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. 

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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.

I get calls time to time from clients about how to get their utilities turned on.  Even though this is basic for me, this is a challenge for a lot of us if we do not know the steps to make this happen. 

Let me share some tips when having your utilities turn on:

1.  Make sure you know a precise date of move in so you have service ready on the day of move in.  I cannot tell you how many clients forget to coordinate this and do not have utilites on move in day.

2.  Call the utility company at least 2 weeks prior to move in and find out how you will be approved for service.  Some companies require deposits for the services, or pull your credit for approval (this is a soft pull). 

3.  Some utility companys require the escrow number of your file before they will switch service.  You will need to talk with the escrow/settlement company and get this information upfront.

4.  Make sure the boxes are unlocked if they have to go out to the property and turn it on.  This is a rare case, but I have seen utilities not turned on due to this reason.

These are just a few tips that will help with your frustrations of having your power turned on.