The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

Category: Mortgage (Page 47 of 60)

True Communication in the Real Estate World

June 19, 2017 /

Whether you are the buyer’s agent or the seller’s agent, the communication with a loan officer can occasionally get tense.

As the seller’s agent you want to ensure that your client gets the best deal possible and you want the loan to close on time. As the buyer’s agent you want to ensure your client gets into the home of their dreams without a hitch.

At the same time, the single biggest issue I hear from agents regarding their lenders has to do with communication….or lack thereof.

“My biggest complaint has always been communication with the consumer and me through the entire process” – Mike K, Realtor

The most important thing to always keep in mind is that whether you are the buyer’s agent or the seller’s agent, I believe it’s best consider the loan officer a part of the team. Remember, we want this loan to close as badly as you and your client.

Key Questions to Consider

Are you receiving weekly and timely Loan Status Updates from your lender?

Are you the first to hear both good news and bad regarding the progress of your client’s loan?

Do you find out about the need for escrow extension only a day or two before the expected close?

If you can’t answer these in the affirmative, you might need to find a new “go-to” lender!

“If the client can’t qualifyy, then don’t waste my client’s time and MINE by trying to fix a square peg in a round hole. However, if they client can be brought along, developed, consulted into becoming a viable buyer then you are a hero to me! I want you calling me and not ME chasing you down.” Kyle C, Realtor

The Importance of The On-Time Close

As a loan officer, my worst nightmare is a loan that doesn’t close. We are paid strictly on commission, so we don’t get paid unless the loan closes (just like you), so there’s extra motivation to come up with any possible solutions to a problem. We don’t want to spend weeks and weeks on a file and then not have it close – and we are no different than the agents in this regard.

The Lending Coach as Your Teammate

So, think of me as your teammate throughout this process.

The referral agents I work with have my word that they will hear the good, bad, and the ugly immediately from me.

They know that we will work together to solve those problems and issues that inevitably arise quickly and professionally.

Please do contact me for more information and how we might be able to work together!

Fannie Mae Eases Qualification Requirements

June 12, 2017 /

The country’s largest source of mortgage money, Fannie Mae, soon plans to ease its debt-to-income (DTI) requirements, opening the door to home-purchase mortgages for large numbers of new buyers.

This move by the mortgage giant will dramatically increase the number of people who will now be able to qualify for a home loan.

Per The Washington Post, “Studies by the Federal Reserve and FICO, the credit scoring company, have documented that high DTIs doom more mortgage applications — and are viewed more critically by lenders — than any other factor.”

Using data over the last 15 years, Fannie Mae’s researchers analyzed borrowers with DTIs in the 45 percent to 50 percent range and found that a significant number of them actually have good credit and are not prone to default.

Simple Definition : Debt-To-Income (DTI)

Debt-to-Income (DTI) is a lending term which describes a person’s monthly debt load as compared to their monthly gross income.

Mortgage lenders use debt-to-Income to determine whether a mortgage applicant can maintain payments a given property.

DTI is used for all purchase mortgages and for most refinance transactions.

It can be used to answer the question “How Much Home Can I Afford?”

Debt-to-Income does not indicate the willingness of a person to make their monthly mortgage payment. It only measures a mortgage payment’s economic burden on a household.

Most mortgage guidelines enforce a maximum debt-to-Income limit – and Fannie Mae has essentially “upped” that ratio to help more borrowers qualify!

Housing Ratio or “Front-End Ratio”

Lenders add up your anticipated monthly mortgage payment plus other monthly costs of homeownership. These other costs of homeownership could include homeowner association (HOA) fees, property taxes, mortgage insurance, and homeowner’s insurance.

Normally, some of these expenses are included in your monthly mortgage payment. To calculate your housing ratio or front-end ratio, your lender will divide your anticipated mortgage payment and homeownership expenses by the amount of gross monthly income.

Total Debt Ratio or “Back-End Ratio”

In addition to calculating your housing ratio, lenders will also analyze your total debt ratio. At this time your other installment and revolving debts will be analyzed and added together. Installment and revolving debts will appear on your credit report.

These payments are expenses like minimum monthly credit card payments, student loan payments, alimony, child support, car payments, etc.

Your monthly installment and revolving debts are then added in addition to your estimated monthly mortgage payment and housing expenses and divide that number by your monthly gross income.

Because of these changes by Fannie Mae, many individuals that did not qualify for a home loan might now be eligible under these new regulations.

Please contact me to find out more!

New Fannie Program to Solve Student Loan Debt Qualification Issues

May 29, 2017 /

A truly groundbreaking mortgage solution is now being offered by Fannie Mae, as the country’s biggest mortgage agency is making getting approved for a mortgage much, much easier.

Fannie Mae announced three new features that will help those burdened with student loans to qualify to buy a house, or pay off their student loans via a refinance.

“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae.

The new program is called Student Loan Solutions, and represents a huge shift by Fannie Mae.

Source: The Mortgage Reports and Tim Lucas

Change #1: Student Loan Payment Calculation

Fannie Mae has changed how lenders calculate student loan payments.

Lenders may use the student loan payment as it appears on the credit report for qualification. Period. That may seem like common sense, but it’s not how things have been done in the past.

Change #2: Student Debt Paid By Others

Just because a payment shows up on a mortgage applicant’s credit report does not mean he or she pays it.

Often, that obligation is taken care of by a parent or another party.

In these cases, Fannie Mae is disregarding the payment altogether. That applies not only to student loans, but payments for all debts.

Change #3: The New Student Loan Cash-Out Program: Pay Off Education Loans With A Refi

Perhaps the biggest shift of all is Fannie Mae’s rework of cash-out rules regarding student loans.

Typically, cash-out refinances come with higher rates. They are considered higher risk by lenders and Fannie Mae.

So, according to Fannie Mae’s loan level price adjustment matrix, a lender must charge an extra 1%-2% of the loan amount in fees or more, just because the loan is deemed “cash-out”.

Now, Fannie Mae does not consider the loan a cash-out transaction if loan proceeds completely pay off at least one student loan.

This loan classification has never been seen before — a kind of hybrid between no-cash-out and cash-out financing. Fannie Mae simply calls it the Student Loan Cash-Out Refinance.

Please do reach out to me to discuss these significant changes to see how I might be able to help you either purchase or refinance!

Zero Down Payment FHA Loan Option

May 15, 2017 /

There is a new option available for homebuyers looking for affordable housing – one with a zero down payment option! This is NOT a governmental down payment assistance program, but an investor that utilizes a first FHA mortgage in conjunction with a “soft second” mortgage.

The 2nd mortgage, in this case, is 3.5% of the purchase price. Depending on the borrower’s income, the 2nd lien can be forgiven after 36 months of on time first mortgage payments!

Certain credit criteria, debt-to-income ratios, and income must be met (there are other specifics, as well) – but a good number of FHA qualifiers should fall within the guidelines.

A few specifics:

  • Available in AZ and CA
  • 30, 25, and 20 year terms available
  • Minimum FICO is 640
  • Single Family Residence Only
  • Debt-to-Income restrictions apply

Please do reach out to me for more details, as it would be my pleasure to assist!

How Credit Scores Impact Loan Interest

May 8, 2017 /

It seems like those with good credit catch all the breaks when it comes to getting lines of credit. It’s easier for them to qualify, and they get lower interest rates.

Well, there’s a pretty good reason for it.

A person that has good credit has a low statistical probability of defaulting on a loan. Therefore, they are given a lower interest rate. A person with a lower credit score has a much higher probability of defaulting, therefore they are charged a much higher interest rate to cover the losses incurred by lenders by those who do default.

It’s all about mitigating risk.

One of my favorite finance bloggers, Cleverdude, has a great piece with specific examples of credit scores and interest rates that shows how much you can really save by working on that credit score.

Find out more here….

He concludes that “people with good credit also have an easier time keeping and improving their credit because they get lower interest rates, which lowers their monthly payments. This makes loans easier to pay back, and keeps more money in their pockets.”

Wise words from the Cleverdude, indeed.

 

 

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