The 5 Steps You Must Take in the Next 2 Months if You Plan to Buy a House This Year!

January 21, 2016

We are now three weeks into the new year.  Energy levels depleted by the holidays have begun to return.  You may have already blown most of your New Year’s Resolutions.  The college football bowls are finished up.  You’re back into your work and family routine.  Downton Abbey is back on PBS and in between “snow days” you’re beginning to make your Super Bowl plans.  What better time to begin to think about your needs and desires for a new home in 2016?!?

I have worked with hundreds of home buyers over the past 18 years as a nationally certified, state licensed mortgage professional and I have found some who have made great preparations to enter into the largest single purchase they will ever make in their lives and I have also met some who are woefully unprepared.  Those who prepare well generally experience a much smoother process and avoid being hit with additional fees for extensions and delays.  If the right steps are taken BEFORE you actually go out to look for a house the new home buyer will find the process manageable, systematic and successful.  Those who rush into a home purchase contract with a seller and Realtors without taking these steps will generally experience an immense amount of stress, confusion and unnecessary pressure from everyone involved in the process – and will be tempted to give up after spending $1,000 – $2,000 of their hard earned and saved money.

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Follow these 5 simple steps to ensure that your home buying process is a success in 2016 and in the future.

What can a prospective home buyer do now to prepare for their upcoming home purchase later this year?  Here are the steps I would recommend:

  1. Get your tax returns for the past 2 years finished and get copies ready to pass off.  Your mortgage professional will be required to submit your completed tax returns and W-2’s for the past 2 years to the underwriter who will approve your loan.  Borrowers who have not completed their taxes or can’t find their returns will delay the underwriting process.  The Loan Processor who will take your file from your mortgage originator and prepare it for underwriting will need to verify the tax returns you submit as the same as what was submitted to the IRS.  This takes a few days and will cause additional delays if your tax returns are not prepared correctly and available to be submitted when you have an accepted offer to buy a house.
  2. Locate and provide your pay stubs for the past 30 days.  It is required for any loan to show that the buyer has the ability to repay the new loan.  You must show a consistent and reliable income stream from somewhere.  Most borrowers can do this with pay stubs from a company where they work.  If the buyer is self-employed it is still possible to do this with tax returns and a year-to-date Profit and Loss statement.  Find your pay stubs if they are on a HR website with your company and begin downloading them each pay period so you have them available to pass off to your originator or his assistant.  Again, this information will be verified by the Processor to make sure that the employer agrees with the information that is found on the pay stub.
  3. Locate and provide your bank statements and all retirement account statements for the past 2 months.  I find is amazing when I hear a borrower tell me that their bank “doesn’t do bank statements any more” when in reality they just don’t know how to navigate within the online banking website of the bank where they have been a customer for many years.  Take the time, now, too find, print or download bank statements every month and save them to a folder on your computer or in your home office cabinet so you will have the bank statements required to get your loan approved.  You will need at least 2 months of statements and in some cases you might need 12 months of statements to show rent payment or the receipt of child support or some other income source you desire to use to help you qualify for your new loan.
  4. Talk to a licensed mortgage professional to help you explore you loan options early.  There aren’t as many loan programs available to a home buyer as there were back before the Credit Crash of 2008 but there still are many options and most mortgage companies will be able to offer many of the same programs.  Banks will generally have fewer options but they also can offer many options to a prospective home buyer.  Your licensed mortgage professional will evaluate the documents we listed above and help you explore which home loan option would be best suited for you.  Some programs are only available for first-time home buyers.  Some programs are only available for those wishing to buy a house outside the city limits or in certain counties.  An experienced, licensed professional will keep up with the ongoing changes in the program requirements and be able to help the new home buyer know what needs to be done in preparation for approval for best loan fit and where the buyer should be looking to find their next home to purchase.
  5. Prepare your down payment and cash required to close your loan.  After talking to your licensed mortgage professional the prospective home buyer will have a good feel for how much cash and down payment will be required – if any.  Some loans allow for the seller to pay for the buyer’s closing costs and require NO DOWN PAYMENT!  Even if no down payment is required, many programs will require the buyer to show that they have 2-3 months of house payments in the bank – just in case the bottom falls out regarding a job or extended health issue.  It is important for the borrower to demonstrate to the underwriter that they know how to manage a checking and savings account and that there are no recent overdrafts on their bank statements.  Get control of your banking accounts and manage your cash flow so it will be easy to prove to the mortgage underwriter that you are now ready to take on a new house payment for the next 30 years and that you can make this payment on time, every time.

This year can be a year of amazing new beginnings and one where life-time accomplishments can be made.  However, without making the necessary preparations in advance, it could also be one of set-backs, disappointments, frustrations and failures.  Follow these steps above to make this year an unimaginable milestone for  well-deserved successes!

Brian Short is a nationally certified, state licensed, dream maker and problem solver who helps provide home loans with LeaderOne Financial Corp.  He can be reached HERE or by calling 615-302-0809.

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No More 30-day Closings? The Elephant in the Room!

May 28, 2015

TRID? – On August 1, 2015 the Consumer Financial Protection Bureau (CFPB) is requiring the roll-out and enforced usage of new mortgage loan disclosures and replacing others.  TRID stands for the “Truth-in-Lending and Real Estate Settlement Procedures Act Integrated Disclosures” and these new disclosures will replace the Good Faith Estimate, Truth-in-Lending Disclosure and the HUD Settlement Statement. WOW! This is big news and these new disclosures (Loan Estimate and Closing Disclosure) will mean BIG CHANGES for many of the parties in a Real Estate purchase and refinance transaction.

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New mortgage disclosures = MORE PAGES + MORE DELAYS.

In our industry, new disclosures usually means MORE PAGES and MORE DELAYS!  This is also true in this case.  These new disclosures will require a delay before the appraisal order can be placed.  The borrower must know exactly what their loan will look like BEFORE the appraisal is ordered and this will result in delays “out of the chute” for many new loans simply because many borrowers are still considering their loan options during those first few days of the mortgage loan process and sometimes have not had time to fully consider the consequences of a 15 year loan verses a 30 year loan, or an FHA mortgage with less down payment compared to a conforming mortgage which usually requires more down but a less expensive monthly mortgage insurance premium.  All of this must be considered, numbers need to be gathered and compared and a busy couple with active kids needs to find a few peaceful few minutes to consider all of this information in the midst of inspections, contingencies, offers, counter-offers and packing!  YIKES!

If that is not enough, the biggest delay related to these new disclosures comes at the end when everyone is weary, worn-out and tired of receiving daily emails from their loan originators, Realtor, inspectors, movers, utility companies, etc.  All of the final numbers represented on the new Closing Disclosure (which replaces the old HUD 1 Settlement Statement) must be “spot-on”, no changes and exact – 3 DAYS PRIOR TO THE CLOSING DATE!  This means no additional changes, last minute fees, or forgotten invoices can be added during those last 3 days prior to the closing date.  If so, then the closing will be pushed back another 3 days to allow the new Closing Disclosure to be printed and received by the borrower to review. Here is link from Frank and Brian at the National Real Estate Post where their video gives more details: Click Here.

The issue at hand with these new disclosures - Will 30 day purchase closings be a thing of the past after August 1?

The issue at hand with these new disclosures – The Elephant in the Room – Will 30 day purchase closings be a thing of the past after August 1?

Many in the industry are hinting at the likely consequences of these delays come August 1 but I have not heard any admit what I am about to say.  Realtors who what to avoid the high-pressure finger-pointing, name calling, threatening phone calls and punishing per-diem being charged to their buyers caught in the middle of these changes will wisely prepare their buyers and sellers for 45-60 day closings rather than 30-40 days closings which will result in eventual extensions and everyone hating everyone at the end of the transaction.  Allow me to address the elephant in the room – these loans will not close until the lenders fulfill the new federally mandated time-lines which are put in place to protect the buyers from being rushed into a 30-year decision – regardless of when a Real Estate Purchase Agreement says the transaction will close.

Please be smart when setting realistic expectations with buyers, sellers, Realtors and your loan originators and set dates which will allow the new system to work to protect the buyer from being caught in a pressure-cooker of unrealistic and overly demanding deadlines which do not serve anyone well.  It is my opinion that a 30 day closing for a purchase transaction is now another historical display in the Museum of Mortgage Lending right beside pre-payment penalties, negative amortization, interest-only loans and 30-day adjustable mortgages.

The CFPB wants to do all they can insure that there will be no surprises for any borrower at the closing table.

The CFPB wants to do all they can insure that there will be no surprises for any borrower at the closing table.

Rushing a home buyer into a 30 year commitment and several hundred thousand dollars of debt with a stack of “sign here quickly” documents and terms not understood or clearly explained is never a good idea, in my opinion.  The CFPB is doing their best to slow this whole process down to allow the borrower digest the details of what is happening.  Buyers. sellers, Realtors, closing attorneys and mortgage originators must now embrace these changes, work as a team and make these Real Estate transactions a positive experience for all parties involved.  Our industries need the public trust and these changes are part of us all working together to rebuild what was lost in the “rush to simply close deals” from 2000-2008 with very consideration given to making sure the buyer knows what they are signing at the closing table.

REALTORS – To view a video presentation by Kenneth Trepeta Esq, Director of Real Estate Services for NAR, explain the new rules and regulations and review the new forms – CLICK HERE.


HUD Proposes Lowering FHA Loan Limits in Middle Tennessee

May 31, 2011

Last Thursday, just before the long Memorial Day weekend marking the beginning of the 2011 summer, the US Department of Housing and Urban Development (HUD) released a 23 page proposal outlining loan limit decreases in 669 US counties – 13 of them in Tennessee and all of these located in middle Tennessee. 

Unless Congress prohibits these proposals, beginning October 1, 2011, each of these 13 counties, including Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, Wilson, will see their maximum FHA loan limit decrease $39,200 to a new lower maximum FHA loan limit of $393,300. 

Counties Affected by Possible Decrease in FHA Loan Limits for Loans

The current FHA maximum loan limit in these 13 counties was set at $432,500 in 2008 as a part of the Housing and Economic and Recovery Act during the waning days of the Bush administration in an attempt to stabilize the fragile housing and credit industries. 

This 9% decrease in FHA maximum loan limits in middle Tennessee will affect less than .5% of all of the FHA loans being originated in these middle Tennessee counties.  HUD decision to lower these maximum loan limits is an attempt to ward off the Republican critics in the US House of Representatives who are proposing changes to the FHA mortgage insurance program to limit the expansion of the risk of taxpayer supported programs in hope that private players and investors will re-enter the mortgage industry to replace what the Federal Government discontinues subsidizing.

Last year 32,126 FHA loans were closed in these 13 middle Tennessee counties and the new decrease in loan limits would have affected 138 of those transactions.  The argument could be made that Tennesseans borrowing more than $393,300 to buy or refinance a house would have been able to use other loan programs or that other non-government programs would be developed if FHA would move out of this particular high-end market.  Statistically, these higher-end mortgages have preformed much better than the lower-end mortgages but HUD would argue that these loans are not part of their stated mission to target “lower and middle-income borrowers” when they are using taxpayer money to operate a program insuring home mortgages at more than 150% higher than the Area Median House Price.

What is the expected outcome of such a move if Congress does not block these proposals for home buyers in Tennessee? 

Minimal.  Most first-time home buyers or home buyers with a scarred credit profile are not buying homes $400,000+ homes with only a 3.5% down payment as currently required by HUD for FHA insured loans. 

The initial potential panic caused by news reports of such proposals may cause a handful of buyers to get off the fence to get approved for their high-end FHA insured mortgage in order to beat the October 1, 2011 deadline but because so few Tennesseans will be affected by this proposal, only 138 in 2010, the Tennessee Congressional Delegation would likely not support any legislation thwarting efforts by HUD to continue to solidify the government supported mortgage insurance program – especially if these changes will affect only a few wealthy Tennessee home buyers.


Get Your House in Order – Before you Lose it!

January 30, 2009

By Brian Short, CMC, CRMS, GMA

The job losses reported last week were the topic of an article entitled, “A Litany Of Job Losses: When Will It End?” written by Linton Weeks  for NPR Online, “Read aloud the litany of lost jobs and it sounds like a funeral knell.

On Monday, Caterpillar construction equipment. 20,000 jobs. Gong … Pfizer pharmaceutical. 8,000. Gong … Sprint Nextel telecommunications. 8,000. Gong … Home Depot home improvement. 7,000. Gong … Texas Instruments computers. 3,400. Gong … General Motors automakers. 2,000 Gong …homedepot

On Tuesday: Corning glass. 3,500 jobs. Gong …

On Wednesday: Starbucks coffee. 6,700 jobs. Gong … AOL online. 700 jobs. Gong …

On Thursday: Ford Motor Co. 1,200 jobs. Gong … Eastman Kodak cameras. 3,500 plus. Gong … Also on Thursday the Labor Department reported that nearly 4.8 million people are on the unemployment benefit rolls, a historic high. Anyone who has glanced at the news in the past few days is not surprised.

You know the causes: mortgage shenanigans, housing values falling, construction paralyzed, credit market frozen. ”

This negative economic news causes even the most positive person to swallow hard and take a careful inventory of what might happen if the bottom would fall out their own life.  Some nay-sayers have even pulled out their notes from “dusty old” Y2K Prep Courses urging us to stock-pile dehydrated foods, water, gold and ammo – again. 

All of those ideas might be worthwhile to consider if things fall apart and the government can’t keep control of our typically orderly society.  However, what about your house and your finances in case “life as we know it” does not fall into complete shambles but continues to struggle month-by-month for next year or so as some have suggested.

Even our new President and his advisers have admitted that this economic recovery may take an additional 12-24months.  One good way to prepare for additional lay-offs and a continued down-turn in our economy is to get YOUR house in order. 

pink-slip1What if you lost YOUR job? 

What if YOUR needed cash for medical bills without your employer-paid insurance?

What if YOUR fuel went back up to the all-time high July 2008 prices and stayed because of an international crises in the Middle-East or if another “super-power wanna-be” decided to test this new President like that last guy was tested only 8 months into his first term?

Mortgage interest rates are at a nearly 30 year low and many of your neighbors, friends, co-workers and family members are still holding on to mortgage interest rates at 6%, 7%, 8% and higher because they’ve been convinced by the press (their brother-in-law!) that those of us in the mortgage industry have folded up our shops and have gone away.  This can not be further from the truth!

We are in the midst of a very strong refinance market because many who had adjustable mortgage interest rates are now refinancing to “fix” their rates. Others bought homes in the past couple of years and have been paying a higher interest rate but are now able to lower their monthly payments, consolidate their high interest credit card debt and lock in the peace of mind that a long term fixed rate mortgage in the low 5%’s would bring to their monthly budgets. 

Who do you know who needs to get their house in order before THEY get a “pink slip” and then have lost THEIR opportunity to qualify for an historically low interest rate on their most prized and stable asset – their house?

I can help nearly any homeowner with their refinance needs by putting a new low interest loan in place or giving them a plan for systematically preparing for the day for when they would qualify for that new loan or for their next home purchase. 

NOW is the time to prepare for what could be another of year of lay-offs and down-sizing.  And one way to prepare might be to re-work the mortgage in order to lower the term, the monthly payment or the total out-flow of cash from the monthly budget.  Help is now available even before any new “stimulus packages” are snookered through Congress!


Guaranteed Retirement???? By Whom???

November 26, 2008

 By Brian Short, CMC, CRMS, GMA

private_jetThere still seems to  be much discussion about what should be done to or for the “Big Three” US Auto Makers (affectionately referred to in some circles as “The 3 Little Pigs”) who arrived in Washington, DC earlier this month stepping off their private corporate jets with a tin cup in their hands.  My private conversations with friends and family members have reflected some of the uncertainty and complexity of the thoughts and comments being circulated in the media and among our elected politicians who are admittedly “over their heads” on this one!  (I told one friend a few weeks ago, “Suit me up and put me in.  At least I understand the mortgage industry!”  Not a bad place to start for those who are trying to figure out this current mess!)

Many of the comments I have been hearing vacilate between one or two of the following positions:gmassembly-300x300

“They’re too big to let fail!  Nearly 25% of all jobs in the US are in some way related to the US auto industry!”

“Let them go under! The unionized US auto worker is costing almost twice as much at those who work for Japanese, German or Korean auto companies.  This is the only way to bring the UAW back to the negotiating table to restructure and reorganize.”

“The US government made this mess by over-regulating our auto industry when the foreign companies could continue to use their standard practices and make better cars, cheaper.”  They are blaming the increased government regulation for the collapse of the US auto industry as many of us have suggested when looking at the current condition of the US mortgage industry. (This seems like a reoccurring theme.)

The comment I overheard recently which really caught my attention was one where she said, “But what about those retired UAW workers who were PROMISED their retirement?  If we let the US auto companies fail all of those retired folks will lose their retirement!”

financial-advisorThey were “PROMISED” retirement pay?  Someone guaranteed them a certain level of pay during the rest of their days on this earth, just because they put in their “30 years”?  This guarantee was made with no respect as to the condition or continued viability of a company which has not yet successfully made it into the 21st Century in terms of what the consumers are demanding and what current levels of domestic fuel types can propel?  

Who made these promises?  What gave them the right to do so?  They are still cranking out under preforming, overpriced, inefficient machines causing us to remain attached at the breasts of foreign governments lactating their crude oil and holding us hostage to their tyrant policies directed at crippling our government, the balance of trade and our standard of living. 

They “PROMISED” them retirement?  What was guaranteed?  What is it that my buddy with Edward Jones always says?…..” Past Performance does not guarantee future results.”  Whose retirement is guaranteed?  My parents have surely seen their retirement account balance dwindle over the past several months – The Dow-Jones has fallen16% since the Presidential election!  They will likely never see their accounts recover fully to what they were prior to this most recent downturn.  My retirement is not guaranteed – assuming I EVER retire!

Retirement benefits can never be ethically “guaranteed” to anyone!  Just as your financial planner is stocks_downrequired to say – your money will only last as long as the companies or governments in which you have bought an interest by securing stocks or bonds – or funds made up of those stocks or bonds – successfully operate.  If they fail, your interest (stock, bond or fund) will also fail.  That’s life in the REAL WORLD! 

Why should the American taxpayer be assumed to be on the hook for unethical promises or guarantees made by those doling out the UAW retirement funds when they, most likely, contributed to the failure of the US auto companies and their employee’s retirement funds?  Who is going to bail me out if my retirement fund fails? Or my parents if their retirement fund fails?  Do they deserve “full retirement” even though their companies where they they had an interest performed poorly or possibly failed?  Of course not!

dec-of-independenceRetirement is NOT GUARANTEED!  Neither is equity in ones home.  We’ve certainly seen that lie ruin a few million people this year!   Our founding fathers wrote that we were guaranteed “life, liberty and the pursuit of happiness” because those “inalienable rights were endowed by our Creator.”  Some have argued that this list of “inalienable rights” should be expanded to “include freedom of speech and expression, freedom of religion and conscience, freedom of assembly, and the right to equal protection before the law.”

Those who have been persuaded to expand this list even farther to include: minimum mage, government health care, guaranteed retirement, home ownership, never-decreasing home equity, a job you love, a spouse who always loves you, kids who never disobey, and a boss who always puts the care of his employees ahead his own bottom-line will surely bring this country and our free-market economy to its knees. 

Life is full of risk.  Some lose and some win – even on a level playing field.  What we’ve been rightly runningpromised is the opportunity to get back up, dust off our knees and start running AGAIN!  Being pushed down once, twice or hundreds of times doesn’t mean that we’ve lost.  We lose only if we remain on our butts and never get back up. 

You mean we can keep running?  Now, that’s a pretty sweet guarantee!


Bailing out the Auto Industry? I hear Starbucks is having trouble!

November 11, 2008

bucketThere seems to be a rush to bail out, yet, another industry.  Banks, Insurance companies, Fannie and Freddie and now, the “Big Three” auto makers.  How can this be “good” for our country and economy?

The mortgage industry applauded the bailout of the GSE’s (government sponsored enterprises) Fannie Mae and Freddie Mac.  They were already quasi-government agencies with directors and CEOs appointed by Congress (for better or worse!).  Unlike the insurance industry, no other company – government run or private – does what they do.  Unlike the auto industry, no other company – domestic or foreign – keeps our banks fluid and the housing market flowing.  Without Fannie and Freddie the wholesale banks, which buy the mortgages originated by mortgage brokers, would have no more money to fund the new loans.  Fannie and Freddie were put in place by the federal government to keep the market fluid. 

The Federal Government determined, over fifty years ago, that fluidity in the housing market was the key to keeping Americans buying their homes.  This strategy has worked for our country for the past several decades and has given this generation unprecedented opportunity to own a house (or two) when our grandparents seldom owned property and certainly did not buy without a 25%-30% down-payment. 

Fannie and Freddie (whether there should still be two of them is a topic for another day!) have played a key role in the “ownership society” announced by President Bush nearly 8 years ago prior to this recent unprecedented growth in home ownership among all Americans – including minorities, women and young people.  No one else has done or could do for our economy what Fannie and Freddie have done in giving Americans ownership, equity, property and a vested interested in a community.

circuit-city2So, many are now saying, “let’s take all hurting industries to the Feds and let them bail them out, too!”  Insurance companies (AIG is back for a SECOND round?!?), Wall Street Banks, the Auto Industry…. Why stop there?  Circuit City just announced the closing of 155 stores and that they will ask for Chapter 11 protection from their creditors as they reorganize and attempt to restructure their debt.  We’re losing our Circuit City (only 4 months old!) in the city where I live. 

Other retail chains are hurting, as well.  Starbucks was in the news earlier this week for posting a worse than expected earnings report.  Starbucks recently forced the closing of a Saxby’s coffee shop in our starbucks-cup-21humble city when they built theirs one block away from the newly finished Saxby’s.  Is the over-priced coffee industry hurting and should the Feds step in a bail out the Grande’s, Latte’s and Espresso’s of the world because many teen-aged multi-pierced, messy-haired servers and “Espresso-Masters” will be displaced?  I tend to believe that, as John McCain took a beating for saying, the fundamentals of the US economy will work themselves out – in the insurance industry, the banking industry, the auto industry and, need I say,  the gourmet coffee industry.  We must let the free market do its work and not let the Feds try to convince us that they know how to run a business and to micro manage these selected industries and our economy.

Is the mortgage industry really that different?  YES.  When it comes to competition and product availability, the secondary market of the mortgage industry is very different.  Fannie and Freddie play a role that no other private or foreign company or agency play and that is why it is not inconsistent to support the limited propping up of Fannie and Freddie (already quasi-government agencies) and be opposed to the Federal government picking and choosing which private company or industry to bail out.  Unions have made the US auto industry what they are today – unresponsive to market changes, overpriced, less efficient, dependent on foreign fuel, and not environmentally friendly.  The US auto industry must change at their core or they deserve to fade into the history books along with their union-thug bed-fellows.