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Why Your Mortgage Lender Needs All That Paperwork

As a loan officer, I don’t just ask for paperwork to be a pain in the…

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QM that’s why. The Qualified Mortgage became a thing in January, 2014. Proposed, promulgated and made law of the land by the CFPB (Consumer Financial Protection Bureau) as a safe haven for lenders that played by the rules. Unveiled and delivered to the mortgage lending universe in tandem with ATR (Ability-To-Repay) underwriting guidelines, QM protects lenders from loan buybacks if they follow the CFPB “how to” directions for assembling a mortgage loan file.

QM is a good thing. So is ATR. Together they provide a standard; a common sense (most of the time), make sense approach and framework for determining borrower wherewithal and then providing a schematic for how to corroborate that wherewithal. If lenders stay in the QM/ATR lane and deliver audit worthy loans to secondary markets like Fannie Mae and Freddie Mac, then even if a loan goes bad, the lender will not be at risk of buying it back.

And remember for you history buffs, bad loan buybacks led to the great mortgage collapse almost a decade ago.

The primary weapon in the lender defense arsenal to fend off the dreaded buyback is verifiable proof, mostly in the form of documentation. Paystubs, W2s, 1099s, tax returns, bank statements, IDs, real estate contracts, evidence of this, evidence of that, letters of explanation, and on and on. Essentially any and every piece of information disclosed and used to make a mortgage credit decision, needs to have a bona fide and verifiable document trail that proves beyond a reasonable doubt that what you say and what you do is in fact what you said and what you did.

read more via http://www.forbes.com/sites/markgreene/2016/04/03/why-your-mortgage-lender-needs-all-that-paperwork/#1ff706a45b1d

 

 

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Will The New Credit Score System Help You Get A Mortgage?

A client of mine recently questioned why the FICO scores I get are different from a site they use, Credit Karma, when both are using info from the same credit bureaus.  Credit Karma’s site explains that there are different scoring models.  The scoring-model Credit Karma uses is different from the ones used in the mortgage industry.  But proposed legislation may change the scoring-system used by Fannie Mae & Freddie Mac…  

A new bill in Congress could significantly impact your ability to secure a mortgage by changing the way lenders look at credit scores.

In December 2015, two members of the U.S. House of Representatives introduced a new bill. Known as H.R. 4211, or the Credit Score Competition Act, the bill is in its first stage of the legislative process. Although it’s a long way from becoming a law (and your eyes may have glazed over at all that legislative jargon), future homebuyers have good reason to keep an eye on this bill. Proponents say it should help a number of first-time homebuyers compete in the real estate market.

That’s because the bill would push for a new credit-scoring system, one that could potentially allow more buyers to secure funding (and be more competitive in the Portland, OR, real estate market and other challenging markets). But how much will it really help your credit-score rating — and how quickly?

What is the Credit Score Competition Act?

H.R. 4211 is a bipartisan bill introduced by Ed Royce (R-CA) and Terri Sewell (D-AL). The bill would impact the Federal National Mortgage Association Charter Act. The core of the bill would require government-backed mortgage institutions — meaning Fannie Mae and Freddie Mac — to use credit scores in the underwriting process of residential home loans “only under certain conditions,” which would include making the process used to validate and approve credit scores publicly available. According to the representatives who introduced the Credit Score Competition Act, this means that Fannie Mae and Freddie Mac could go beyond using the FICO credit-scoring model and use other systems, which is a big deal for those who have a low FICO credit score but are otherwise good home-loan candidates. – See more at: http://www.trulia.com/blog/new-credit-score-rating-system/?ecampaign=con_cnews_digest&eurl=www.trulia.com%2Fblog%2Fnew-credit-score-rating-system%2F#sthash.VmMEkqb1.dpuf

– See more at: http://www.trulia.com/blog/new-credit-score-rating-system/?ecampaign=con_cnews_digest&eurl=www.trulia.com%2Fblog%2Fnew-credit-score-rating-system%2F#sthash.VmMEkqb1.dpuf

Relationships are Key

I had a closing at my clients’ home this morning.  We have worked together for almost 2 and a half years from their lot purchase, through their construction loan phase and finally now, their end loan.  It was so fun to see the fruits of their labor (they themselves were the general contractor).  The home is gorgeous!  Loving that my job is all about relationships!

2016 is Off to a Great Start!

First business day of the new year.  What could be better than a closing for a home purchase with first-time home buyers!  Congrats Tim and Sheli!!  And the closing only took 45 minutes from start to finish.  I just need to get back into the swing of things as I forgot to take a photo.  Feeling good about 2016!!

Last-Minute Real Estate Tax Deductions For Homebuyers

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If you’re a homeowner, or looking to buy soon, here’s what you need to know about your tax burden for 2016.

Let’s face it: The last thing you want to worry about after that second glass of eggnog during this year’s holiday festivities is what you might need to deal with during next year’s tax season. But it’s well worth paying attention to real estate tax deductions now so that you can save later.

In the summer of 2015, a Senate committee approved many tax extender bill provisions into 2016. The bill extended a collection of tax-related deductions and credits that had expired, and this could give taxpayers a break through the end of 2016 if the bill is fully passed by Congress before the end of the year.

This act amends sections of the IRS tax code and can change what you’ll owe come April. Yes, the extenders bill is packed with many tax breaks targeted to special interests, such as the research and development credit, so you may be tempted to think the changes don’t apply to you — but they do!

If you own a home or are hoping to close on a home for sale in Santa Fe, NM, your tax picture for 2016 may look different than it did previously. Here are a few of the breaks up for consideration in Congress that could help lower your federal tax bill.

Mortgage debt forgiveness

When a mortgage lender writes off all or any part of a forgiven debt, the amount that is forgiven is “passed back” to the borrower as taxable for federal income tax purposes. The rule applies to all debt, including home mortgages. However, in 2007, in the midst of the housing crisis, Congress pushed through the Mortgage Forgiveness Debt Relief Act, which allowed for an exemption.

Under the rule, qualifying homeowners who have either lost their homes to foreclosure or qualified for some kind of repayment adjustment don’t have to pick up the forgiven debt as income on their tax returns. The rule was intended to be temporary but has been renewed several times, and Congress is currently debating whether it will renew this rule for 2016.

Deduction for mortgage insurance premiums

In a tough market, lenders are a bit more cautious. Buyers who financed homes in the last few years found that many lenders required private mortgage insurance (PMI) to protect the lender in the event of a default.

But here’s the rub: Even though the lender required you to purchase PMI as a condition of getting a mortgage, you couldn’t write it off. Unlike the interest paid on your mortgage, mortgage insurance payments are generally not deductible for tax purposes.

It was possible to claim and deduct PMI payments in 2015. If the tax extenders bill is approved and enacted through 2016, those who qualify and itemize may now claim a tax deduction for the cost of paying PMI for their homes.
– Read more at: http://www.trulia.com/blog/2015-real-estate-tax-deductions/#sthash.VD5ghDIL.dpuf

Source: Last-Minute Real Estate Tax Deductions For Homebuyers – Money Matters – Trulia Blog

3 Ways to Boost Your Credit Score (and 3 Ways to Damage It)

When it comes to taking the next step in your life, one of the most important numbers could be your credit score. After all, it can stand in the way of some of the biggest purchases you may want to make, like a car or a house.

First the basics, five factors comprise your credit score

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Not all debt is the same and some  is considered ‘good’ according to Scott Smith, president of CreditRepair.com. “Any kinds of car loan, home loan…those things actually provide you great credit history when you pay them off on time and fill those debt obligations,” he said.

Even credit card debt isn’t “necessarily wrong” said the credit expert. But Smith warned “you don’t want to have more than 30% utilization on that (account) and you do want to pay it down as often as possible.”

Scott Smith gave his assessment on the three Do’s and Don’ts of improving your credit score.

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read the 3 DONT’s via http://finance.yahoo.com/news/3-do-s-and-don-ts-of-improving-your-credit-score-175614971.html#

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More Money, More Problems: When a Big Down Payment Could Spell Trouble

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Hey, there’s nothing wrong with making a sizable down payment—if you’ve got the money to support it. Financial experts advocate putting at least 10% or 20% down, and we’ve got to agree: The more you can pay at the start, the easier managing your mortgage will be.

But there’s a caveat: Sometimes putting down a ton of cash can actually wind up compromising your quality of life or future savings goals. In some cases it can actually hinder your ability to close on that dream home you spent so long saving up for.

Here are five reasons you might want to dial down your payment.

You’ll flush your emergency fund

“Under no circumstances should buying a house be an emergency,” says Jeff Jones with Longview Financial Advisors in Huntsville, AL.

Raiding your emergency fund for the sake of a giant down payment isn’t smart—and it means you’re more likely to find yourself in a terrible position if you lose your job or wind up otherwise financially incapacitated.

Jones recommends building a three- to six-month emergency fund—the longer the better, especially if you have kids—and “not touching it unless it’s truly an emergency.”

And remember: Building this emergency fund comes firstbefore buying the house or even building your 401(k).

If your home-buying aspirations mean you’re skipping the safety net, you need to take a step back and save first. Don’t plunk down a huge down payment if it means leaving yourself vulnerable.

You won’t be able to cover closing costs

Don’t let the massive specter of your down payment make you blind to all of the other expenses that come with closing on a home, which can run about 3% to 6% of the purchase price.

If you’ve put all your money toward one massive down payment, you’re sure to be surprised by the myriad expenses—fees, taxes, the cost of an independent home inspector—all of which need to be paid once your sale is final.

 And, of course, the ultimate closing cost: moving itself.

It might not be much—maybe just the cost of pizza and beer for your buddies—but if you’re moving cross-country or even cross-city, costs can easily inch into the thousands, Jones says.

You might not be able to afford the mortgage

Ever heard the term “house poor”? It refers to buyers who have more house than they can afford, and are in over their head with mortgage and tax payments. Scary stuff.

Trust us—you don’t want to be one of those people.

While this is common among buyers who can offer only the smallest possible down payments, it’s also a potential problem for people who put down more than they can afford. If 20% down strains you, chances are good that the costs associated with owning that home are going to strain you, too.

Your home might be empty

Let’s face it, an empty home is hardly a home at all—and if you’ve spent all your money on the excessively massive down payment, your home might be empty for a while. What’s the purpose of buying a new home if you can’t afford the sofa sectional to put in it?

Especially if you’re moving from a smaller apartment into a home, there’s nothing sadder than an endless succession of empty rooms. It’s not that you need lavish accommodations—really, this is just another symptom of buying more than you can afford—but wouldn’t it be nice to at least put a bed in the guest room?

Retirement, vacations, college—all might be out of reach

So you’ve poured all your money into a down payment, and you’re squeaking by just to pay the mortgage. The potential result: no money left over for the other things that matter in life.

read more via http://www.realtor.com/advice/finance/when-a-big-down-payment-could-spell-trouble/?identityID=10250946&MID=2015_0807_WeeklyNL&RID=361386642&cid=eml-2015-0807-WeeklyNL-blog_2_big_down_payment-blogs_buy

Should You Refinance Even If You Plan to Sell Your Home?

Are you interested in refinancing your mortgage, but hesitant to do so because you’re thinking of selling your home at some point? Believe it or not, refinancing could still make sense. Here are several reasons why you might want to consider refinancing anyway.

Your financial circumstances could change

Let’s say you plan to sell your house in five to seven years. No matter how well you plan for the future financially, things happen. Job loss, illness, death—life inevitably gets in the way of your financial plans. Focus on the here and now, as long as you can financially justify refinancing your mortgage. The longer the horizon of selling the home, the more chances life has of getting in the way. If refinancing can save you money in the meantime, it may just make sense.

Because financial circumstances can change over time, for better or worse, it can be a good idea to calculate how affordable your house really is for you.

You could take advantage of lower interest rates

At publishing time, 30-year mortgage rates have edged their way up and are hovering just over 4%. The new outlook for mortgage rates points to continual increases, bringing the cost of debt up. Picture this, if you don’t sell the property or if there is a market correction—and you do not refinance for whatever reason—is your current loan rate and payment something that you can afford to carry for the long haul? If you could save money or better your financial position, it is probably worth investigating. Rates are even better on jumbo mortgage loans, as more investors are pouring into this particular market niche. So if you have a big mortgage on your home you may want to consider refinancing.

You’re facing a higher rate on your ARM or HELOC

With the increased likelihood of interest rates going up in fall 2015, the subsequent recasting of adjustable-rate mortgages and home equity lines of credit will affect millions of homeowners. Most adjustable mortgage loans were tied to the London Interbank Offered Rate, which closely trails the Fed Funds Rate, the rate at which the Federal Reserve uses to control the U.S. economy. If the Federal Reserve hikes interest rates, LIBOR will soon follow suit, and any homeowners within their adjustment period will experience a higher payment or a future higher payment when their adjustable-rate loans reset.

A HELOC works in a similar fashion to an ARM with a fixed period for the interest rate, followed by a rate reset. For a HELOC, payments are interest-only for the first 10 years of the 30-year term. After 10 years, the loan resets, and for the remaining 20 years the loan payment is principal and interest, so at the end of 30 years, the loan is paid off in full. The payment shock will happen after the first 10 years.

If you have a first mortgage on your home with a HELOC, it very well might make sense even if you plan to sell the home down the road, to roll the first mortgage and HELOC into one, saving money and continuing to make a manageable mortgage payment until you sell.

read more via http://www.realtor.com/advice/finance/should-you-refinance-even-if-you-plan-to-sell-your-home/?identityID=10250946&MID=2015_0807_WeeklyNL&RID=361386642&cid=eml-2015-0807-WeeklyNL-blog_3_refi_if_selling-blogs_own

CFPB announces finalized TILA-RESPA effective date

The Consumer Financial Protection Bureau has finalized the extension of its Know Before You Owe disclosure rule effective date.

The CFPB announced the finalization of the effective date on Tuesday. The rule, also called the TILA-RESPA Integrated Disclosures rule, will take effect on Oct. 3.

“The Bureau believes that moving the effective date may benefit both the industry and consumers with a smoother transition to the new rule,” the CFPB stated in a press release. “The Bureau further believes that scheduling the effective date on a Saturday may facilitate implementation by giving the industry time over the weekend to launch new systems configurations and to test systems.”

The rule was originally scheduled to take effect Aug. 1. However, both industry groups and Congress pressured the CFPB to extend the effective date – or at least institute a grace period – citing concerns that spotty implementation in the early days of enforcement could lead to problems.

via http://www.mpamag.com/news/cfpb-announces-finalized-tilarespa-effective-date-23295.aspx#.Va6urX58PBM.facebook

Mortgage Shopping and Credit Scores

The notion that a flurry of credit inquiries from mortgage lenders will lower a borrower’s score is a common misconception, experts say. The truth is that five inquiries are likely to have no more impact than one, provided they are made within a compressed period of time.

When it comes to mortgages, as well as automobile financing and student loans, “in both the FICO and VantageScore credit-scoring systems, there is logic in place that protects consumers’ credit scores from any negative impact caused by multiple inquiries as a result of rate shopping,” said John Ulzheimer, a credit expert with Credit Sesame, a website that helps consumers manage credit.

With FICO (the scoring model required by Fannie Mae and Freddie Mac), credit inquiries for mortgage loans that are less than 30 days old are ignored and have no impact, Mr. Ulzheimer said. Inquiries older than 30 days are looked at, but multiple inquiries from mortgage lenders made within 45 days of one another are treated as one inquiry. With VantageScore, the window is 14 days.

Both scoring systems assume that if someone has multiple mortgage-related inquiries in a short period, they are likely shopping for the best deal on a single mortgage, Mr. Ulzheimer said.

If one of the multiple mortgage inquiries occurs outside the allowed window — say, on day 46 — it would be counted as a second inquiry. “But it probably wouldn’t hurt you even then,” said Daniel Sater, the owner of Credit Scoring Advisor in Melville, N.Y. “One or two isn’t a significant risk factor in determining your ability to pay your debts in the future.”

continue to full article http://www.nytimes.com/2015/02/01/realestate/mortgage-shopping-and-credit-scores.html?_r=0