Tired of “Trigger Leads”? Take ACTION NOW!

If you’ve applied for a mortgage, you are probably painfully aware of what it’s like to be a “trigger lead”. When your credit is pulled, the consumer reporting agencies resell your information to lenders. These unfamiliar lenders relentlessly harass consumers via phone calls and even text messages. This is very different than consumers who sign up to receive calls from various lenders when the consumer visits and enters their contact info into “lead generating” websites in search of rate quotes. A person having their credit pulled by a lender they have selected should not involuntarily be subject to having strange lenders contact them. [Read more…]

Big Changes Coming to Real Estate Excise Tax for Washington State Homes

wordswag_1556818054305The Washington State Senate has passed revisions to excise tax that is paid when real estate is sold or transferred. Instead of having a flat rate, the new tax once signed into law by Governor Inslee, will be graduated. Some will enjoy a lower tax rate while others will pay a significantly higher tax rate. Real estate excise tax is typically a cost paid for by the seller. In San Juan County, the excise tax has been split by both the seller and buyer of real estate. Many would argue that excise tax (as with other cost of selling, such as real estate commission) is often passed onto the buyer as it is factored into the sales price. [Read more…]

Improvements to Credit Scoring

Earlier this year, the three major credit bureaus (aka “credit reporting agencies” or “CRAs”), Experian, Equifax and Transunion, came to a settlement with the New York Attorney General impacting credit reporting. It is anticipated that the settlement will help some consumers improve their scores by 10-40 points. [Read more…]

Mortgage Insurance Deductible through 2014

You may have heard that last week, Congress passed and President Obama signed the 2014 Tax Increase Prevention Act. It has some good news for home owners who currently pay various forms of mortgage insurance. If you pay mortgage insurance, including private mortgage insurance (pmi), or VA, FHA or USDA forms of mortgage insurance during 2014,  you may be able to deduct that on your 2014 income taxes.

Before you get too excited, this act does not extend the mortgage insurance deduction past 2014.

So if you are paying any form of mortgage insurance, especially if it’s private mortgage insurance or FHA mortgage insurance, it still makes sense to see if you can eliminate or reduce your payment with a refinance as you will not be able to deduct your mortgage insurance during 2015 (as things currently stand).

If I can help you with your refi or home purchase on property located anywhere in Washington state, please contact me!

 

Why would a consumer work with a non-licensed Mortgage Originator?

Following the release of the QM and Ability to Repay rules from CFPB, I decided to try to read through the proposed Loan Originator Compensation rules. I found this pretty interesting. Instead of making additional regulations for Mortgage Originators who work at banks or credit unions, why not just make them subject to the SAFE Act and require them be licensed?

[Read more…]

CFPB’s Qualified Mortgage Rule and the Ability to Repay

Today the CFPB released the “ability-to-repay” and “qualified mortgage” rule which is set to go into effect next year on January 10, 2014. These new laws will require that lenders consider a borrowers ability to repay a mortgage.

[Read more…]

Happy New Year! Is your Loan Officer Legal?

Mortgage originators (also referred to as Loan Officers or MLOs) are required to be licensed with the NMLS unless they work for a depository bank or credit union, in which case they are only required to be “registered” (per the SAFE Act).

[Read more…]

My thoughts on NAR’s Pending Home Sales for April: Mortgage Guidelines are NOT “Excessively Tight”

This morning NAR released the Pending Home Sales report which revealed that "contract signings, dropped 11.6 percent in April from a downwardly revised 92.6 in March. The index is 26.5 percent below a cyclical peak of 111.5 in April 2010 when buyers were rushing to beat the contract deadline for the home buyer tax credit." Pending home sales is a forward indicator since it's reporting on contracts that are signed but not yet closed.

Lawrence Yun, NAR's Chief Economist states that part of reason for the larger than expected drop is due to how difficult it has become to obtain a mortgage. 

“No doubt the continuing excessively tight mortgage underwriting process is making the housing market recovery unnecessarily slow…We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. Bank balance sheets show rising cash reserves and declining loan balances – it’s time to loosen the purse strings….” 

It's my experience that it's not that difficult to obtain a mortgage and underwriting guidelines are not "excessively tight".  The difference between qualifying for a mortgage now and pre-2007 is that borrowers must now prove (provide supporting documentation) that they meet program guidelines.  Stated income, low or no-doc loans are gone.  

  • Every penny of your down payment and funds for closing must be documented with complete bank statements (all pages) or other asset accounts being used.
  • Large deposits on your bank statements must be sourced (more documentation) to show where the funds came from.
  • Employment must be steady.  Buyers are not required to have been on the same job for the past two years…heck, they can be out of college (may count as employment) and there may be some unemployment periods…it needs to make sense and be documented.
  • Income must be steady.  If a potential borrower is not paid salary (hourly, commission, bonus, self-employed, etc.) they need to show they've received this type of income for the past two years.
  • Borrowers must be able to afford their home based on their income and debts. Some debts where payments are deferred, like student loans, are factored into your debt-to-income ratios…one day, you are going to have to make payments on it!  
  • Borrowers who take out new debts before funding (closing) of their loan, may find they no longer qualify for their mortgage.  Doesn't this make sense? Yes, home buyers may need new a washer and dryer…however if they're borderline with their credit or pushed with their qualifying ratios, they risk blowing up the purchase just before closing due to "LQI".  Home buyers need to make sure they honestly reflect the loan application from the start of the transaction to finish.

Okay, I'll admit that credit scoring has become tougher. Pre-2007, a person with 600 credit scores (or lower) could qualify for a mortgage.  Now you pretty much need a mid-credit score of 630 or higher for most loan programs.  And their are price hits (risked based pricing) that are factored into interest rates based on loan to value and credit scores.  Credit scores are reflective and borrowers can work on improving their credit scores (and should).  

Income is also scrutinized more than before with 4506Ts being required on every transaction. If your income is higher on your loan application than what you claim on your tax returns, be prepared…you'll be providing additional documentation (tax returns) even if you're paid a salary and your income may be adjusted lower.

Here's where Congress may really muck up the housing recovery, especially in light of this report:

  • Lowering the conforming loan limits, which is scheduled to happen on October 1, 2011.  In the Seattle area, the current conforming loan limit is $567,500.  Effective October 1, 2011, it's set to roll back to $506,000 meaning that loan amounts of $506,001 or higher will be "jumbo" non-conforming.  Jumbo loans have much tougher guidelines and higher rates which does mean that fewer people will qualify for higher priced homes.  Loan limits are also set to be reduced for FHA and VA loans after September 30, 2011.  By the way, 2012 loan limits may be even lower!
  • Increasing the minimum down payment for FHA loans from 3.5% to 5%. Congress is working on this right now and it's been tossed around by our government for quite a while.  Does having 1.5% more "skin" in the game really make a more responsible borrower?  I don't think so.  I would rather see that a borrower have that 1.5% in their savings than invested as down payment (where they do not have access to it should they have an emergency) in a home.

People can still get a mortgage today.  It bothers me that NAR and others are painting that mortgages are too tough to obtain…painting an inaccurate picture does not help the housing market either.  Today's buyer needs to be prepared to provide plenty of paperwork to support they actually qualify for the mortgage by showing they earn what they say, have the funds for closing and are employed.  What's wrong with that?

If you are considering buying a home, I do recommend meeting with a local licensed mortgage professional as early as possible to start on the prequalification process.  If your next home is located anywhere in Washington State, I'm happy to help you!  

PS: I still believe that it would tremendously help the housing markets recover IF home owners who want to refinance and who qualify based on credit, income and employment are allowed to without an appraisal…very similar to an FHA streamline refi. This would allow people who want to stay in their homes and who qualify, to be able to take advantage of today's lower rates and not cause them to be punished due to lower appraised values.