BluefoxToday blog : Eleanor Thorne 919-649-5057 Cary Mortgage Loans (Steve Thorne NC Mortgage Experts)

Many new homebuyers make the mistake of rushing out to buy things to fill their home with as soon as the seller accepts their purchase offer and the lender pre-approves their loan. But there are still a few major hurdles to overcome before the keys are handed out. Don't Shoot Yourself in the Foot!

Here are some things to avoid during the home buying process to assure your transaction goes as smoothly as possible:

• Don't make an expensive purchase. It may be tempting to order that new sofa for your soon-to-be living room, but its best to avoid making major purchases like furniture, cars, appliances, electronic equipment, jewelry, or vacations until after the closing. Financing that furniture with a store credit card or even one of your own credit cards could jeopardize your credit worthiness during the time it means the most. Your credit WILL be pulled AGAIN approximately 72 hours prior to closing - so the Underwriter is going to know if you do this!  Using cash to purchase big items can also create a problem because many banks take into consideration your cash reserve when approving your mortgage.

• Don't get a new job. Banks like to see a consistent job history. Generally, changing jobs will not affect your ability to qualify for a mortgage loan - especially if you are going to be making more money. But for some people, getting a new job during the loan approval process could raise some concern and affect your application... in addition, some banks require that you receive your first paycheck from your new employer before you can close!  If you are applying for a USDA Home Loan, or a NC Housing loan (that has an income limit requirement) PLEASE PLEASE PLEASE let us know if you are making a ton of additonal overtime!  We've seen people declined because they took on TOO MUCH overtime - trying to save up additional money for the home... the overtime counted when the underwriter was trying to determine if the client met the ceiling requirements!

• Don't switch banks or move money around. As your lender reviews your loan package, you will likely be asked to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. Changing banks or transferring money to another account - even if its just to consolidate funds - could make it difficult for us to document your funds... which will cause a delay.  If you get a gift from someone - let us know.  If you sell an asset (we've had customers sell bass boats, extra refridgerators, their grandmother's silver) to raise money to buy the house... TELL THE LOAN OFFICER BEFORE YOU DO IT!  There are paper trails that we MUST verify! Trying to do something GOOD (like raising money from a sale) could end up HURTING you, if you don't document it properly!

• Don't give a good faith deposit directly to the seller in a FSBO purchase. As a rule, your good faith deposit (Earnest Money Check) belongs to you, not to the seller, until the deal closes. Your FSBO seller may not know that your good faith funds should be applied to your expenses at closing. Get an attorney or other neutral party who can hold the deposit or put it in a trust account until you close on the home. Your purchase contract should dictate to whom the funds go should the transaction fall through.  It really is best to use a Realtor!

• Don't disregard your lenders requirements. You may have been pre-approved for the loan but your work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, W2s and other paperwork. It is up to you to get these to us as soon as possible. We have Banks that we do mortgages with that will not allow us to lock the rate in until we have all of these documents (especially on Jumbo Loans).  Again, if you are applying for a mortgage loan that has an Income Ceiling Requirement like USDA Home Loans in NC and NC Housing Mortgage Loans, MCC and DAPs it is CRITICAL to let us know if your income changes!  We work with a ton of folks who initially come to us qualifying for a program - but they need some help with their credit... we work 3 to 4 months and get their scores up... and DURING that time - they take on extra overtime, or they get a raise, or a huge commission check - and suddenly they no longer qualify for the program!

If you want to purchase a home in Raleigh, or get a mortgage loan in Cary call Steve Thorne 919-649-5058 NC Mortgage Expert.  We have the Bank Programs you need and the lowest mortgage interest rates available!

If you are one of the millions of families that lost their home in the last couple of years to Foreclosure… you might think…

Been There – Done That

You might not want to own a home again! 

But if you’re one of those folks who truly does want to purchase again, here’s some potentially good news.

USDA says that they will allow you to purchase a new home to owner occupy, after foreclosure if you’ve done the following things:

• Wait 3 years from the date of the Foreclosure.
• Re-establish Credit
• Have Credit Scores that meet the guidelines (as of the date I am writing this, that means you need a 620 score.)

Here’s the other part… you need to DOCUMENT what happened, and why you ended up in a Foreclosure. 

“FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower’s main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit…

This does not include the inability to sell a home when transferring from one area to another.”  So you MIGHT be able to buy after two years. 

My “real life” answer to this question is… in today’s credit environment, it’s going to be HARD to get a Bank to loan you money for a home if you had your home foreclosed upon less than 3 years ago.  I know what the guidelines say, but Bank’s do not have to follow guidelines set by FHA. 

FHA does not say you have to have a 620 credit score, but there are VERY few lenders who will allow you to purchase a home without at least a 620 score!  There are some Banks that will not allow you to purchase with FHA if you have ANY lates on ANY accounts in the last 12 months!  That’s not an FHA guideline, that’s a BANK rule, so again – I’d say - you might still be forced to wait 3 years, and have all of your documentation in order!

These guidelines are different from the Fannie Mae / Freddie Mac Conventional Guidelines… And these foreclosure guidelines are changing OFTEN… so I would not rely soly on information you get from an online site. 

Call a loan officer.

If you are considering a mortgage loan in NC, call Steve and Eleanor Thorne, First Financial Services, 919-649-5058 we'd love to help answer your questions!

Starting in January, 2011 the next part of the journey in underwriting loans that are "smart" and will "survive" the uncertain real estate market begins.  It's being called the Loan Quality Initiative, or LQI.

Fannie Mae's system will "Fail" loans that might otherwise be approved, if they do not meet mandatory Debt To Income Ratios... NO EXCEPTIONS.  45 is the hard and fast maximum number.

This is significant - because verified High Liquid Assets have ALWAYS been considered an "off setting" factor.

Let me give you an example... Let's say you are moving from California to be closer to all of your children here in North Carolina.  If you own a home in California, and you've decided to rent it, instead of trying to sell it right now... we have to count that payment in your ratio.  

Let's say with both your new house payment, and your "old" house payment, your ratio is 49 percent.  Now your ratio is not REALLY that high, because you are going to get rent to offset your payment in California - but for the computer underwriting the loan, we won't be giving you credit for that rental income until you've received it for 12 months.

Fine, you have a 48 percent Debt to Income Ratio... if you have 401Ks, stock accounts, CDs, Money Market Accounts that total a couple hundred thousand - we could get that loan approved. (we actually closed this exact scenario last month).

Starting in January of 2011 - we would be suggesting that you buy a smaller home here, or put more money down, or do SOMETHING to get your ratio to 45%... makes FHA Mortgage Loans in NC look more attractive #justsayin'.  Wish our maximum FHA loan was higher than the $295,000 cap!

If you have questions about qualifying for a home in North Carolina - call Steve and Eleanor Thorne, 919-649-5058 Certified Mortgage Professionals.  We have the Best Rates and the Lowest Fees available.!

We just answered a question from a Veteran that went something like this, "I sold a home last year that had two mortgages.  The first mortgage was paid in full, the second mortgage was not.  Can I get a VA Loan now that it's been more than 12 months?"

There are two really, really important facts that we need before we can answer the Veteran's question.

The first one is - why did you short sale the home? Strategic Short Sales are not going to sit well with an underwriter, and could be the basis for denying the loan.  

Additionally, since it's been 12 months, we need to know if there were any late payments on the mortgage prior to the Short Sale.  If there were missed payments, then VA will make us wait three years before we can do another VA Mortgage Loan.

Since it was a first mortgage that was paid in full, it is unlikely that the Veteran has a delinquent FHA, VA or USDA mortgage loan balance showing.  If there WAS a delinquent Government loan balance - you would not be eligible for another Government Insured Loan.

The Veteran in this case has a credit score of 660, and the second mortgage does not show a deficiency balance owed, but it does clearly show on the credit report as a short sale.  The reason for the move was because the Veteran lost their job in Florida and relocated to NC with a job they've now held for over a year (same line of work). In this case, the Veteran never missed a payment on the mortgage - they simply did not have cash (they'd been living on savings while looking for a job) to cover the $25,000 short on the second mortgage.

In a case like this - 12 months must pass from the time of the short sale, and the application for a VA loan. Our underwriters require that we get some sort of statement from the Second Mortgage Holder indicating that they are not going to file a deficiency balance against the Veteran... we ARE able to make this loan.

If you've had a short sale, and you want to know if you can now purchase a new home in North Carolina - call Steve and Eleanor Thorne, FFSI, 919-649-5058 - we have the best mortgage rates and the lowest fees available!

On February 15, 2010 The Federal Housing Administration adopted new appraisal guidelines that include "geographic competency" requirements.  Effective June 30, 2010 Fannie Mae adopted similar requirements, a move that we think is important.

The HVCC ruling came from NY Attorney General Cuomo and it is intended to protect appraisers from coercion from lenders.  Since May of 2009, large banks have been using the HVCC  (Home Valuation Code of Conduct) as a way to create "revenue" centers.  Because the ruling prohibits lenders to SPEAK to an appraiser (or email, txt whatever) Big Banks set up "companies" that collect (for instance) $450 for an appraisal, and then pay the appraiser $275.  Appraisal Management Companies (AMC)are at times, because of their size, working against the system.

Many appraisers refused to do this... and subsequently the Large Banks "hired out" people from 100's of  miles away (or more) to do appraisals.  My theory is "you get what you pay for..."

In the June 30th memo, Fannie Mae and Freddie Mac agreed that the new rules for appraisals adopted last year need some additional "guidance."

The HVCC does NOT bar Realtors, or other authorized third parties, from requesting that appraisers correct factual errors in their reports, or provide additional information or explanations about the basis for their valuations.

Fannie Mae put lenders on notice that they can only use appraisers who are knowledgeable about the area in which they are being asked to value property, and who have the ability to access records on recent sales in those markets.

Fannie Mae also clarified previous guidance to lenders on the selection and use of comparable sales, saying appraisers must consider a property's condition when choosing to use foreclosure sales or short sales as comps.

The current Financial Reform Bills being debated in Congress create a Consumer Finance over site unit that will blend current National Predatory lending requirements and HVCC - so the CURRENT appraisal system will be out the window on November 1, 2010... but it's unlikely that whatever replaces it will be much better.

If you are interested in purchasing a home in North Carolina, or refinancing a home in Raleigh, please call Steve and Eleanor Thorne, FFSi 919-649-5058.  We know the rules, and we have the best mortgage interest rates available!  We are still closing USDA Home Loans!

For the last 18 months most lenders have added additional "Quality Control" in the mortgage process between Underwriting and Funding.  Many of those same Investors require the tax transcripts pulled prior to the loan being submitted for Underwriting, and they perform additional Automated Appraisal Valuations on each file - again as a Quality Control measure... trying to get rid of Fraud.

In an Announcement earlier this month, Fannie Mae made it clear to Lenders that they need to do more to determine "Undisclosed Liabilities."  In particular, Fannie suggests the following:

• Refreshing a credit report just prior to closing may uncover additional debt or credit inquiries.
  
• New vendor services are becoming available to provide borrower credit report monitoring services between the time of loan application and closing.
  
• Credit inquiries listed on the credit report should be investigated to determine whether the borrower did in fact open additional debt resulting in repayment obligations. In some cases, it is possible to obtain a direct verification with the creditor associated with the inquiry.

Okay - for the most part I think the extreme measures we are going to are warranted.  They are a pain, time consuming, and add to the overall cost of processing a loan... but I get it.

But can you imagine having to actually verify if credit was issued from every inquiry? 

So a week before closing, the borrower shops for a sofa, a refrigerator, a lawn mower... and it will show up on the final credit report pulled the day before closing... and we'll have to WAIT to see if Lowe's actually issued credit to them?  OUCH!

We ALL need to be talking to borrower's about this important, and possibly problematic change in the system! For more information on Credit Inquiries click here.

If you are looking for a mortgage in NC - please call Steve and Eleanor Thorne 919.648.5058 First Financial Services.

A little birdie told us last month that USDA Rural Economic was going to run out of money... and Wells Fargo, and probably some other banks too, stopped taking any USDA Home Loan Applications. (click here for more details)

At the time... we were using about 100 million dollars in USDA Home Loans a Day from the line, and at that rate, it looked like we would run out by April 17th, 2010.

Once they ran out, we were told... the program might change, or maybe there would be a next Tax Credit Extension... or maybe Congress would just give them more money - "Who Knew?"

We continue taking USDA Home Loan Applications - because the current numbers look like this:

April 6, 2010 USDA Guaranteed Rural Housing Funds Utilization Data

Total FY10 Allocation  $13,533,663,697

YTD FY10 Obligations  $10,888,061,403

* $2,645,602,294

Total Available Funds $2,548,636,600

That's right - there's still at least $2.5 BILLION available for funding.

If you have questions about getting a USDA Home Loan - call us!  Steve and Eleanor Thorne 919-649-5058

The Federal Housing Administration is currently insuring more than 3 of every 10 loans originated... and they see that as a risky proposition!

Because of that, FHA is expected to announce changes today, in an effort to protect the American Taxpayer (who backs the default insurance on this program!)!

Expected changes include:

• Raising the Upfront Mortgage Insurance Premium (UMIP) from the current 1.75% to 2.25%.  This means that when you borrow $100,000 on a FHA mortgage loan, and additional $2250 will be added to the mortgage that you pay back... so your $100,000 mortgage just turned into $102,250.  If you move, part of that Mortgage Insurance is refunded - so it's not a bad deal! (Click here for more details on how FHA "PMI" works!)
• Changing the amount a Seller can contribute to Closing Costs.  Currently a Seller can contribute 6% toward closing costs to a transaction.  This is expected to change to a maximum of 3%.

There are news reports that the minimum credit score for FHA is also going up... however, the reality is that 580 has been the minimum credit score that is offered by Lenders for years! 

The REALITY is that you really need a 620 credit score to get best priced mortgage offerings!

IMPORTANT TO NOTE! FHA has changed it's rate on MIP (now) FOUR TIMES in the past 2 years. Because of this you could see MULTIPLE posts online saying MIP is 1.5, or 1.75, or based upon your credit score! These are all TIME SENSITIVE pieces of information... if you are CURRENTLY looking for a FHA mortgage, you should consult with a mortgage professional!

If you or your clients are considering a FHA mortgage loan to finance a home purchase, please call Steve and Eleanor Thorne, First Financial Services, 919-649-5058! 

We offer the very best mortgage rates available and have the ability to pre-qualify you over the phone in about 20 minutes! 

This is a GREAT time to purchase a home in the Triangle!

If you are looking for a new home, you are probably aware that your Credit Score is a CRITICAL item in determining your interest rate and possibly how much house you can buy / qualify for!

We talk to people every week who receive a copy of their credit report, see some derogatory remarks from 2005 and immediately start writing dispute letters.

This might not be your best strategy (each case is different of course), because the credit score is really an indication of what you are about to do.  It tries to PREDICT what your credit behavior is going to be based upon RECENT activity.

So what happened 3 years ago, is not really as important as what happened 18 months ago!  If it is a MEDICAL COLLECTION - there's a possibility it won't have to be paid... most judgments and liens will have to be cleared before you can get a mortgage.

If you are considering a purchase, and want to know more about your particular credit report and circumstances, to get pre-qualified...  call Steve and Eleanor Thorne, First Financial Services, 919-851-3031 x 104.

The Borrowers' Right to Inspect Closing Documents Act of 2009 H.R. 4229 is currently in the House Finance Committee for Review.

But it brings a HUGE question to mind:

"Are we ready to make mortgage lending so precise that we can meet 8 different disclosure dates within each transaction?"

THREE DAYS BEFORE CLOSING???  Mandatory?  Seriously?!?!

Maybe this is another job creation effort by Congress?  Most mortgage companies are so lean, that in order to meet Realtor expectations of closing in 20/30 days (or less), almost ALL mortgage companies would need to hire an extra person for every 10 transactions (IMHO)... or maybe we just need to get REALLY efficient?

I'm trying to figure out where those 3 days are going to come from!  I just made a list of places that might be spots in our office where we might be able to squeeze a few hours -but for the most part underwriting is what sucks up time.  And if you think about the fact that an underwriter can only really look at a new loan every 45 minutes to an hour - you can see why it takes a while to get through there...

I don't know how we will all change systems to adjust to this latest twist (if it passes) - but I can tell you this much about Mortgage Lending in 2009 and 2010...

Mortgage Lenders deserve an AWARD for being the most flexible industry on the PLANET!