scrub rate whereas the free ipod guys (lure people in with promise of a free ipod but they and their friends have to signup for credit cards, netflix and talk to mortgage brokers to get it) have around a 50-60% scrub rate.
Having been an FHA lender I can attest it is a pain at times. FHA requires annual financial audits of the mortgage brokers financial condition and more. We always have survived the several day pain, and the expenses tied to it, but only FHA drags brokers through this. The actual banks that sponsor the mortgage broker go through even more red tape and grief. Loan officers have to know more rules. FHA doesn?t rely on the easy automated underwriting or the quick answer from a subprime lender. FHA restricts how the borrowers pay for certain expenses and how much the lender can charge.
