Let's face it. Lenders don't know us from Adam or Eve, so the only way they can tell how big of a risk we are to them is by measuring us up against a set of guidelines. I call these the 4 C's of Lending.
Here's a list of the top 10 questions I ask my borrowers to determine if they measure up to those guidelines:
1) Do you know what your current credit score is ?
2) Do you have any lates, charge-offs or any kind of delinquencies on your credit cards, auto loans, student loans, etc.
3) Did you co-sign for anyone's loan?
4) How much debt are you carrying right now (especially on your credit cards, auto loans, student loans)?
5) Have you had a bankruptcy or foreclosure?
6) Are there any type of liens against you ?
7) What is your gross annual income ?
8) How much money do you have in a savings/checking account or CD ?
9) If you have a 401k, how much is in it ?
10) If you have stocks or bonds, how much are they currently worth ?
These ten questions merely scratch the surface. The best way to determine whether you qualify and what you qualify for is to actually talk to a trusted mortgage advisor about your particular situation.
Friday, May 30, 2008
Friday, May 16, 2008
Consider Foreclosures If You're Thinking of Buying A Home
In my last blog, I mentioned that foreclosures decreased in April, and that this may be an indicator that the housing crisis may have hit rock-bottom, and that it can only get better from hereon out.It seems that more data confirms this positive trend. I picked up a copy of the Los Angeles Daily News yesterday and the headline emblazoned on the front page was So-Cal Housing Market Sales Hit 8-Month High.
Here's the takeaway from that story:
- Home sales hit their highest level in eight months in April due to bargain hunters snapping up foreclosed properties.
- 66% of those April sales were for homes priced under $500,000
- There was a jump of 22% in home and condo sales from March.
- Most of the activity was in areas hardest hit by foreclosures, specifically the Antelope Valley and Inland Empire.
- Analysts are mixed on whether numbers do in fact indicate that the worst may be over, but according to John Karevoll of Dataquick, "it's looking as if the worst is behind us".
- Although we may have reached the bottom of the sales slide, it doesn't mean we've also reached the bottom of the price decline, because foreclosures are still working their way through the system and will push down prices.
If you want to see what's out there in terms of foreclosures in your area, here's a freebie that you can take advantage of:
Before any of you go out foreclosure hunting though, whether you're a first-time homebuyer or an investor, please, please, please, puh-leaze don't look at any homes until you call me first (or your own mortgage advisor, if you already have one) and get preapproved (my preapproval process includes a detailed review of how you stack up against the lenders' guidelines, how much of a loan amount you're qualified for based on your monthly payment comfort level, what you can expect in closing costs, the do's and don't's you need to keep in mind as you go through the homebuying process, just to name a few).
Unless you know how much home you qualify for (or, if you don't qualify based on your current circumstances, what you can do so you can qualify for a home before you're priced out of the market again), you should NOT be out there looking at anything. You'll just break your own heart.
Till next time, Happy Foreclosure Hunting!
Dezzi Rae
Mortgage Monsters Who Give The Industry A Bad Rep
It's a sad fact that a lot of people think that loan officers and mortgage brokers rank even lower on the respectability totem pole than used car salesmen (no offense to the used car salesmen out there who do their jobs with honesty and integrity).
In my quest to ensure that I give my clients the best service possible, I've hung my real estate license at a few mortgage companies. While I loved hanging my hat with the last one, I felt that working with a company that was Los Angeles-based was important for several reasons. Thus, I began my search for the company with the right fit. In my mind, "right fit" meant a mortgage company that is highly regarded within the community, one that charges fair, reasonable rates and which places a high premium on honesty and integrity.
When I first started working in the mortgage industry, I came upon a website called The Mortgage Professor and in it, Jack Guttentag introduced the concept of the Upfront Mortgage Broker or UMB. Ever since then, the UMB Commitment has been my guiding principle as a mortgage professional and it was important that the company that I hung my license with believed in these same principles.
Luckily, I found that company in First Security Lending. Considering that it had been voted the best mortgage company eight years in a row by the City of Burbank, I couldn't have asked for a better new home.
In my quest for a new mortgage company to move to however, I was reminded of why so many people look down on mortgage professionals. I had responded to this one internet posting and got the following email back from Ryan Z:
thank you for your response to my posting on craigslist. I reviewed your website and do no feel that you would be a good fit with my company. I think your section on "YSPs: The Mortgage Industry's Dirtiest Little Secret" is irritating and obnoxious. not that I condone rate abuse, bate and switch or as you put it leaving the client holding the perverbial bag, but honestly I think your feeling about YSP and charging people to help getting them a loan ridiculous. I bet you are the type of person that goes to an expensive restaurant for dinner, orders her food, eats everything on the plate, goes home and the next morning complains that she was over charged and wants her money back. its people like you that actually feels sorry for the borrower that bought houses that they couldn’t afford 2 years later when their loans turned adjustable. I bet you are the type of person that blames the mortgage industry for the housing crisis! either way I would never hire someone like you to work in my office. I am looking for aggressive, intelligent and successful people not kiss asses!
I wish you the best of luck and im sure there is some lucky broker out there that would be blessed to have someone taking up his/her time not charging people! im sure that brokers enjoys giving away free loans!
get a life
I read his email with bemusement, deliberated on whether I should just hit the 'delete' key or shoot him back a response. I decided to go with the latter, and sent him this reply:
Quite the contrary. I do not blame the mortgage industry for the current housing crisis. I blame irresponsible loan officers who put borrowers in loans that they damn well know these people should never have been given in the first place.
True, there is that argument that the lenders should never have come up with these ridiculously lax loan programs in the first place, but as far as I’m concerned, the buck stops with us. If we do what we’re supposed to as mortgage consultants- which is, educate borrowers (so that they know just how much home they could afford, the pitfalls of loan programs du jour. etc.), and help them make the right choices that would not put them in financial disarray, the mortgage meltdown may not be as bad as it is now.
As for some lucky broker out there being blessed with someone like myself who takes up his/her time NOT charging people and giving away free loans, I don’t do my deals for free, I charge what’s fair, and it’s meant having clients for life. Sure, I’ve been known to do the loans for less than what I should be charging. However, what I lose in heavily discounted fees, I more than make up for in the goodwill and constant stream of referrals that I’ve gotten from my past clients. Plus, I sleep soundly at night.
Knowing what I know about you now, you’re the last person whose company name I’d want on my businesscard as well. Being aggressive, intelligent and successful are traits that are laudable in any loan officer. Being greedy is not.
I have a life- one that’s filled with borrowers who have become good friends.
Now go get yourself some integrity.
In my quest to ensure that I give my clients the best service possible, I've hung my real estate license at a few mortgage companies. While I loved hanging my hat with the last one, I felt that working with a company that was Los Angeles-based was important for several reasons. Thus, I began my search for the company with the right fit. In my mind, "right fit" meant a mortgage company that is highly regarded within the community, one that charges fair, reasonable rates and which places a high premium on honesty and integrity.
When I first started working in the mortgage industry, I came upon a website called The Mortgage Professor and in it, Jack Guttentag introduced the concept of the Upfront Mortgage Broker or UMB. Ever since then, the UMB Commitment has been my guiding principle as a mortgage professional and it was important that the company that I hung my license with believed in these same principles.
Luckily, I found that company in First Security Lending. Considering that it had been voted the best mortgage company eight years in a row by the City of Burbank, I couldn't have asked for a better new home.
In my quest for a new mortgage company to move to however, I was reminded of why so many people look down on mortgage professionals. I had responded to this one internet posting and got the following email back from Ryan Z:
thank you for your response to my posting on craigslist. I reviewed your website and do no feel that you would be a good fit with my company. I think your section on "YSPs: The Mortgage Industry's Dirtiest Little Secret" is irritating and obnoxious. not that I condone rate abuse, bate and switch or as you put it leaving the client holding the perverbial bag, but honestly I think your feeling about YSP and charging people to help getting them a loan ridiculous. I bet you are the type of person that goes to an expensive restaurant for dinner, orders her food, eats everything on the plate, goes home and the next morning complains that she was over charged and wants her money back. its people like you that actually feels sorry for the borrower that bought houses that they couldn’t afford 2 years later when their loans turned adjustable. I bet you are the type of person that blames the mortgage industry for the housing crisis! either way I would never hire someone like you to work in my office. I am looking for aggressive, intelligent and successful people not kiss asses!
I wish you the best of luck and im sure there is some lucky broker out there that would be blessed to have someone taking up his/her time not charging people! im sure that brokers enjoys giving away free loans!
get a life
I read his email with bemusement, deliberated on whether I should just hit the 'delete' key or shoot him back a response. I decided to go with the latter, and sent him this reply:
Quite the contrary. I do not blame the mortgage industry for the current housing crisis. I blame irresponsible loan officers who put borrowers in loans that they damn well know these people should never have been given in the first place.
True, there is that argument that the lenders should never have come up with these ridiculously lax loan programs in the first place, but as far as I’m concerned, the buck stops with us. If we do what we’re supposed to as mortgage consultants- which is, educate borrowers (so that they know just how much home they could afford, the pitfalls of loan programs du jour. etc.), and help them make the right choices that would not put them in financial disarray, the mortgage meltdown may not be as bad as it is now.
As for some lucky broker out there being blessed with someone like myself who takes up his/her time NOT charging people and giving away free loans, I don’t do my deals for free, I charge what’s fair, and it’s meant having clients for life. Sure, I’ve been known to do the loans for less than what I should be charging. However, what I lose in heavily discounted fees, I more than make up for in the goodwill and constant stream of referrals that I’ve gotten from my past clients. Plus, I sleep soundly at night.
Knowing what I know about you now, you’re the last person whose company name I’d want on my businesscard as well. Being aggressive, intelligent and successful are traits that are laudable in any loan officer. Being greedy is not.
I have a life- one that’s filled with borrowers who have become good friends.
Now go get yourself some integrity.
YSPs: The Mortgage Industry's Dirty Little Secret
I'm about to let you in on an explosive dirty little secret that no broker or bank wants you to know- a dirty little secret that spells the difference in whether you get a fair rate on your mortgage or not.
That dirty little secret is called the yield spread premium or YSP (for banks, it's called a service release premium or SYP).
What's a YSP? It's a broker's income for for increasing the rate on brokered loans (or, in the case of a bank, the bank's income for increasing the rate on correspondent loans). One YSP is equal to one percent of the total loan amount, just so you know.
Former Secretary of Housing and Urban Development Mel Martinez claims that it is costing American homeowners over $16billion in closing cost overcharges and unnecessary interest, and it has a lot to do with YSPs.
This reward that the loan originator gets for increasing your rate goes by many names. The most common are Yield Spread Premium (for brokers), Service Release Premium (for banks). overage, broker rebate, lender paid fees or lender paid compensation. But for the remainder of this article, let's just call it a YSP. Regardless of what it's called, not knowing about the YSP spells the difference between getting a fair rate or being bilked out of thousands of dollars over the life of the loan.
How does the YSP end up costing you thousands of dollars in overcharges? Simply put, it's got everything to do with your mortgage broker disclosing what he or she is really charging you- both upfront as part of your closing costs, and "in the back" by way of a YSP. There are some brokers who will tell clients that they only charge 1% of the total loan amount, while some say they don't charge any broker fees. That's all great in theory but in the real world, if brokers and loan officers actually did that, they'd be in the running for sainthood because, generally speaking, we're all on 100% commission and if you don't charge enough or didn't charge at all, how the hell are you going to feed your family and pay your bills?
What most brokers are NOT disclosing is the fact that they only charge 1% upfront but are taking more YSPs than they should. The mentality behind this is either "I want my clients to feel that they are getting a good rate and are not paying too much" or "What I get as a yield spread premium is paid directly to us by the lender, it doesn't come from the borrower's pocket."
My response to that is, "DUH! On a $400,000 loan amount, you just raised someone's rate from 5.875% to 6.5%, you're making them pay $208 more per month than they should, and to add insult to injury, stuck them with a three-year prepayment penalty while you scurry away with as much as 3 YSPs (which comes out to $12,000 since 1YSP equals 1% of the loan amount), in addition to the 1% ($4,000) that you charged as part of upfront closing costs. So now the borrower is left holding the proverbial bag stuffed with a three-year prepay and a fully indexed rate that is much higher than it should be, which in turn leads to higher negative amortization. DUH!"
In my case, since I dislike playing games and bargaining from the onset, my rule is always this: disclose upfront, disclose upfront, disclose upfront. "These are my fees and it's your choice whether you want to pay for all of it upfront, pay some of it upfront and have the lender pay for the rest as a yield spread premium (which typically works best for most folks since the interest rate and their upfront closing costs both stay reasonable) or pay nothing upfront in order to have the smallest amount of closing cost possible as long as one keeps in mind that this translates to a much higher interest rate."
I find that it's a great way to weed out the people I'd rather not have as clients anyway. so I'm able to work with the no-nonsense straightshooters who appreciate dealing with an upfront mortgage consultant who charges only what's fair and reasonable and won't hide YSPs from them.
I had one client who practically fainted when she received her Good Faith Estimate from me. It turned out that her last loan officer had been pulling the wool over her eyes for several years. "I only got charged a flat $800 broker feewhen I refinanced last year!" she cried. I asked her to bring her Final HUD-1 from her last mortgage transaction so we could go over it. Surprise, surprise! Her loan officer had whacked her with a 7.9% on a 30-year fixed whe her profile indicated that she would ahve been able to get a 5.5% for her $325,000 loan amount. It was a pretty rude awakening when she found out that her loan officer had made off with a 3% yield spread premium on the back. So, what she thought had been a bargain at $800 turned out to be a costly illusion. Not only did she get hit with a higher rate where she ended up paying more per month, she also ended up with a 2-year prepayment penalty as well. After I handled her transaction, she wrote me a really nice email that said, "I know I wasn't the easiest person to deal with. I was played a fool for so long that working with someone who tells it like it is was a bit of a shock, but I learned so much from you during my transaction, and I know better now."
So how do a lot of mortgage brokers explain it when their clients spot the YSP on the Good Faith Estimate or the Final HUD-1? There are two columns on a GFE and a HUD-1 - debit and credit. Since the YSP doesn't show up as something coming out of the borrower's pocket upfront, most borrowers don't even notice it. The ones that do are given some hogwash along the lines of "Oh, that's just a standard incentive that we're given by the lenders on every loan."
Now don't run off to your nearest savings and loan institution either, thinking that you won't find YSPs over there. While Federal Real Estate Procedures Act rules that govern informing you of this extra profit, this only applies to the YSP in brokered loans. Banks and broker-banks- because they have more money to pay lobbyists in Washington- are completely exempt from disclosing that "extra" profit they receive on their loans because technically, their loans are not brokered loans. Scary, no ?
Don't get me wrong. There are advantages to the YSP. If you want to shell out less in upfront costs, or if you want what is falsely termed a no-closing cost loan (I hate the term because it is so misleading. Read my lips: There is no such thing as a no-closing cost loan!), you have the option of having the lender pay some or all of your broker's fees by way of a YSP. The trick is in making sure that you know what that YSP is.
Want to see if you got ripped off or want to ensure that you don't get ripped off? If you're a homeowner, take out your loan documents and look for your Final HUD-1 (the settlement statement of closing costs) and call me so we can through it with a fine-tooth comb. If you're a homeshopper just starting the homebuying process, pull out the Good Faith Estimate that you were given and give me a holler. You've got thousands of dollars at stake. Learning to spot the YSP could save you a lot of money in the long run.
That dirty little secret is called the yield spread premium or YSP (for banks, it's called a service release premium or SYP).
What's a YSP? It's a broker's income for for increasing the rate on brokered loans (or, in the case of a bank, the bank's income for increasing the rate on correspondent loans). One YSP is equal to one percent of the total loan amount, just so you know.
Former Secretary of Housing and Urban Development Mel Martinez claims that it is costing American homeowners over $16billion in closing cost overcharges and unnecessary interest, and it has a lot to do with YSPs.
This reward that the loan originator gets for increasing your rate goes by many names. The most common are Yield Spread Premium (for brokers), Service Release Premium (for banks). overage, broker rebate, lender paid fees or lender paid compensation. But for the remainder of this article, let's just call it a YSP. Regardless of what it's called, not knowing about the YSP spells the difference between getting a fair rate or being bilked out of thousands of dollars over the life of the loan.
How does the YSP end up costing you thousands of dollars in overcharges? Simply put, it's got everything to do with your mortgage broker disclosing what he or she is really charging you- both upfront as part of your closing costs, and "in the back" by way of a YSP. There are some brokers who will tell clients that they only charge 1% of the total loan amount, while some say they don't charge any broker fees. That's all great in theory but in the real world, if brokers and loan officers actually did that, they'd be in the running for sainthood because, generally speaking, we're all on 100% commission and if you don't charge enough or didn't charge at all, how the hell are you going to feed your family and pay your bills?
What most brokers are NOT disclosing is the fact that they only charge 1% upfront but are taking more YSPs than they should. The mentality behind this is either "I want my clients to feel that they are getting a good rate and are not paying too much" or "What I get as a yield spread premium is paid directly to us by the lender, it doesn't come from the borrower's pocket."
My response to that is, "DUH! On a $400,000 loan amount, you just raised someone's rate from 5.875% to 6.5%, you're making them pay $208 more per month than they should, and to add insult to injury, stuck them with a three-year prepayment penalty while you scurry away with as much as 3 YSPs (which comes out to $12,000 since 1YSP equals 1% of the loan amount), in addition to the 1% ($4,000) that you charged as part of upfront closing costs. So now the borrower is left holding the proverbial bag stuffed with a three-year prepay and a fully indexed rate that is much higher than it should be, which in turn leads to higher negative amortization. DUH!"
In my case, since I dislike playing games and bargaining from the onset, my rule is always this: disclose upfront, disclose upfront, disclose upfront. "These are my fees and it's your choice whether you want to pay for all of it upfront, pay some of it upfront and have the lender pay for the rest as a yield spread premium (which typically works best for most folks since the interest rate and their upfront closing costs both stay reasonable) or pay nothing upfront in order to have the smallest amount of closing cost possible as long as one keeps in mind that this translates to a much higher interest rate."
I find that it's a great way to weed out the people I'd rather not have as clients anyway. so I'm able to work with the no-nonsense straightshooters who appreciate dealing with an upfront mortgage consultant who charges only what's fair and reasonable and won't hide YSPs from them.
I had one client who practically fainted when she received her Good Faith Estimate from me. It turned out that her last loan officer had been pulling the wool over her eyes for several years. "I only got charged a flat $800 broker feewhen I refinanced last year!" she cried. I asked her to bring her Final HUD-1 from her last mortgage transaction so we could go over it. Surprise, surprise! Her loan officer had whacked her with a 7.9% on a 30-year fixed whe her profile indicated that she would ahve been able to get a 5.5% for her $325,000 loan amount. It was a pretty rude awakening when she found out that her loan officer had made off with a 3% yield spread premium on the back. So, what she thought had been a bargain at $800 turned out to be a costly illusion. Not only did she get hit with a higher rate where she ended up paying more per month, she also ended up with a 2-year prepayment penalty as well. After I handled her transaction, she wrote me a really nice email that said, "I know I wasn't the easiest person to deal with. I was played a fool for so long that working with someone who tells it like it is was a bit of a shock, but I learned so much from you during my transaction, and I know better now."
So how do a lot of mortgage brokers explain it when their clients spot the YSP on the Good Faith Estimate or the Final HUD-1? There are two columns on a GFE and a HUD-1 - debit and credit. Since the YSP doesn't show up as something coming out of the borrower's pocket upfront, most borrowers don't even notice it. The ones that do are given some hogwash along the lines of "Oh, that's just a standard incentive that we're given by the lenders on every loan."
Now don't run off to your nearest savings and loan institution either, thinking that you won't find YSPs over there. While Federal Real Estate Procedures Act rules that govern informing you of this extra profit, this only applies to the YSP in brokered loans. Banks and broker-banks- because they have more money to pay lobbyists in Washington- are completely exempt from disclosing that "extra" profit they receive on their loans because technically, their loans are not brokered loans. Scary, no ?
Don't get me wrong. There are advantages to the YSP. If you want to shell out less in upfront costs, or if you want what is falsely termed a no-closing cost loan (I hate the term because it is so misleading. Read my lips: There is no such thing as a no-closing cost loan!), you have the option of having the lender pay some or all of your broker's fees by way of a YSP. The trick is in making sure that you know what that YSP is.
Want to see if you got ripped off or want to ensure that you don't get ripped off? If you're a homeowner, take out your loan documents and look for your Final HUD-1 (the settlement statement of closing costs) and call me so we can through it with a fine-tooth comb. If you're a homeshopper just starting the homebuying process, pull out the Good Faith Estimate that you were given and give me a holler. You've got thousands of dollars at stake. Learning to spot the YSP could save you a lot of money in the long run.
Wednesday, May 14, 2008
Is The Housing Crisis Over ?
I just read an article in The Wallstreet Journal indicating that the housing crisis is over. It's a pretty lengthy piece, so rather than cutting and pasting it into this blog, I'd rather have you click on this link so you can read it in its entirety (after you finish reading my blog, of course): Wall Street Journal: The Housing Crisis Is Over
Not to rain on anyone's parade or anything, but before you start jumping up and down and doing the happy-happy-joy-joy dance though, here are a few real world facts I thought I'd throw out there:
Not to rain on anyone's parade or anything, but before you start jumping up and down and doing the happy-happy-joy-joy dance though, here are a few real world facts I thought I'd throw out there:
- Just because the market's bottomed out doesn't mean the value will shoot up like crazy over the next year or so the way that it did five years ago so don't start counting your equity chickens before they hatch. Besides, a house is not a giant ATM machine.
- Lenders have gotten stricter with their guidelines. Forget about 100% financing loans without having to provide income documentation. Those vanished right about the time lenders started keeling over from the vast number of defaults on these same I-don't-have-to-see-how-much-you-make loans that they churned out like crazy.
- If you're looking to buy and your score is as low as 580 and you don't have enough for a down payment or closing costs, you may still qualify for an FHA loan BUT you (and your co-borrowers) need to be in the same line of work for at least two years, you can prove by way of paystubs and tax returns that your house payments plus other debts aren't more than 45% of your total gross monthly income.
- If you are looking to refinance and it's difficult to document your income (like a late actor I knew of who made most of his moolah signing autographs at fan conventions but would require the convention organizers to pay him in cash so he wouldn't have to declare it, which isn't fair to the rest of us, but that's a whole 'nother Oprah), you can still do a stated income loan but you have to have reasonable assets (at least 2-3 months worth of house payments) and a score of at least 680 to compensate for the fact that you don't have the full income documentation to back up whatever you say you make. And yes, you have to have at least 20% equity left in the property after the refinance is done.
- If the rate on your loan is about to adjust for the worse and you currently have a 1st and 2nd loan, even if the combined amount of both loans is 110% of the value of the property, if your 1st loan amount is under 95% of the value of the property, you may still be able to qualify for an FHA loan just to bring your interest rate down. But again, you'll need to provide full income documentation.
- You can't qualify for a loan (FHA or conventional) if your bankruptcy hasn't been discharged for at least two years. No way. No how.
- If you've got the triple threat (crappy credit, have difficulty documenting your income, don't have enough liquid assets) but you need a cashout for some reason and you need it baaaaad, there are still hard money loans out there but it only works if you've got tons of equity (as in, your loan is only 60% or so of the value of your property) and you're willing to pay the figurative equivalent of an arm and both legs in lender fees (it can go as high as 18% of your loan amount) and interest rates (which can be as high as 11-16% as well).
Every scenario is different though, so I always say, it never hurts to discuss your situation with a trusted mortgage advisor who can provide good, solid advise.
Till next time,
Dezzi Rae (The Mortgage Maven)
Tuesday, May 13, 2008
The 4 C's of Lending
Whether you're refinancing or buying a home, you'll want to know what lenders look at when approving a loan.
While I'm giving you a rundown below of what I call the 4 C's of Lending, there's several layers to each "C" that come into play (folks who switch employment, kind-hearted people who co-signed for relatives without realizing that the relative's debt also becomes factored into their own debt ratios, astute pennypinchers who pay everything with cash so they inadvertently have no credit history on record, etc.), so my recommendation is to contact me about your own particular situation so I can help you paint a better picture of your strength as a borrower.
CAPITAL
How much money do you have in your checking and savings accounts, CDs, 401k, stocks and bonds? Do you have enough cash for the down payment and closing costs ? (Note: If you don't have enough for down payment and closing costs, I do have Down Payment Assistance programs that you can apply for. All you gotta' do is ask me! -Dez) Do you have enough cash for emergencies?
CAPACITY
How much do you make and can you repay the debt ? A good rule of thumb is that your mortgage payments should ideally not exceed more than 31% of your monthly gross income. (Note: If you need help calculating your debt-to-income ratio, shoot me an email. -Dez)
CHARACTER
What's your credit history like? Do you pay your bills on time ? Have you maxed out your credit cards to kingdom come? What's your credit score? Anything above 700 and lenders will love you. Anything in the low 600's, they'll go, "hmmmm...". Since lenders don't know you from Adam (or Eve), your credit history is the one of the few things they have to go by to determine whether you will repay the debt or not. (Note: Just because your credit score's blemished doesn't mean you're out of the running. Divorces and health crises have ruined many lives financially, and you just need the lender to see the whole picture. -Dez)
COLLATERAL (aka The House)
Lenders will only allow you to purchase a home that you can truly afford. If, after considering all the factors, they determine that your $1,800/month comfort level means being able to afford a home under $200,000, that's all you're going to get approved for. Anything over that would put you in danger of default and foreclosure, and the lender in jeopardy of holding the veritable real estate bag if you can't repay your loan.
Remember, shoot me an email at dezzirae@dezzirae.com or call me at (818) 642-9343 in case you want me to help you determine how strong of a borrower you are, what loan programs are available to you. If you're not as strong a borrower as you'd like to be, I'll give you tips on how to get there.
While I'm giving you a rundown below of what I call the 4 C's of Lending, there's several layers to each "C" that come into play (folks who switch employment, kind-hearted people who co-signed for relatives without realizing that the relative's debt also becomes factored into their own debt ratios, astute pennypinchers who pay everything with cash so they inadvertently have no credit history on record, etc.), so my recommendation is to contact me about your own particular situation so I can help you paint a better picture of your strength as a borrower.
CAPITAL
How much money do you have in your checking and savings accounts, CDs, 401k, stocks and bonds? Do you have enough cash for the down payment and closing costs ? (Note: If you don't have enough for down payment and closing costs, I do have Down Payment Assistance programs that you can apply for. All you gotta' do is ask me! -Dez) Do you have enough cash for emergencies?
CAPACITY
How much do you make and can you repay the debt ? A good rule of thumb is that your mortgage payments should ideally not exceed more than 31% of your monthly gross income. (Note: If you need help calculating your debt-to-income ratio, shoot me an email. -Dez)
CHARACTER
What's your credit history like? Do you pay your bills on time ? Have you maxed out your credit cards to kingdom come? What's your credit score? Anything above 700 and lenders will love you. Anything in the low 600's, they'll go, "hmmmm...". Since lenders don't know you from Adam (or Eve), your credit history is the one of the few things they have to go by to determine whether you will repay the debt or not. (Note: Just because your credit score's blemished doesn't mean you're out of the running. Divorces and health crises have ruined many lives financially, and you just need the lender to see the whole picture. -Dez)
COLLATERAL (aka The House)
Lenders will only allow you to purchase a home that you can truly afford. If, after considering all the factors, they determine that your $1,800/month comfort level means being able to afford a home under $200,000, that's all you're going to get approved for. Anything over that would put you in danger of default and foreclosure, and the lender in jeopardy of holding the veritable real estate bag if you can't repay your loan.
Remember, shoot me an email at dezzirae@dezzirae.com or call me at (818) 642-9343 in case you want me to help you determine how strong of a borrower you are, what loan programs are available to you. If you're not as strong a borrower as you'd like to be, I'll give you tips on how to get there.
Friday, May 2, 2008
FHA LOANS MAY JUST SAVE THE DAY
Here’s the lowdown, folks: those easy-to-qualify stated income/100% financing loans that lenders were churning out like there was no tomorrow just a couple years back are few and far between, and if you do find them, they come with pretty stringent guidelines- and rightly so. With foreclosures at an all-time high, investors know that they run the risk of losing their shirts if they give a borrower with not-so-great credit a half a million dollars without seeing paystubs or bank statements.
Before you start crying into your pillow though, I have some good news for you. If you’re a renter who thinks your dreams of homeownership will remain nothing more than that due to the stricter lender guidelines, or you’re a homeowner who was hoping to get a refinance but couldn’t get approved due to lack of equity or the fact that stated income loans are hard to come by, there just may be hope for you yet in the form of FHA loans.
Here are just a few reasons why an FHA loan may be what you’re looking for:
No minimum credit score. You can have a FICO score in the 500’s as long as your debt-to-income ratios are within FHA guidelines. (You do have to submit proof that you do make what you say you do though!)
Before you start crying into your pillow though, I have some good news for you. If you’re a renter who thinks your dreams of homeownership will remain nothing more than that due to the stricter lender guidelines, or you’re a homeowner who was hoping to get a refinance but couldn’t get approved due to lack of equity or the fact that stated income loans are hard to come by, there just may be hope for you yet in the form of FHA loans.
Here are just a few reasons why an FHA loan may be what you’re looking for:
No minimum credit score. You can have a FICO score in the 500’s as long as your debt-to-income ratios are within FHA guidelines. (You do have to submit proof that you do make what you say you do though!)
FHA allows non-occupant co-signers. If you can’t qualify on your own income, you can ask your favorite aunt to be your co-borrower, as long as she can document her income.
FHA will allow up to 97% of the total purchase price. Before you start lamenting the fact that it does you no good because you don’t have the remaining 3% for the down payment, read on. Mind you, the norm was that homebuyers used to have to put down at least 20% so the fact that you can still buy a home without putting any money down is still a steal, no matter how you look at it.
Seller can contribute up to 6% of the total loan amount towards closing costs. Great news for those who want to buy but can’t cough up the closing costs associated with buying a home.
Down Payment Assistance programs allowed. So, you’re approved for the maximum 97% In addition to your seller being able to contribute as much as 6% toward your closing costs, FHA also allows you to use Down Payment Assistance programs as well.
Gift funds allowed. If you don’t want to apply for a Down Payment Assistance program, FHA also allows 3% gift funds from a family member or employer.
No reserves required on 1-units. If you are buying or refinancing a single-family home, but you don’t have enough reserves in your bank account, 401k, stocks or bonds to show after the transaction closes, FHA won’t hold that against you. On 3-4 unit properties, you do have to show at least 3 months reserves though.
Rate & term refi’s can go up to 97% of the value of your home. If you merely want to refinance to get out of an ARM that will raise your monthly payments, this is the loan for you.
Cashout refi’s can go up to 95% of the value of your home. Perfect for those who need to pay off higher-interest debts. Prior bankruptcies OK. If you have a Chapter 7 that was discharged two years ago, or even if you’re in a Chapter 13 but you have at least 12 months of demonstrated payments, you’re good.
While FHA loans may be your key to homeownership today, not all lenders and brokers are able to do FHA loans. At First Security Lending, we’re proud to say that a huge portion of the mortgage transactions that we do are FHA and Cal-FHA, so we know what we’re doing.
In addition, we’ve been voted “Best Mortgage Company” by the City of Burbank eight years in a row, named one of INC’s 2007 Top 5000 private companies in the U.S. and was honored by the Burbank Association of Realtors in 2005 as “Affiliate of the Year”.
I love answering questions about mortgage, so feel free to call me at (818) 642-9343 or at dezzirae@dezzirae.com .
While FHA loans may be your key to homeownership today, not all lenders and brokers are able to do FHA loans. At First Security Lending, we’re proud to say that a huge portion of the mortgage transactions that we do are FHA and Cal-FHA, so we know what we’re doing.
In addition, we’ve been voted “Best Mortgage Company” by the City of Burbank eight years in a row, named one of INC’s 2007 Top 5000 private companies in the U.S. and was honored by the Burbank Association of Realtors in 2005 as “Affiliate of the Year”.
I love answering questions about mortgage, so feel free to call me at (818) 642-9343 or at dezzirae@dezzirae.com .
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