Borrowers are going to pay more for an FHA loan in 2012.  FHA mortgage insurance premiums are going up AGAIN.  This change could possibly take an approved loan file straight to the DENIED bin.

The recent, signed legislation to extend the payroll tax deduction means an increase in FHA’s mortgage insurance premium.  The FHA (Federal Housing Administration) has 2 charges to the borrower:

·        Up Front Mortgage Insurance, which is currently 1% of the loan amount

·         Annual Mortgage Insurance, currently at 1.15% and slated to increase to 1.25%

How could this affect you?

It could end in loan denial.  Namely, if as a borrower, you are near the limits of allowable debt-to-income ratios.  For example, on a $250,000 loan, this increase will add another $26.04 per month in additional mortgage insurance which also gets added into the debt-to-income ratios.  This increase couple topple the peak of allowable ratios and result in a denied status on your loan.

What do you do?

We Are All About Solutions!

Two things:

1. If you are an FHA buyer, get off the fence, find your home and CLOSE on your loan…now rather than later.   Push that spring market today!  Heck, even if you do still qualify after the increase, who wants to pay extra mortgage insurance?  Pew.
2. Convert your financing goals to conventional financing.  With as little as 5% down (good credit needed), you can get a loan with NO monthly MI.  HUGE advantages:

               a.       No monthly MI means your purchase power just increased dramatically (see illustration below).

b.      Sellers and banks LOVE conventional offers!

c.       Many lenders will tell you that there is a rate increase for doing this “flavor” of conventional financing (called single premium financed MI).  DON’T LISTEN.  You can get the SAME rates as those borrowers paying monthly mortgage insurance.  You just need to work with a lender who has that capability.

Happy House Hunting!

Recently, my daughter had to write a short essay from a list of topics for her English class.  I wanted to share.  There is a whole lot of wisdom in this teenager's thoughts...........

One of the things that confuse me most in life is why people accept average or less than average.  People live in a world of mediocrity, settling for something less than what life could offer them.  People don't excel.  Many people don't even try.  We live in a society of people who believe "I can't".  This country exposes us to a world of opportunity.  The sky is the limit.  Only our imaginations and drive can stop us.  When people are young children, they have big dreams, larger than life goals.  They want to be actors, astronauts, lawyers, and doctors. Then as we age, those dreams fade.  People begin to accept less, they allow themselves to be less.  They lose any kind of drive to do better.  People just settle, and I just don't understand that. 

It confuses me how people who live like this know that they can do so much better.  But they do nothing or choose wrongly.  People choose drugs and alcohol, drop out of school, get small jobs or don't work at all.  So many have accepted a life where dreams, goals and ambitions are non-existent.  It seems that they forget what they dreamed of when they were still young.  Every day people wake up in the morning and do the same thing, day in and day out, with no better results than the day or year before.  They continue to choose a lifestyle that does not promote "the best that I can be". 

Fortunately for me, I still have that child in me.  I still dream and hope to do great things in my life. And I refuse to be part of the "I can't" group of people.   How I act now and how hard I try now reflects over to how I am going to act and try in my future.  They are great habits and life rules to live by.  In other words, trying my best now will only benefit me in the long run.   I will bring that child in me forward in life.  I will live and strive for the fullest life can bring.  My sky is my limit and there is no end to my imagination.  I can and I will.

We should all live by these words.  Can you find that child in you?

The MN Mortgage Mom is on a rant.  I'm a little crazy right now.

ATTENTION BUYERS!  Long gone are the days of easy real estate, no doc financing and everything in between.  Let me direct your attention to "today's world":

• Short sales, foreclosures, banks and asset managers...are you really equipped to deal with these realities?
• Declining values, appraised values, overpriced, underpriced...what kind of tools do you have in your back pocket to ensure you are getting the BEST value and deal available to you?
• Seller paids, seller concessions, seller carry backs....bet you can't even define these potential opportunities!
• Negotiations, multiple offers, cover letters and preapprovals...I know, I know, you got more saavy than Donald Trump, right?

ATTENTION BUYERS!  Did you know, as a buyer you do not pay any commissions?  Yes, you get the luxury of working with a LICENSED professional free-of-charge.

My blatant aversion toward unrepresented buyers does not come unfounded.  Recently, I have had the un-pleasure of working with: #1, a buyer who was trying to purchase on their own and #2, a buyer who was working with a VERY part-time real estate agent. 

The unrepresented buyer thought he could do a better job on his own.  Why?  I'm still scratching my head.  He was a jack of all trades and a master at none.  As the "relationship" progressed, I found myself in a position where he expected me to advise and assist on the real estate side.  "Hello!  I am not a licensed Realtor!"  And then he was fired, Donald Trump style (yep, I had my saavy on that day!)

The buyer with the VERY part-time agent.  This agent had not done a real estate transaction in a VERY long time.  Long story short, the agent ended up screaming at me because I did not offer his investor client 100% financing for his upcoming duplex purchase.  Are you serious?  100% financing on investment property?  Under what rock did you crawl from?  Now, I'm not trying to "diss" part-time real estate agents, but for pete sake, lending guidelines change as fast as I change my mind.  There is a lot to be said for Realtors who make this business a career.  They KNOW 100% investor financing does not exist and would not lead their clients to believe so.  This is yet a mere example of what a "career" real estate agent knows.  I could write a book on others.  For starters, refer to the bullet points above. 

Bottom line....BUYERS, the housing and lending industries are tough these days.  They are ever changing.  GET YOURSELF REPRESENTED BY AN EXPERIENCED, FULL-TIME REAL ESTATE AGENT.  THIS GREAT SERVICE IS FREE. In the end, you may get your new home, price negotiated to save thousands, with seller paids, beating out those other offers and at lending terms that leave you grinning ear-to-ear.  And did I mention?  You actually closed ON TIME because your Realtor successfully drove that transaction from start to finish.

The formula is easy! 

A few years ago, we lost a friend, a companion and a family member.  His name was Pup and he was a beautiful, 11 year old black lab.  Kidney disease took him.  He was incredibly special to us and the loss was sooo hard.  I remember the final days...his body was so weak, but his mind was just like it was when he was 2.  I couldn't let go just yet and I filled an air mattress, covered it with lots of comfy blankets and that's where Pup and I slept, cuddled and spent our final time together.  When the day came to say goodbye, we knew he was ready.  He would look at me on that mattress and say, "Mom, I'm too tired to fight anymore."  Uuugh...that was one of the worst days of my life.  I still reflect on his beautiful life...sometimes with tears and sometimes with smiles.  We loved him dearly and still miss him terribly.

And my husband and I said never again.  The loss was too hard to go through a second time.

Well, that didn't last long.  Our home was too lonely.  It was just too quiet.  Our kids said, "How bout a puppy?  P-L-E-A-S-E!!!"  A puppy!  Do you know how much work they are?  No way!

For any of you who have kids, well, they can be quite pursuasive and in their world, yes means yes and no means maybe.  They continued to "work" us...nothing like hitting mom and dad when we're down!  Our hearts were still broken and those little stinkers knew it...they preyed on our weakness.

So, a puppy it was!  What kind should we get?  Ha!  Not a cute little terrier that I could galavant around in my foo-foo bag to all my closings.  Not even another lab...we didn't want to feel like we were trying to replace Pup.  How about an Old English Mastiff?  "Mom, they are so cute and we can have lots of fun with it!"  Are you nuts???  Those things are HUGE!  But I couldn't help myself...I went straight to my handy dandy laptop and started doing the research...

The next thing we knew, we were driving to Cambridge, MN to pick up our cute little 8 week old Mastiff from a Mastiff breeder.  And cute he was!!!  11 pounds of wrinkly skin and baby slobber to boot.

That was 2 years ago.  Now, at 2 1/2 years old, everything is gotten REALLY BIG.  Big body (lordy, this guy is almost 200 pounds), big paws (or should I say massive), big slobber (our home is littered with bibs to catch it before it slings), even big poops.  Okay, I could have probably skipped the last visual, but dang, everything about this wonderful beast is BIG.  Sorry if I offended anyone.  Small digression...we keep teasing our next door neighbors, who are one of our dearest friends and non-pet owners that we're going to build sculptures out of the stuff...Ha!  Let me just say, it's a whole lot of poop.  Dad's daily clean up job...

Back to the 4-legged child.  His name is Mic.  He's cute, he's funny and he's a whole lot of work.  First came the potty training.  For all you who have a puppy, invest in Nature's Miracle.  It IS a miracle...the stuff WORKS.  We now own stock in the company :).  Let me tell you, potty training was not fun.  Mic just didn't understand...he was confused by the whole process, but we were successful...2 weeks and he figured it out.  Kind of reminds me of my First Time Home Buyer clients!  Now don't get me wrong...I love first time home buyers...they are my niche.  I really enjoy working with these people.  The lack of understanding and confusion about the whole process is what grounds me...keeps me to the basics with patience, kindness and understanding of my own.  Kind of like Mic and the whole potty training business.

And he whines...he whines when he is bored, he whines when he wants attention.  He's the perfect little toddler.  And when I want him to do something (we're STILL working on obedience and tricks) he just looks at me like "you're kidding, you really want me to do this?"  Think about all those underwriters out there that get paid the big bucks to make all of our lives a little bit miserable.  They want this, they want that...conditions, conditions.  I call my wonderful mortgage client and I can feel that look right through the telephone wires.  "Are you kidding?  You really want me to do this?"  Don't kill the messenger...we've got a doozy of an underwriter on our hands...we all take a deep breath and work through it together.

What makes it all worthwhile?  His love and appreciation.  When he wags his tail because he's so happy to see us.  When he slobbers on our face to show us his love.  It's unconditional.  When the day is done, all the work, the headaches and frustration melt away.  He adores us and shows it in so many wonderful ways.

I have been blessed with so many wonderful mortgage clients throughout the years.  Through the mutual patience, admiration and appreciation for hard work well done.  The appreciation of my clients does not go un-noticed.  It's what makes me tick and move forward.  It is rewarding and fills me up with warm fuzzies.  Just like Mic...warm fuzzies and a little slobber to boot.

Okay, perhaps that's a little TOO much information!  Perhaps you really don't need to know what splash of color your loan officer is bestowing on his or her bloomers on any given day.

But what you SHOULD know is who your loan officer IS. 

Let's see....scum bucket, slime ball, scammer, fraud frog...any of these ring a bell?  They do to a whole lot of people, as our industry has been historically speckled with less than scrupulous loan officers committing fraud and scamming the innocent.  Unfortunately, those LO endearments have, in many cases, been very well founded.  (And how embarrassing that Minnesota and the rest of the Midwest have some of highest percentages of all this nastiness.)

What do you do?  Protect yourself by doing your homework.

You have never been in a better position to check out the color of your loan officer's undies.  With social media, licensing requirements and the good ole world wide web, you can get a pretty good recon on the LO you intend on working with.  Pure attrition (as I wrote about on Who is Going To Write These Loans?) has definitely wiped out much of the riff raff, but those little stinkers still loom.  Whether you are a consumer or real estate agent, it is imperative to check ‘em out. 

To that end, here is a list of ways to get that done:

•·         NMLS.  Is your loan officer licensed?  Remember, as of January 1, 2011, it is REQUIRED.  No license, no ability to write a mortgage.

•·         Linked In.  Great place to check out your loan officer's resume.

•·         Facebook.  Whoa!  This is a real "personal" insight into your LO's world. 

•·         Google.  For heaven sakes, this is one of the easiest ways to check out your loan officer...just type in his/her name on the search box.  What pages come up?  If you see your loan officer's name right next to the words San Quentin, you may wanna think twice.

•·         BBB.  Who does your loan officer work for?  What is their company's rating?  More importantly, check to see if there is a list of consumer complaints.

•·         Twitter.  Is your loan officer tweeting about the next local club they are partying at or are they providing tweets that would be relevant to our profession?

•·         FHA Neigborhood Watchlist.  This is a policing site that allows HUD/FHA to oversee lender activities and performance and publish this information to the public.  Good stuff!

There.  That should give you a robust start into your loan officer recon search.  I just showed the colors of my knickers!  Can yours?  And nope, mine are not the lime green polka-dotted kind, either.

612-363-1106 / sherri@iloanhomemortgage.com / www.sherrisherpy.com

via Deb Brengman

Qualifying for a Mortgage, we went from one extreme to the next!  3 years ago, if you had a social security number, stated  income and ordered an appraisal (with practically a stated value), you were good to go.

Today, when The Mortgage Lady meets with a potential client, one of the opening statements is "we are going to be required to document your documents" and, ask them to not be insulted when the investor has conditions that are beyond what they would expect.

We live in a country where our justice says, we are innocent until proven guilty, everyone has their day in court.  In the mortgage world, you're a fraud committing deadbeat WHO LIVES IN A SHOE until you have had your day in court (we call it underwriting)

Because the market was wrong in creating loans available to everyone,  who were not even required to show a pay stub or bank statement, and allowed "the liar loan", today's buyer is paying the price.

Previously we needed no  pay stubs , today's buyer must provide 30 days of pay stubs, w2's for the past two years, and in some cases, two years of federal tax returns.  Of course, that is not enough; the lender is then required to pull your tax transcripts directly from the IRS, need to make sure everything matches. And, we are not done, then it is time to contact the employer to get verbal verification of employment, not just once, but twice!!!  Once when the loan process starts, and again within 24 hours of closing, on your new home. The investor wants to know that you are employed, that your employer does not have plans for layoffs or pay reductions, and that you are likely to have continued employment.  And that is the requirement for hourly/salaried employees, the requirements grow for self-employed, commission or bonus paid folks!

Previously, no bank statement, today's buyer must provide 60 days of banking history, all pages, even if blank!  And heaven help us all if you have a deposit on your bank statement that is not identified as a payroll deposit!  All deposits must be sourced and documented.  Stating that you had been saving coins for the past 10 years and put the cash deposit in your account is not going to fly; cash is an unacceptable source (what's cash by the way) And, if a relative is gifting you some money, they best be ready to be part of the spot light.   Until you prove otherwise, that money got wired to you by Fidel Castro. The person giving the gift will be required to show proof they had the money to give you by providing their bank statement (a cancelled check, no dice, not enough).  Then they have to show the money being withdrawn and get their bank statement updated to show the money leaving the account (again, a cancelled check, no dice, not enough).  And guess what, if the person giving the gift has non-payroll deposits get ready to write an explanation for that too!   Better take a photo copy of that check before you deposit the check too because now you, the buyer, need to show proof it was from the donor, and proof of deposit into your account, and update their bank statement showing the money has been deposited.

And, you better remember every detail of your payment history, because your credit report does (or does it?), and you are going to have to write letters of explanations for everything, and my dog ate the bill is not going to fly!  Cross your fingers for a 720+ score, or you are nothing but below average, 680 use to be looked at as decent mortgage credit score, not anymore, you can still get a mortgage with as low as 640 with some investors, however, for best pricing and rates, you need above 720.  Your credit report will be pulled at the beginning of the process. Do not think you are done and go out and spend money, for example ON A new couch, because your credit is going to be pulled again the week before closing, and if your debt has increased by more than 5%, you might not get your mortgage.  And, that 15% discount off that you will receive for taking out a new credit card at the mall, you better be sure it was worth the discount, because it could stand between you and getting a mortgage.

The moral of the story, please do not wait until 2 months before purchasing to get pre-qualified, it is more important now more than ever to meet with a mortgage lender 6 months prior to buying.  That way, if any of the crazy little "hick ups" are in your way, your lender can put you on the right track for homeownership.

It is one of the best times in history to purchase WITH THESE low housing pricing and low rates. Do not be scared, be prepared.  Get financially naked in front of your loan officer, and be a healthy homebuyer!

The mortgage industry has seen much blood shed in the last 2 years, particularly in the last year.  After reading a very interesting magazine article, I began to think about the future...the eminent future and a big question arose, "Who the heck is going to write these loans"?  What is the MN Mortgage Mom rambling about now?  Well, let me take a step back a few years first.

In the early to mid-2000's, loan officers were a dime a dozen.  We were in offices, working out of our garages and in the comforts of our living rooms.  We were dressed in suits, dressed in jammies, dressed in nothing (remember, we were working out of our living rooms, for pete sake).  The point is, it didn't matter....we were all writing loans and becoming fat cats.  Loans were written at light speed. Home values were sky rocketing.  In fact, if you had a pulse and could sign your name on a line, you could get a mortgage.  Good, bad or evil, that was the environment and our industry was crammed with LO's.  Life was EASY.

Fast forward to 2008.  WHOA!  The big bubble burst.  HVCC (Home Valuation Code of Conduct) was introduced.  Appraisals became harder.  Lenders started to freak out just a tad.  Guidelines became just a bit stricter.  In MN, for example, stated income loans became a thing of the past.  What?  No stated income?  We really have to collect a paystub or W-2 or tax return?  The audacity!  Moreover, home values plunged and no one had any equity left.  Refinances dried up and it was the year loan officers had to re-align or get out.  Many exercised the latter.

Now, I'm not saying that was such a bad thing in hind sight.  The mortgage industry could use a fresh cleaning...get rid of the riff-raff, so to speak.  The tough got tougher and the weak perished.  All-in-all, 2008 proved to be a hard year for all of us.

Present day....WOW.  The introduction of the NMLS in 2009.  That freaked a whole lot of people out.  For those of you who do not know, the NMLS is the National Mortgage Licensing System.  It is Big Daddy watching over us.  It is one of the ways, as a consumer or realtor to check out your LO.  It is our report card of compliance and good work.  And we had a deadline...December 31, 2010 or we were barred from writing mortgage loans.  Now, being the pig-headed person I am, I was not going to let the NMLS conquer.  Commitment or stupidity?  Some days, I wonder.  Nevertheless, I completed my education requirements, took the national test, took the state test, got finger printed, mug shots and a credit report pulled to boot.  Feeling like a convict, needless to say, I passed with flying colors.  No, the Twin Cities mortgage market was not going to get rid of me that easy.  I'm here to stay.

THAT HAS NOT BEEN THE CASE FOR THOUSANDS.

Let me give you an example.  In Arizona, prior to the NMLS, that state had 18,000 loan officers.  In the past year, that number has dwindled to 3,200.  And it is going to get worse.  These numbers are BEFORE the final tally of those who passed their NMLS requirements and are licensed to write mortgages as of January 1, 2011.  Every other state is seeing attrition much like this.  Our numbers are dwindling really fast.

Moreover, the lending guidelines, restrictions and regulations today are TOUGH.  Remember the old saying, it doesn't take a rocket scientist?  That does not work for the mortgage industry.  In today's environment, you better bet that every thriving loan officer is just that...a rocket scientist.  We have to be.  Lending guidelines fluctuate at a moment's notice.  Regulatory changes are occurring by the minute.  Appraisals, title, income, credit and a whole myriad of other factors are scrutinized to the nth degree.  It is a literal feat of accomplishment to successfully drive closed mortgage loans and prosper in this environment.

Finally, as of April 1, 2011 the mortgage industry will discover how the government will be dictating our compensation.  As part of the Dodd-Frank H.R. 4173 Act, (page 762) loan officer compensation will be governed with oversight from the Feds.  Fun stuff.  Can you see people clammering to their local mortgage companies aspiring to become a loan officer?  Umm...not so much.

Now, let's jump to the future.  Six months, a year.  The mortgage industry has gone through severe attrition.  The bloodbath is over and there are crickets in the halls of former mortgage offices.  An excited buyer dials the mortgage call center to get the mortgage process started.  A heavily accented person, 2000 miles away replies, "Yes sir, that will be 26 weeks before you can close."  Can you imagine?

So, who IS going to write these loans?  This brings us full circle and to my final point...Although my illustration above is a bit tongue-in-cheek, there will always be loan officers in every state.  BUT, there is going to be a big shortage.  Whether you are a consumer or real estate agent, it is in your best interest to align yourself with the best.  CHECK OUT YOUR LOAN OFFICER (I will show you how in the next blog).  Make sure you are working with a LO who is "in it to win it"...the lifer.  Make sure your loan officer is a rocket scientist or has aligned himself/herself with a team who is.  Why?  Because after the dust has settled, dialing up that call center because you don't know where else to turn is really going to stink.

Happy Buying and Selling!

The MN Mortgage Mom

This is a much needed legislative change in MN.  Our state needs to do away with deficiency judgments for those who have exercised a short sale.  Contact your state representative and be heard!

You've just completed the renovations.  New paint, carpet, kitchen, bathrooms, you name it.  You took a nasty dwelling and completely transformed it into "home-sweet-home" for that buyer lucky enough to reap the benefits of your hard work and skill.  AND YOU DID IT IN RECORD TIME.  Two months after your acquisition, you are ready to throw up the FOR SALE sign.  Woot!  Life is good.

 Okay, maybe not that good...

 Have you considered the buyer pool in your market?  Have you thought about who your buyers are?  How knowledgeable are you and your listing agent on current financing guidelines?  The fact that you are ready to flip that home in record time is nothing less than admirable.  But if you don't have the ABILITY to sell to a whole group of buyers or are unaware of potential hurdles, your timeline and patience are going to be tested.

So, what the heck is The MN Mortgage Mom rambling about now???  FHA.  FHA buyers.  And there is a whole lot of them out there.  Statistically, FHA accounts for more than 30% of all loan originations nationwide.  In many areas of the country, that number is closer to 50%.  When I look at my own pipeline for the last year from the Minneapolis/St. Paul market, my FHA buyers constitute nearly 70% of all my originations.

 I certainly am not suggesting as a seller, that you steer away from FHA buyers.  Quite the contrary.  What I am suggesting, however, is that you know the rules and guidelines.  Knowledge is power and that power will keep ALL buyer pools open and get your flip to a successful closing.

So what's the big deal about flipping your home in record time from acquisition?  Simply put (given the example above), you might as well forget about the FHA buyer.  FHA will NOT insure a mortgage on a property in which the owner of record has held that property less than 90 days.  You may be thinking, "Well that's okay.  By the time we close, we will be over that 90 days."  WRONG.  FHA defines that 90 days as:

• Seller must be owner of record for a minimum of 90 days AND
• The buyer's purchase contract may not be dated inside those 90 days

In summary, you cannot go under contract with an FHA buyer until 90 days have lapsed from your date of acquisition.  Time yourself correctly and you will open your home sale to hundreds of buyers.

Other dates to be cognizant of:

• 90-180 days from acquisition:  A 2^nd appraisal will be required if the sale is between these dates AND you are selling your home 100% or above your acquisition price.  NOTE:  The buyer cannot pay for this appraisal. 
•  Up to 12 months from acquisition:  Underwriter reserves the right to require additional documentation in support of the resale value.  Note to flipper:  If you have the home priced right and the appraisal report is able to identify and support the value,  more times than not, you will sail right through this without having to provide any documentation.

What do you do now?  Get that home up for sale and have it priced right.  If you have a little time on your hands, that's okay.  If a conventional buyer doesn't come around, you have a few days to re-polish the wood and perhaps throw in a furnishing or two to stage your finished gem.  And when that FHA purchase contract presents itself, you are ready.  "Ain't no hiccups happenin in this transaction."  Right on...because you have the knowledge and that is a powerful thing. 

Happy Selling from The MN Mortgage Mom