I had a real estate agent call me the other day that I did not know.  She was calling around looking for a lender to place a loan for her borrower.  She specifically asked me if my company can offer her client a Fannie Mae HomePath loan. I told her yes, got out my yellow steno pad and started to ask her certain questions to uncover the best loan option for her  borrower.  In some states the new lending laws are pretty clear that a loan originator must provide a borrower the best lending option based on their situation.  It just happens that Fannie Mae HomePath options do not usually offer the best terms in comparison to FHA options except in the case of 2nd homes and investment loans.  So I asked her straight up, “Why does your client want to use Fannie Mae HomePath?“, she says because her client’s wife is short selling her home (on her credit only) and this is the only way that we can do a loan is by placing it in the husbands name only.  Now on the surface this seems correct.  Go conventional, because you do not have to use the other spouses credit.  So I asked her further if the husband was living with his wife in the home that is being short sold.  She said “Yes“.  I also asked her if the wife going to be living with him in the new home once the short sale is finalized.  She answered “Yes“.  So I explained to her that even though conventional loan guidelines do allow a buyer to purchase a home in his own credit, he did live with her a had a communal responsibility for the debt that is being sold short.  Most Mortgage Investors treat this like a buy and bail and just are not comfortable with granting the new loan.  I explained further that the loan could be done, but my company (Sunstreet Mortgage, LLC) did not have an investor who would buy the loan from us.  The guidelines basically say “Yes” but the investor says “No“.  I told her politely that she would need to seek out another lender to help her with the loan.  This is when the conversation when wrong:
She says “Don’t tell the bank about the wife’s situation.“.  Beyond the fact that the investor would of figured it out, I said to her that I cannot leave out materials facts about the borrower’s situation for a loan decision. This is called “Mortgage Fraud”

Wikipedia defines Mortgage Fraud-as “a term used to describe a broad variety of criminal actions where the intent is to materially misrepresent or omit information on a mortgage loan  application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth. In federal courts, mortgage fraud is prosecuted as wire fraud, bank fraud, mail fraud and money laundering, with penalties of up to thirty years imprisonment. “

By leaving out the facts that the husband is married to a wife that is short selling a home in her name only is leaving out material information that could change the outcome of a loan decision (LOAN FRAUD!!).

I am still not sure if the real estate agent understood this.  A lender cannot leave out the facts to grant a good decision for a client.  Now if all information is presented to a lender and the bank that is making that loan grants a positive decision to take on the risk, then this is NOT loan fraud.  Understanding the difference is key.

Gary Miljour- Mortgage Lending for Tempe Arizona

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I know so many people that still do not realize that their ARM (adjustable rate mortgage) might not be broken.  I wrote about this way back in March 2008. Is your ARM (Adjustable Rate Mortgage) Really Broken? Most homeowners always assume that if they have an adjustable rate mortgage that their payment and interest rate is going to go upward.  Well due to rates being so low, this is actually the opposite.  If you are truly not sure if you have a broken “ARM”, please feel free to contact me and I will be happy to review your paperwork and help you find out.  The last client who thought they had a broken “ARM” saved $550.00 a month when the interest rate when down. 

Gary Miljour- Mortgage Lending for Tempe Arizona

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With interest rates dipping as low as 4.25% to 4.75% on a 30 year fixed, the tax credit gone should not make much of a difference in the minds of home-buyers. However, that has not been the case.  So far the mortgage application volumes since the tax credit ending has been very low.  Most borrowers have not yet realized that due to the low interest rates that the long term benefits of owning a home is more beneficial today than the customer who bought their home 3 to 6 months ago.  The reason for this phenomena is due to interest rates creeping down to all time low levels between 4% to 5%.  Most homeowners who took advantage of the first time home-buyer tax credit paid for mortgage rates in the ranges of 5.25% to 5.75% range.

So let me give you 2 great examples using a $90,000.00 loan and a $180,000.00 loan of the benefits today buying a home versus the tax credit of yesteryear.

Example #1:

First Time Home-buyer bought a $100,000.00 home and put 10% down during the first time home-buyer tax credit.
The loan was for $90,000.00 at a rate of 5.5%.  That Principal and Interest payment is $511.01.  This borrower earned the $8,000.00 tax credit.

vs.

The same First Time Home-buyer bought a home today at $100,000.00 and put 10% down.  The loan was for $90,000.00 but now the estimated rate is 4.75%.  That Principal and Interest payment is $469.08.  The borrower did not earn $8,000.00 but
is now saving $41.93 a month.  over 360 payment or 30 years, this total:  360 payments X 41.93 =  $15094.80 in payment
savings.

This is basically 2 times more beneficial than the first time home-buyer tax credit.

Example #2:

First Time Home-buyer bought a $200,000.00 home and put 10% down during the first time home-buyer tax credit.  The loan was for $180,000.00 at a rate of 5.5%.  That Principal and Interest payment is $$1022.02. This borrower earned the $8,000.00 tax credit.

vs.

The same First Time Home-buyer bought a home today at $200,000.00 and put 10% down.  The loan was for $180,000.00 but now the estimated rate is 4.75%.  That Principal and Interest payment is $938.97.  The borrower did not earn the $8,000.00 but is now saving $83.05 a month.  Over 360 payments or 30 years, this total:  360 payments X $83.05 = $29,898.00 in payment savings.

This is basically 4 times more beneficial than the first time home-buyer tax credit.

The hard part is predicting the interest rates, and these rates will not stay this low forever. If you felt you missed out on the tax credit, quit kicking yourself.  You can still get that home and get the same benefit.  Yes it is not instant money, but it also does not come with tax consequences if you sell your home early (please seek CPA about that).

The reason I shared this is because I feel we all got sucked into believing all the gimmicks and tax credits as a sole reason to buy a home. The real reasons are right in front of you.  With prices and interest rates at all time lows now is the time to act.

Gary Miljour- Mortgage Lending for Tempe Arizona

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This old adage sometimes makes you think of the chicken or the egg and which came first. Those type of philosophical debates are fun for the ages but when it comes time to figure out if renting a home is more advantegeous to owning a home, there are many personal factors involved in the decision.

I will be the first to state that NOT everyone out there should be a homeowner. Homeownshership takes a lot of responsibility, and sometimes we are just not ready to make that committment. But when the time feels right and the decision has been made that you want to explore homeownership, then at that point, you will need to know if owning a home has a bigger benefit versus renting.

Now I could show some slick charts to show you everytime that home ownership is a better place to park your housing dollar versus renting, but truly until we know your unique circumstance for me to say this is just not true.

I can give you quite a few reasons where renting makes more sense than owning.

• Not ready to take on the responsibility of a mortgage obligation.
• No permanent work location.
• Rental costs per month could be cheaper at the moment.
• No down payment for the mortgage.
• No job or income source.
• Your credit is too low.

Now if these reasons above are not your situation, then I would be the first to tell you that it would make sense to run the numbers and see how much of a mortgage payment would cost you versus renting a place.   Remember, rents have a tendancy to go up over time while a fixed rate mortgage payment will stay the same.

To figure out your break even time, I have an attached link to a real slick:   buy vs. rent calculator

Bottom line, if you plan on being in a home for five years or more, most of the equations equate in your favor to purchase.  Some equate out in as little as three years.

If you have specific questons about renting vs. homeownership, please give me a call.

Gary Miljour- Mortgage Lending for Tempe Arizona

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I pose this question not to give a literal answer to this simple question but to really examine what a 30 year mortgage is. I am here to state the obvious, and be quite blunt in the process.  Once a 30 year mortgage is created, you are a payment slave to that bill until the day the loan is paid off.  You have just signed your life away and have to find a way through thick or thin to pay on that mortgage or the bank will take back their asset.  Even further, it is not really even yours until it is paid for.

30 years is a long time. Most of us do not like to have the same car for 5-10 years, so a mortgage is a huge commitment.  For some homeowners, by the time the mortgage is paid off, their kids have already moved out.  This is not a short term, pay when I want kind of commitment, but a grown-up kind; pay every month type of commitment.  We have a better chance of going through a divorce or changing jobs before the home is paid off.  So we better start treating it as a big deal.

I, like most, have had to change my thinking in the last few years and re-prioritize what is important in my life.  Debt free sounds pretty good right? This takes a big commitment, it also means not calling me (the loan guy) every 5 years or so to refinance, but looking at all smart options.  Remember, every single time you refinance, unless you go with fewer years, you are starting back at a new 30 year obligation. Personally, I have owned a home for 11 years, but really have only owned for 3 years.  I sold one home and bought another and refinanced a few times along the way.  Yes, $150.00 a month less sounded good at the moment, but now the one thing I cannot get back is time.  I have lost that forever and now need to make up ground.  My point is; take it from the mortgage advisor, the best mortgage rate in town means nothing if it goes against the basis of eventually not having a mortgage payment.  Remember your commitment and be ready to own it… for a long time.

Gary Miljour- Mortgage Lending for Tempe Arizona

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Attention all real estate investors and buyers trying to buy homes from real estate flippers:

Most mortgage lenders now have strict guidelines when it comes to title seasoning. Title seasoning is determined based on how long the seller has been in title to the current property.  If a seller has been on the title of the property for a very short period of time and now is trying to re-sell the property, banks will require the home to be title seasoned.

A lot of people ask why a bank would care.  Well let me try and answer that question.  The mortgage lender cares because not enough time has passed to truly verify that the home value is holding, declining or appreciating.  Mortgage lenders today do not want to take the risk of the unknown so they feel that title seasoning helps protect them from this risk.  Now if you agree or disagree with the mortgage lender, that is not going to change the fact that they are now requiring this as a condition.

Here are some good indicators with mortgage seasoning:

1.  FHA loans do require a 90 day title seasoning.  A purchase contract cannot be written until the title is seasoned beyond the 91st day.  Day 92 is the best time to execute the new contract.

Click here to read the rest of my post.

Gary Miljour- Mortgage Lending for Tempe Arizona

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The new cliché in the mortgage industry is that “We are getting back to basics.”

I have heard this phrase thrown around lately, but sometimes I wonder if anyone except other lenders knows what we are talking about?

I have a theory that if you get 2 or more mortgage lenders in a room at a party and they start talking shop, others watching probably think we are speaking Klingon, or what I been calling for a long time “mortgagese.”  You see, we like to throw a lot of words and acronyms around like FICO, DTI, LTV, flipping, deals, etc.  But I think we sometimes forget that Joe homeowner or maybe even most Real Estate Professionals have no idea what we are talking about.  So in plain old English, let me share what I know about getting back to the basics with mortgage lending.

“Mortgage Lending Guidelines 101″

Cash is King: The more funds liquid in bank deposits and retirement accounts the better.

Down payment is crucial: The more funds you have for a down payment, the stronger the loan file becomes.

Credit trumps all cards: Without a decent credit score, a mortgage lender cannot even give you lending options.

Weird deals are to be avoided at all costs: 95% of the time if the deal is a little off the wall, it won’t work.

You must have a job or income: The income source must be verifiable, believable and well documented for usually 2 years.  No job, no loan…Sorry!

Equity in your existing home will have a huge impact on the new mortgage loan being approved: Today you must either choose to sell your existing home or have some pretty good equity if you expect the bank to offset the debt with rents.  Also, it must actually be rented out!  You cannot just say “we plan to rent it out.”

Appraised value matters: The home must appraise for your offer price or the lender will cut the maximum amount they are lending.

Chain of title is important: I have run into this issue lately with short sale flipping companies.

Title seasoning is a big deal: Most lenders have sources that can do this loan 1 day after transfer of title, but are limited to where the loan can be placed.  FHA has a 90 day anti-flipping policy.

Mortgage insurance companies prevail over the lenders guidelines: If the loan is going conventional for whatever reason, the mortgage insurance companies have their own lending overlays.  It gets real fun when you are in a declining market value state.

AND LASTLY,

Mortgage Rules Change Daily: This one is the most crucial.  What your mortgage lender knew in the past means nothing today.  The good lenders study up on current mortgage guidelines sometimes daily or weekly.  Even then it is almost impossible to keep up with the ever changing mortgage guidelines.

Again, when we say “we are getting back to basics” it means that common sense underwriting will usually trump with a mortgage lender.  If you have cash in the bank for a down payment on a home with some left over cash called reserves, you have a great job for over 2 years and you have decent or better credit score; you should be able to get approved.  If you do not have those 3 items, then you might run into some challenges.  There are always exceptions to these basics, but in general, that is what a mortgage lender is looking for today in a borrower.

Gary Miljour- Mortgage Lending for Tempe Arizona

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Research mortgage professionals to get the best loan and service.

As Arizona Media insider Catherine Reagor at The Arizona Republic puts it, the mortgage industry in the past has “duped you.”  You were deceived Mr. Consumer for having an unlicensed loan officer do your mortgage loan, collect higher fees and force you into the worst loan products possible.  So I guess until our industry is fully licensed next year, no one will be able to get a “fair mortgage.”  The problem with this information is the mortgage professionals left in our industry today are the ones that played by the rules to begin with.  Now we have to face the music for the flaws of others who were looking at the mighty dollar and not what was best for their customers.

In my opinion, it goes back to doing some research before you choose a mortgage lender.  When we need our taxes done we seek out the brightest and best CPA’s, when we are sick we visit the most specialized and best doctors.  For some reason, when the consumer needed a mortgage to buy the biggest investment in their life, they sought out the guy who had a billboard advertising the lowest rate in town.  I’m not sure about you, but I was taught at an early that “you get what you pay for.”

It’s simple advice: seek out the best and the brightest.  True mortgage professionals left selling loans did not get into this business to set our clients up for failure.  Why would I want to put a client into a loan that would cause them to lose their home?  You see, true mortgage professionals want the referral business of their clients and are looking out for their best interest.

At the end of the day, consumers will still buy homes and homeowners will need a mortgage.  You will need a mortgage lender to provide this service.  A piece of paper saying I can pass a test does not make me a reputable loan officer; having a reputation that is backed up from prior clients and business partners does.

Gary Miljour- Mortgage Lending for Tempe Arizona

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I’ll be honest; the entire process of purchasing a home is not fun.  Having your teeth pulled by a dentist may be more comfortable than getting a mortgage approval these days.  When I am asked about my system, I make it clear the more that is accomplished early on will make for a smoother closing.   The system from the beginning to the end is time intensive.  I will walk through some of these steps:

1. You hire a “team,” meaning the right players helping make the outcome a positive one.  First, you hire a lender and see how much you can get approved for.  Then you hire a real estate agent to help you find a dream home.  This is just the beginning.  By the time the process is done you have hired many others including an appraiser, home inspector, termite guy and title company.

2. Get a plan (with your lender and agent).  In my experience, I have found that having a plan upfront will make the last days of closing run smoother.  Preparing early helps reduce stress levels on all parties involved with the transaction.

3.  Get a pre-approved loan.  This process can range from a couple hours to days and weeks depending on your specific challenges.  If a real estate agent tells you he can have a pre-approval by a lender in minutes, that is not the case in this market.  A pre-approval in my book is determined when;

• I have a complete and fully reviewed mortgage application on file.
• An automated approval process has been run and come back approved.
• I have received all supporting documentation to meet loan guidelines.

Once I have all of this done, your loan is fully pre-approved and I can issue a pre-approval letter or loan status report.  I can then inform your real estate agent that he or she can take you house hunting in your pre-approved range.

4.  Start house hunting.  This process could take hours, days, weeks or months depending on your specific needs, wants and requirements.  Once the real estate agent has an ACCEPTED CONTRACT is when the clock starts ticking.

5.  Signed contract.  This means that the accepted contract is signed by all parties involved in the transaction.  All parties include the buyer, seller and agents.  If you have a verbal acceptance but it will take three additional weeks to receive from the bank, this doesn’t count!  Your final approved loan starts with a FULLY ACCEPTED CONTRACT.

6.  Process, underwrite and close your loan.  Right now my turn times for these steps is in 30 days or less on FHA, VA or conventional financing.  Sometimes we can speed up that process, but be prepared for it to take that long.

Knowing and understanding the process of a mortgage approval can prepare you for your own experience.  It doesn’t have to be as painful as a visit to the dentist, all it takes is a little (or a lot) of patience.  Good luck!

Gary Miljour- Mortgage Lending for Tempe Arizona

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The days of choosing a mortgage professional based on a personality test and box of donuts in your real estate office is changing.  Today with the tightening mortgage guidelines, having a mortgage professional who can review credit, employment, debt to income ratios, calculate assets, document the file and make sure that 2+2= 4 is the smart move for a business partner.

We just got word that in 2nd quarter of 2009, the big mortgage investors are still taking pretty significant losses on performance of their mortgage securities.  These are not just the old loans that were originated 2 to 3 years ago with guidelines allowing anyone who could fog a mirror get a home loan, but these are the more recent loans requiring verification of credit and employment for approvals through underwriting.  Based on the fact that mortgage backed securities are still not fully performing, investors will start to require stricter guidelines.

We are not too far along of seeing minimum requirements of 660 to 680 credit scores on conventional loans and 640-660 minimum credit scores for FHA and VA loans from the investor overlays.

With the lending environment getting tighter versus looser, it means more mortgage professionals will need to adhere to new guidelines. It will require a mortgage professional who has years of experience and a person dedicated to educating themselves of the new changes.

In recent months, I have heard a new set of complaints from our real estate community of loans denied the day or week of closing.  When I speak to someone and hear this my head spins.  Further into the conversation, I uncover that the mortgage lender did not master their craft.  Some of these folks will not be able to adapt to the new mortgage market.  In this particular situation, if the mortgage lender reviewed the file properly from the beginning, he would have discovered in 10 minutes that the borrower should never have received a pre-approval.  Instead, the lender was going off old information and wasted not only his time but the clients and all persons involved.  This is just another instance that makes our industry look bad.

I am hoping with the new mortgage licensing requirements coming down the peak that some of these lenders will get out of the market.  Sub standard pre-approvals do not work today.

I am asking the Real Estate Community to be aware of our always changing market. Now is the time to make the right change in your mortgage business partners for a successful business.  The “hand out 3” mortgage lender card rule given to clients in this credit tightening market, is setting your business up for disaster.  Seek out a highly knowledgeable mortgage professional and interview them. Make sure they truly know the ins and outs of mortgage lending business.  In the long run, this will make your business more profitable and your clients happy with the results.

Gary Miljour- Mortgage Lending for Tempe Arizona

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