Archive for the 'Qualifying' Category
Okay, after covering down payment, income, and credit in Parts I, II, and III, let’s move on to the fourth important question.
Question #4: Are You Pre-Qualified or Pre-Approved?
When I speak with Realtors, there is inevitably some question about the difference. And lenders will frequently take advantage of the confusion.
An agent of mine recently had a deal fall out at the 11th hour with a client whose lender had provided a pre-approval letter with the original offer. When my angry agent confronted the lender, the lender shrugged and laughed as if to say hey, I lied, so what.
To avoid that type of deception, here’s a convenient place to draw the line in the sand.
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This is the third in a series of posts designed to help prevent fallout when dealing with buyers that bring their own lenders to the deal. Part I discussed down payment, and Part II income documentation.
No one wants to start a new client relationship off with an argument about lenders. But if they arrive with a pre-qual letter from someone you don’t know, don’t automatically put them in the car. These questions will help you determine if that letter is really worth the paper it’s written on.
Remember, if the borrower really is pre-qualified, they’ve been through these questions and should have some very clear answers.
Question #3: What are your Fico scores?
There is no mortgage-related topic that generates more myth and new, old wives’ tales than credit scoring. Most consumers are somewhat aware of the condition of their credit, and some may even be able to tell you their scores. Many people now subscribe to services that keep them updated on their scores. Others recently bought a car, refinanced the old house, or obtained a free on-line credit report. That’s not enough for our purposes.
This series was inspired in part by a friend who is a very successful Realtor. He maintains that 90% of the fallout today is caused by bad lenders. With so many new folks in the business, there are plenty of incompetent and unscrupulous people. Some are your client’s friends, some family members. Most are inexperienced. Protect yourself.
Part I was devoted to down payment. Here is the 2nd key question every agent should ask.
Question #2: Can you document your income?
A lot of buyers won’t know what you mean. That’s okay; just get them talking. You want to determine the quantity and the quality of their income and job history. Lenders want to see a reliable steady income stream. They will often average income over two years because they are as concerned about the quality of your client’s income as they are about quantity.
A couple of tenured teachers making $100k year together have good quantity and good quality. But a recently self-employed person with an aggressive accountant may have neither. From their answer, you still won’t know how much debt they have or their debt ratios, but you may be able to figure out quickly whether they are a full doc or a stated income borrower.
Preventing fallout is a high priority right now in this shakey market. Escrows are falling apart at unusually high rates. The usual issues, repairs, property values, and buyer’s remorse, are now coupled with short-sales, bank REOs, and contingent offers. These are professional realities for those of us in the business, and much of this stuff lies beyond our control.
But one factor within every agent’s control is buyer pre-qualification.
Over the past few years we successfully taught buyers to get pre-qualified before they go home shopping. Then we kicked back, thinking the job was done. Today, buyers show up already pre-qualified, and they don’t necessarily want to talk to your lender.
No seasoned agent I know today would think of putting a buyer in their car without first knowing they can qualify. And yet most will accept a pre-qualification letter from a total stranger. So, to better control that which we can, here are 5 Questions Every Agent Should Ask when a borrower comes to you pre-qualified by someone you don’t know.
For those who missed it, the Sacramento Bee posted this article Tuesday. The 80 or so comments that follow the article make for a lively and sometimes ugly discussion. Not particularly cheery, but there is a silver lining.
Foreclosures in full boom
In ominous sign of more to come, capital region default notices also hit record highs during first quarter of 2007.
By Jim Wasserman - Bee Staff Writer
Last Updated 1:11 pm PDT Tuesday, April 17, 2007
Story appeared in BUSINESS section, Page D3There’s a new kind of “For Sale” sign appearing in the region’s neighborhoods — offering property repossessed by the banks — and there will be more, according to the newest round of statistics.
There is no denying the rapid decline in Sacramento home values and the challenge that creates helping home owners refinance into sustainable home loans. My appraiser says he has seen a 10% decline in values in certain areas over the past 90 days. Two agents I know that previously specialized in the REO (“real estate owned” by banks) business, are back in that business again, with around 300 bank-owned properties listed between them.
Here are a couple of the article’s statistics:
Safe 100% Financing with “MyCommunity Mortgage”
I recently wrote about FHA Access, a wonderful and safe way to obtain 103% financing. With 100% financing becoming more scarce every day, I’ve been rechecking guidelines for traditional 100% loan programs. I’ve done plenty of FHA, VA and 100% agency loans, but that was years ago, and it’s time now to reconsider programs that promote sustainable homeownership while helping borrowers who qualify but lack a down payment.
I want to share a few highlights from my conversation yesterday with an underwriter about Fannie Mae’s MyCommunity Mortgage™. This program isn’t new, but it does require that borrowers prove income. At the peak of our market here in California, people were buying homes for which they weren’t qualified—at least in traditional underwriting terms. That’s an interesting comment all by itself, isn’t it.
The link above to MyCommunity Mortgage™ is 6 months old, and Fannie Mae is nationwide. The rules can vary by state or by a particular wholesaler’s agreement with the agencies, so I called to update myself on the current local guidelines and pricing.
Urgent Notice from Wells Fargo on 100% Financing
Today’s message from Wells Fargo on 100% stated income/stated asset loans.
Urgent notice: Wells Fargo Home Equity will continue to have SIVA (stated income/verified assets) to 100%, however, the Stated Income/Stated Asset to 100% will no longer be offered for loans locked/registered on or after Tuesday, April 17th. Monday, April 16th will be THE FINAL DAY to get your SISA 100% loans in our system (an earlier communication incorrectly approximated a final locking date of April 23). Mark your calendars now and make sure you don’t miss the final SISA 100% CLTV opportunity.