My new house for Christmas!

Often I hear that it is getting close to the Holidays so I am going to wait until the new year. I understand what people are trying to say. There is a lot going on around this time and everything is rather stressful. For some the holidays are not so joyous. However, if everyone has that very same mentality then you will have less competition.

Each year my business activity increases in November and December. Just in time to claim that income for 2009. Ughh! I will never complain about it though and when I think about it I realize it is because I am working. I do not take the Holidays off. There are only three from November 1-December 31st. There is Veterans day, Thanksgiving day, and Christmas. All other days are work day and sure I take a half day here and there but overall there really just are not that many holidays. I find that because of the drop off my clients get fast efficient service and keys to celebrate Christmas and start the new year in style. If there are 100 people looking for the same home as you and 50 of them take a break for the holidays your chances just doubled to get an accepted contract.

Moral of the Story: It is a great time to get your new house for Christmas. The homes are there, the price is right and the rates are awesome. Time continues to pass whether or not we want it to. So why do we pause our lives and our futures, wants, hope and dreams for a few days that we are told to celebrate. Make the celebration more grand.

Consider having the holiday party in the new home before you replace the carpet and paint. No need to worry about making a mess!

25% Gross Income. Don’t become a Jones!

When we set out on our home search we often think of a lot of things but rarely do we really analyze our budget totally. For many years Conventional Lending and Conventional Wisdom would tell you that your Housing payment Taxes and Insurance should not exceed 28%. Government Lending would set that standard over the years at 31%.

What do the Experts Say? In the book Total Money Makeover by Dave Ramsey he suggests that 25% is a great number to shoot for.

So what do these percentages mean? Debt to income is a measure of your debt versus your income. In this case the debt that we are talking about is your total housing responsibility. The income is your Gross Monthly Income not what you take home to live on.

Let’s Look at Example – Borrower A makes $8,000 per month Gross Income. Their Future Housing Payment will be $2,700 out the door. Their Debt to income in this case would be 2700/8000 = 34%. Based on conventional wisdom or even the number for government lending this would be higher than we would like to see. However, it is very common that this is acceptable through the automated underwriting engines. In fact I have seen ratios that are in the high 30’s and low 40’s make it through the system. In this example it would be advisable to have a payment that does not exceed $2500 on the government side and $2240 on the traditional conventional thought. According to Dave Ramsey $2,000 would be the max and I tend to agree with him.However, if I insisted on this I would be out of business!

Why are high ratios bad? Just take a look at the numbers as a whole. Going back to Borrower A. Borrower A represents a family of five. They like most families have expenses like daycare, food, insurance, cell phones, and you know the rest. So let’s mock an expense report.

Gross Monthly Income $8000 in a 30 % tax Bracket leaves the take home pay at $5600 per month.

$5,600 – $2,700 Housing – $800 Food – $500 in Auto Loans – $800 in Daycare conservatively = $800 remaining for all the everyday life expenses. It would be impossible to not use a credit card. How could you save for retirement, Christmas, incidentals etc.

Same Example: $5,600 – $2,000 Housing – $2,100 = $1500 which would absolutely be better.

So why do we not all buy with a 25% housing ratio? The Joneses. We get so caught up in the need to have a home like our friends or facing the fact that we simply may not be able to afford a home is just to difficult. We, as a society, have not been taught about the numbers. I realize that some wise individual may read this and say you did not mention the tax benefits of home ownership, you are making a lot of assumptions on net income as they have three dependents, 2106 expenses, and a whole slough of write-offs so they will not pay 30%. I understand that. I also know that I did not include many of the incidentals that we come across excluded vacation and  simply want to illustrate a point they may get us to challenge ourselves to look deep into our finances. Owning a home is awesome. Living to service the home is not. When you are stressed each month about whether or not you will be able to pay by the first your whole life is affected.

Please consider your entire budget and consult a CPA before you even look at homes – The reason that I say this is simple. If I go to the local lots and test drive a 2010 Range Rover and then I realize that to have a life I would have to buy a base model pickup truck disappointment would overtake me.

My Job as your professional consultant for Mortgage is to lay out the facts – I want to make certain that I set you up for financial success not only a mortgage. I wish that I had been set down and taught these very basic principles before I entered the work world and housing market.

The principles out-lined here are not my own. They are a collaboration of wisdom that has been passed on to me over time and through trial and error.They are opinion. I have seen some great devastation and continue to see situations that are less than ideal and always will. Free will is awesome we are all given the opportunity to decide what is right and wrong for ourselves. I hope that you have enjoyed the material.

Changes coming on December 12th by Fannie Mae

On December 12th Fannie Mae will be making major changes to their automated engine Desktop Underwriter. DU findings are the basis for most of the loans that are funded today. Once a file is assessed in the DU underwriting engine and receives Approve/Eligible findings this loan can be done. The only thing that would keep this particular loan from closing is not being able to provide the documentation requested or the Loan Officer miscalculating or inputting incorrect information into the system. (this does happen by the way so it is imperative that your loan officer understand several important criteria)

So what changes can we prepare for or expect from Fannie Mae? Highlights of these changes include but may not be limited to the following:

• An Update to the DU Credit Risk Assessment
• An update to the Maximum Total allowable expense ratio (Debt to Income) to 45% with flexibilities to 50% for certain loan case files with strong compensating factors.
• Retirement of expanded level approvals EA II and EA III recommendations
• Minimum 620 fico score for delivery eligibility
• MI Updates
• o    A new minimum MI coverage option; a loan-level price adjustment (LLPA) will apply
  o    Streamlining of other MI coverage requirements
  o    Retirement of Reduced and Lower-Cost MI options
• Implementation of High Balance Mortgage Loan Eligibility Guidelines specified in a previous announcement
• Retirement of Homestyle construction to Permanent Financing
• Implementations from three previous announcements.

The focus of these changes should go to Debt to Income. For too long we have been allowing a total back end Debt to Income to 56.99% for FHA and in some cases exceeding that for conventional financing. For all intensive purposes this means that your Housing Payment plus debt that reports to the credit bureaus minimum monthly payments added together represent 56% of your total gross income.

If you are in a 30% tax Bracket and take home 70% of the gross it leaves you 14% of your gross for all other expenses. Other expenses that include food for a family of five which is at minimum $800 dollars a month. We have set people up for failure of home-ownership.

Why you might ask? California leaves very little option for new buyers. The Housing affordability based on average income and price for the area is still high. It is very difficult to get a home that would meet the needs of a family of five in a location, near to schools on the average household budget. This would be significantly easier if we were taught about finances more accurately growing up and did not have the worldly pressures to keep up with the Joneses.

See it as good news – This may change the amount that you qualify for and that is not a bad thing. You have to see it for what it is. It is an attempt by the banks to save their own butt by forcing you to buy well within your means. It is a good thing to keep you well within your budget. Please check with your Broker and Realtor and make sure that these changes will not affect your closing. Ask them what your back end debt to income is. It should be less than 43% in my eyes.

As always thank you for Reading.

Are you sitting on the fence? 3 reasons why it may cost you.

It can be argued that prices will continue to fall for the unforeseen future. Heck there is an awful lot of  notice of defaults being filed and if those are not modified they will inevitably hit the market. An influx in bank owned properties in any given location will generally lead to a drop in the overall price in the area. This happens because Banks price the properties ultra-competitively to get as many offers as they can. Once you are emotionally tied to the property they will ask for the “highest and best offer” that you can bring and ultimately sell the property for more than list. However, this price is still generally lower than the traditional seller.

So what is it that we are waiting for? The general consensus of the buyers that we are working with is:

• It is a buyer’s market - therefore I can make a deal
• Rates are low and they will go lower -  I have time to find the right property.
• Homes are sitting on the market forever- In Sacramento the majority are sold withing 90 days.

Again, this lends to the question what are we waiting for? Well based on the above consensus I find that buyers are looking for the perfect home. Many of the consumers are looking for their starter home with the mentality that it should look like the dream home.  This causes buyers to remain on the fence. Here are 3 reasons that sitting on the fence may cost you:

1. Rates Rise – There is a great chance of rates increasing in the coming months. Just in the last 10 days we have seen the average par rate for FHA increase by a .5% or more in some cases. On a 250K dollar loan an increase in the rate of .5% is about $80 per month in the payment. If the rates can rise a .5% in 10 days just think what can happen when the tides turn for the long term. An increase of 1% would be $160 per month. In most cases this will decrease the affordability or the possible purchase price. This is a 28K dollar increase over the life of the loan for a .5% and 57K with a 1% increase. The bottom line is that a 1% increase can cost nearly a years salary or more in your bottom line.
2. Home prices rise – Depending on the market you are in and the price range we are starting to see prices stabilizing. Once they begin to stabilize the market will then get tougher to get a closing cost credit as this is a sign of a switch from buyers market to seller. We have already began to see many cases that the bank or the seller is less willing to contribute to closing. If you are trying to buy a home for 250K and the seller is not providing any seller concessions you have to be prepared to bring 17K to the table. 3.5% for the down payment, 2.5%-3% for closing costs and about 1% – 1.5% for the prepaid items in advance. After your tax credit this is 9K out of your pocket. Once the tax credit goes away yo0u would be liable for 17K
3. Incentives go Away -The Fed will not give away free money forever.

AKA – Inflation will come some day. Inflation will bring higher rates. Get in while the gettin is good!

Recurring vs. Non-Recurring Closing Costs!

I am all set and ready to buy a home what are my closing costs and how much out of pocket do I need?

This question is one that I here very often. As a consumer I would want to know this as well. This would be a significant part of what helped me make my decision. Like they say an informed decision helps make the choice that much simpler. Ok so I made that saying up but it is what I believe.

Recurring Closing Costs – Costs that will continue to be paid throughout the ownership of the home – Recurring costs should actually be named Homeowner expenses in advance. Commonly they are called Pre-Paid Items. These items include the following:

Hazard Insurance – one year in advance + 3 months reserves (reserves needed if impounding which is a requirement on all loans that exceed 80% LTV)

Property Taxes - Pro-rated taxes based on purchase date + specified number of months to be impounded determined based on the month that you close. EX. July = 7 months taxes in advance

Pro-rated Interest – This is your first month’s mortgage in advance. It will be pro-rated from the date of close to the end of that month. Your first payment will be the following month on the first. EX. July 15th close date would require 16 days pro-rated per diem interest calculated on your interest rate. You would then have a first payment date of September first.

Mortgage Insurance – Although I do not find this common some lenders will ask for 1 month mortgage insurance in advance.

Miscellaneous – If there is a Homeowners association you may be required to pay a month or two upfront as well.

Non-Recurring Closing Costs – These are the expenses that we are trying to get the seller to pay. These are the one time fees that you have been putting money in the piggy bank for. You will not have to pay these fees ever again unless you buy another home or refinance your existing mortgage. These include but may not be limited to the following:

Origination – This is what the broker or the loan originator charge you to do your loan. Generally 1% on all FHA deals. This does not have to be a fee that you pay but your interest will rise if you choose not to pay it. See – Origination Definition for a more elaborate explanation.

Discount - See Discount Definition for more detail.

Broker Costs – The only fee that Capitol Mortgage Corporation charges its borrowers is $695 for processing. Many brokers will charge processing, admin, broker fee or many other miscellaneous. When in doubt ask.

Wholesaler Costs – Generally the wholesaler that will actually fund the money for you charges an Underwriting fee $750-$850, wire fee, tax service and a MERS which is electronic registration.

Appraisal – For Conventional done through HVCC and for FHA through an independent appraiser.

Credit – There is a cost for the Credit Report through a third party generally collected at the time of application.

Title and Escrow Fees – This is a third party gatherer of the docs. They will collect monies, sign the loan document, provide a preliminary title report, draw up the estimated settlement statement etc. There fees are determined by the loan amount and purchase price. The standard fees that are charged include but are not limited to: Title Insurance, escrow fee, doc prep, notary, Recording, courier, endorsement and other miscellaneous expenses.

I have found that Non-recurring costs generally run between 2.5-3% of the purchase price when you pay an origination of 1%. The lower the loan amount the higher that figure can be because there are set cost ie: $695 processing that is a higher percentage of 100K than it is of 200K.

Recurring Costs depending on the month and the amount of property taxes can range from 1-1.5% of the purchase price.

It is important to know the difference between recurring and non-recurring closing costs and have an understanding of who is going to pay what. You are responsible for the down payment and all of the costs recurring and non-recurring that the seller does not credit for.

EX: FHA PURCHASE 3.5% down payment requirement

100K Purchase Price – Down Payment $3500 (minimum statutory investment required by HUD)

Recurring Costs 1.5% or $1,500

Non-recurring Costs 2.5% or $2,500

Seller Agrees to Pay 3.5% toward closing or $3,500

Borrowers Estimated Cash to close would be Down Payment $3500 + Recurring Closing Costs $1500 + Non-recurring Closing Costs $2500 – Seller Credit $3500 = (3500 + 1500 + 2500) -3500 = $4000 cash out of the borrowers pocket. In this example the seller paid for all the Non-recurring costs and 1% of the recurring closing costs leaving the buyer responsible for down payment and .5% of the recurring costs or Homeowner expenses in advance.

*****Disclaimer – The Examples illustrated in the post are merely to paint a picture and may not represent your transaction. The purpose of this post was to explain the difference between loan costs and pre-paid homeowner expenses. If you have any questions regarding items in this post please add them in the comment section or call your Loan Officer.****

As always thank you for reading.

10 Benefits a Great Realtor will add to your Purchase Experience!

Congratulations! You have decided to take the steps to become a homeowner in today’s market. This is no small task and it can be overwhelming. Many new buyers start there search online on their own. In fact 82% of buyers start their search online. I understand that you do not want to be sold or bound to a Real Estate agent. I get it but you have to do your due diligence and hire a professional. Here are 10 benefites a great Realtor will add to your purchase experience:

1) Professional Advice – Real Estate agents are trained in the very thing you are looking to accomplish, Finding the right home. They can offer professional advice on Style, Location, and Price. They also have knowledge or professional contacts to make sure the structure, floor plan, area are all up to your standards. There is no substitute to Professional Advice.

2) No Cost to You – As a buyer you do not pay the commission of your selling agent. They are paid by the seller for finding you and selling the sellers home to you. It does not cost you anything. Their time they spend with you, the advice they give you, and all the additional benefits come at no expense to you until they find you the right home and you agree to buy it.

3) Negotiation - Realtors are skilled negotiators. A large portion of the job that they do is negotiating the right price and terms of your purchase. This can be the difference and to me very well could be the number one benefit.

4) Expanded Search - Agents not only have access to the local MLS but they also have access to a network of other agents that have inside knowledge on upcoming properties. This extends in most cases above and beyond their own company. Overtime Real Estate agents build strong relationships with colleagues. It is like water cooler talk. In the end you may be the beneficiary.

5) Knowledge of the Area - You may be familiar with the area that you are buying in and you may not. Agents are generally connected with the chamber of commerce, local churches, school associations and restaurants through their farm. Many agents concentrate on specific areas and know everything there is to know about that area.

6) Determine overall value to insure appropriate price – Agents have knowledge of values and sale prices that are accurate in your market. It is their job to stay current with market values and sales in today’s market. There are two markets going on today: The normal market and the distressed REO market. Realtors can help you navigate the two markets and help you to determine the appropriate value or price you may offer.

7) Limit Liability – An agent can limit your liability and make sure that you are protected as a buyer. There are time frames, contingency periods that a buyer must meet and there are contractual obligations to meet. Your agent will guide you through this process and help you to make educated decisions regarding your liability.

Emotion Manager - The market today can be very stressful for a buyer. It is essential to control your emotions. You cannot get attached to a property. If you write an offer on a short sale it is essential to understand that you may be waiting for a long period of time and your agent will help set that expectation keeping your emotions in check.

9) Simple Explanations to Complex Issues – Your agent will break down complex situations so that you can understand them fully. It can be very overwhelming upfront but your agent will break down a complex process and help you to understand the little pieces. This will be a major life-changing event and the Real Estate agent will help simplify it.

10) Experience only time and transactions can provide - Your agent has seen nearly all the situations that you may encounter during your purchase. From uncovering a hidden defect, loan issues, property not appraising, title defects, zoning, septic, well, inappropriate disclosure, and many more. They are there to help you understand the concerns that may arise and help work through any situation they may not have experienced.

If you are in the Sacramento Area or Sonoma County Area I recommend the following Real Estate Agents. I have worked with each and everyone of them at some point. In my opinion each of them comprises everyone of these benefits described above. Please contact me for their contact information as out of respect for them I will not post it.

Sacramento Area – Dayna Neuse Remax Gold Roseville , Peter Bond The Villa Group Roseville, Karen Wallace Lyon Real Estate Roseville, Robert Wallace Lyon Real Estate Roseville, Kevin Nakano Nakano Realty Elk Grove, Bryan Hill McMahon, Phillips Realty Roseville, Nathan Novelo Connect Realty Antelope, Joanie Cowan Lyon Real Estate and many others. I am sorry if I missed you here are there are too many of you too mention.

Sonoma County – Brook Terhune Platinum Real Estate Santa Rosa, Delia Nieto Coldwell Banker Santa Rosa, Larry Mitchell CPS Real Estate Santa Rosa.

In summary, it is imperative that you use the services of a qualified Real Estate agent. It is up to you to interview each and every Real Estate agent that you may want to work with. Determine who is a good fit for you. Communication is the key to every relationship and it is a two way street. Qualified Real Estate agents will help you have a successful buying experience.

Mortgage Locks: Certainly Uncertain! 3 Tips on locking your Mortgage.

When is the best time to lock in my mortgage rate? After all rates are at 3.95% are they not? Heck I think I should wait because the stimulus package is going to help me out and lower the rates to zero. My friend said that they got 4.5% yesterday and I want that rate. I heard that the fifteen year fixed mortgage is 4%. I read in the news that my loan can be modified to as low as 2% and I would like to do that right now can you help me.

OK, I am getting a little redundant but the point to all of the above ranting is simple. Rates are all over the map and they are custom tailored to the individual, the property, and the time that you are acquiring your loan. It is a common question to ask your professional is today the day that I should lock? If they state that absolutely without a shadow of a doubt today is the best day Run!

Larry Baer of Market Alert has this to say: The Market is always right! You and I are some of the time.

In layman’s terms that means to me that you will never be able to time the market and there will always be a rate lower than yours and there will always be a rate higher than yours. Here are three tips that will help you in your decisions to lock your mortgage:

1) If you like it, Lock it – I am a huge proponent of this tip alone. It is your mortgage and your payment that you have to live with for the next thirty years. If there is a payment that you are comfortable with and you like the rate then lock and never look back. Rates are changing by the minute. A swing is rate of a .5% for the worse on 200K is about $62 a month. We tend to think about how much it could go down but I encourage you to remember that we are at historically low interest rates and any rate is a good rate.

2) Don’t Share your business with Friends and Relatives - I am not saying not to be excited about your new home purchase but I am saying to be selective about your excitement. Comparing rates and down payments and programs is certain to hurt someones feelings. As I said before there are always lower and higher rates than your own. If you are the higher rate you wonder why and second guess a good thing and if your lower your celebration has caused others to second guess their dealings. How often do we share our retirement funds or down payment options, or income and credit? That is right we keep the information that tailors our mortgage to ourselves and shout out our rate. Only you and your family have to be excited about your finances and the rest of the world can remain in the dark.

3) Ask your Broker or Banker about Float Down Policies or Rate Renegotiation Prior to Locking – Many of the wholesalers have taken a proactive approach to the market changes. They do not want to lose your business because that costs them money. In order to keep the loan active they are  sometimes willing to renegotiate the terms of your lock. Other wholesalers have a float-down policy in place. They will allow for a float-down of the rate to current market. There is almost always a cost to do this so consult with your Mortgage Broker or Banker on how this applies to your Mortgage.

Just Remember that your Mortgage is yours. It has to work for you and noone else. It is important to be educated and confident in your choices. Choose a Mortgage Professional that makes you feel comfortable with those decisions. You have made a great choice to buy in the current market environment. Take control of that choice be proactive in your education and trust your choices.

As Always thank you for reading,

The 8 stages to homeownership. An illustrative guide for buyers

Stage 1 – Pre-approval – The pre-approval process is a time that you meet with your Loan Officer and talk through the financial side of the purchase. The loan officer will take an application and gather all of your documentation required for pre-approval. This documentation includes but may not be limited to the following: Last Two Years Tax Returns, current pay-stubs covering 30 days (W-2), last two years W-2’s, two month’s bank statements all pages and all accounts, most recent statement for 401K, money market, cd’s, stock, mutual funds and the like. Other items can include mortgage statements, homeowner’s insurance declaration page, bankruptcy papers, divorce papers, lease agreements and more. The more detailed you are with your documentation the more accurate the pre-approval will be. Loan Officers review the documentation, check credit, verify income and run your scenario through our automated engine to receive an automated approval. The automated approval assesses risk and cross references secondary market guidelines to determine your borrowing capability. The accuracy of the information inputted into the system is everything. The automated approval will give you a list of items that you will have to provide to obtain funding of your loan in the end.

Stage 2 – The House Hunt – After you are pre-approved by your Loan Officer they will issue a pre-approval letter to you and your Realtor. As far as the lending side of things you are on a hiatus. Your loan cannot be locked until you have found a property. We lock the collateral not the borrower. During the house hunt your loan officer will keep you up to date on any guideline changes, industry news, and rate movement. They will also be in communication with your Real Estate agent to make sure that your team is all on the same page. When you find a home that you like you will place an offer and wait for the response. There may be counter offers and you may have to write more than one offer before you have an offer accepted. Your Real Estate agent will guide you through this process and provide great advice on how to approach the house hunt.

Stage 3 – Offer Accepted – Now that the offer is accepted and you are in contract to buy the home. There are several things that will occur during this stage. The first few days will be a flurry. In my practice I like to meet with you again and obtain updated information if the hunt has taken a few months. Along with gathering updated information we will go over current rates and pricing, fees, and determine if we want to lock now or hold off. At this point a check for the appraisal is collected and the appraisal is ordered, preliminary title reports are requested, and I request a copy of the fully executed contract. (Please note every loan officer will approach this differently and certain loans such as VA have different appraisal processes.) Gathering the information above from the Title Company and the BANKS can sometimes be a process. The title companies on the Bank owned properties are located all over the place. I have worked with one in Philadelphia. At the same time Your Real estate agent and you will be ordering inspections such as home and termite if you choose too. It is highly recommended and your Real Estate agent will talk you through this. Once the documents above are gathered the loan package will be submitted to our wholesaler of choice to be underwritten.

Stage 4- Underwriting – Once we have chosen the wholesaler that will provide you the money to buy your home we submit the loan package that we have created to be underwritten. The cleaner the package we submit the smoother the process. This is why I am so through upfront and ask you to provide all the information and all pages of everything. The reason that there is an underwriting process although you were already approved through our engine is that we have to have a human check to make sure that the data that we entered in the computer is supported by our documentation. They are checking income, assets, credit depth, appraisal, title reports and contracts for accuracy, missing signatures, appropriate calculation and use of income such as overtime. This underwriter will be overly thorough in today’s market environment so this process will take time. The time varies depending on who we choose to work with and their current volume of business. One thing that will delay the underwriting process is incomplete files. Again, this is why it is important to work with a Loan Officer that can package a clean file for underwriting and important for you to provide everything they ask for to the best of your ability. This stage can be as quick as 48hours and some wholesalers are running 20+days. If the wholesaler is quick it can because they are well staffed, the rates are not that great, they specialize in few products or if they are slow it could mean all the same. The goal of this process is to get a conditional loan approval from our underwriter.

Stage 5 – Loan Approval and Conditions – Once the underwriter has approved the loan they will issue a conditional loan approval. There are conditions that are labeled prior to documents and there are prior to funding conditions. Many of the conditions are behind the scenes and should not be a requirement of you as the borrower. If you are through upfront with documentation there should be minimal conditions at this stage. Some examples of typical prior to document conditions include updated pay-stub, appraiser to provide more data, estimated closing statement, W-2 or letters to explain items that may need clarifying. Some example of prior to fund conditions may include insurance or 4506T results. The conditions I have given as examples are not the only conditions that may occur they are meant for example only. At this point our job is to quickly gather the conditions and submit them back to the underwriter to be satisfied. This process, like underwriting, varies on the time to complete. The quicker we get back the conditions necessary the quicker we move to the next step. Once the underwriter has cleared the conditions we move to the next stage loan documents.

Stage 6 – Loan Documents – When the Underwriter clears the prior to loan document conditions we are able to order your loan documents to be signed. Loan Officers fill out a request for loan documents and submit this to the wholesaler. The wholesaler has a department that works specifically on preparing loan documents to send to the title company. Again, this is a process and every wholesaler will vary on the time that it takes to get the loan documents sent out. In the electronic era that we live in the loan documents are most commonly sent via e-mail. Once the title company receives the loan documents they will prepare the estimated settlement statement and send to your loan officer to review. The settlement statement reflects the costs, loan amounts, down payment requirements and any deposits you have already made as good faith. The Loan officer will review this statement to make sure that it is in-line with the good faith estimate and what you discussed with your loan officer originally. There are a few items that are pro-rated so the numbers will very slightly. Once the settlement statement is reviewed for accuracy either the title company or the loan officer or a combination will schedule a time for you to sign. The signing will take place at the title company, at your home with a notary or at an alternate location that is convenient to all parties. The signing of the loan documents is where you agree to the terms of the loan. You will in front of a notary acknowledge this agreement. Once the signing is complete the title company will overnight the signed package back to the wholesaler for the next stage.

Stage 7 – Funding – Once the wholesaler receives the returned package from the title company they will review the package for completeness. This again is a process that varies from institution to institution. Once the file is reviewed they will issue a funding checklist with any outstanding conditions to be satisfied. There should be very few conditions if any at this stage that require you as a borrower to do something. Between your loan officer and the title company all conditions will get completed. That does not mean that you will never have any conditions required of you. There are cases that you will have to provide additional documentation. This is a rare case as all of it should have been handled prior to documents. Once the funder has cleared all the conditions they will fund your purchase. This is the process of sending a wire of the funds from the loan to the title company to be combined with your down payment to complete the purchase. Once the wire is received the escrow officer will release the file to be recorded in the county of the purchase. Now for the last stageJ

Stage 8 – Recording – The purchase transaction is recorded with the county recorded so that you are officially the homeowner on record. Congratulations you have made it through all eight stages of the home ownership process.

 

* These stages do not represent the process for every loan officer or lending institution. They constitute the process I have learned as a Mortgage Broker and through my time in the industry. You may use them as a general guide to help better understand the stages that you may encounter when buying a home. This is for illustration and not intended to be the ultimate guide to home-ownership.

Home Purchase:How to Survive your 30 day escrow

The market is phenomenal and the opportunity to buy a home is now. Many of you are taking advantage of the opportunity and that is amazing. Warren Buffet said, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.“  Many of you are listening.

The time-line for an escrow to close is 30 days in most cases. In the thirty calendar day period we need to get our inspections done, appraisals done, have the loan underwritten, satisfy any conditions of the loan and be understanding of the turn-times of the third party services we employ. It is a cooperative group effort. I have given you below a few tips to help you survive the 30 day escrow and sneak out a winner.

Tip #1 – Be responsive to the requests from the professionals you hired- Before you began the process of buying a home you found a few professionals that you felt would best help you through the process. Many times these professionals (Real Estate Agent and Loan Officer) do not make the rules of the game. They are there to facilitate the process. If one of these professionals request documentation or a check for a service be quick to get them what they need. Your process will stop without it.

Tip #2 – Provide the documentation requested – It is imperative to provide all of the documentation requested. Do not try to find a way around it or think that something will be sufficient if that something is not what was requested. If you do not have what was requested get with your affiliate or loan officer and come up with an alternative. Holding back information from professionals that are on your team can cost you in the long run.

Tip #3 – Remember that we are on your side – All too often we forget that we are all on the same team. A victory is represented by a closed transaction. Communication is the key to that transaction. It stems from all parties who all have a lot riding on a transaction. Small details excluded can lead to a disaster that was avoidable upfront. Tell me the property is zoned service commercial and grandfathered in so I may come up with a solution prior to the problem.

Tip #4 – Be Prepared to fight for the home you want – It is not 2003, 04, 05 and obtaining a mortgage is a little more invasive than the past. If you could fog a mirror we gave you money in the past. Now we are asking for Birth Certificates to show the child support will continue for three years. The age on the application is no longer significant. This starts with the investors and trickles down to the buyer. Nothing good comes easy in life. It will pay off to be diligent and fight for the property.

Tip #5 – Everything is time sensitive – The purchase time-line is as follows. You go into contract and the clock starts. Your loan officer orders the appraisal, gets all the signed disclosures for the property, requests the preliminary title report and a copy of the fully executed purchase contract. Our wholesalers want a complete package to look at your file. The appraisal can be anywhere from 3-5 days, preliminary title report depends solely on the title company (I have dealt with companies in Philadelphia), Fully Executed Contract which can take time if the property is bank owned 3-15 days I have waited and all of this prior to submitting the loan to underwriting. Once we have all the documentation we can submit to underwriting which can be 3-9 days to underwrite. Business Days but the weekends count on the escrow. Once the file is approved there are generally a few conditions to meet and to be reviewed once they are obtained can be 2-4 days. When they are cleared and we are able to order your loan documents this is a 2-3 day job. Then we sign and the package is returned to be reviewed for funding. The funding process is 2-3 days. So if you add up the days on the short end a perfect process can take up to 12 business days with no hold up at all. This would include 2-3 weekends at 6days and we close the escrow in 20 calender days. On the long end 34 business days and 4 weekends would be a 42 day escrow.

In summary, it would require a group effort to survive your 30 day escrow. Note that we all have the same goal in mind. Home-ownership for you as the client is our goal and what we do best. I look forward to working with all of you in the years to come.