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Interesting...

By Lauren Corna

Real Estate Agent with Archway Realty, LLC

October 06, 2006 03:01 PM

I have noticed a definite gap between many Real Estate Agents and Loan Officers.

I called a Lender today because he pre qualified one of my Buyers... The Loan Officer had no clues about the purchase contract and the Third Party Finance Agreement. He said that he doesn't get involved in the contracts.

I wonder if this Loan Officer ever read paragraph 12b of the contract. I would think that would be very important when the GFE is prepared as well as the rest of the Loan Structure....

Recently a seasoned Real Estate Agent was in a course with me. She was trying to take the class and keep in touch with one of her Buyers because she had just submitted an offer. She was working with a Buyer that put an offer on a $389,000 home. It was a 100% loan program. The Agent told me that the offer had a 10% Seller contribution in 12b.... I started to laugh... I asked her if she was just testing me. The Agent was very serious. I told the Agent that it wasn't going to fly... The next day that Agent told me that it fell through...shocker.

I find it strange that many Loan Officers are not more familiar with a contract and why a Seasoned Agent could possibly think that you could have a 10% Seller contribution on a 100% program.

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George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Seller paid contributions would not have any effect on the GFI. The costs are the same on the GFI no matter who is paying them, but it does have a big impact on the amount the Buyers needs to have to close. The problem is that some Loan Officers only look at the Credit Report, LTV, and Ratios and give a Pre-Qualification Letter based on that. That is very risky because he/she is basing this on their opion alone. Before giving a Pre-Qualification Letter a Loan Officer needs to take a full application and run it through Automated Underwriting. If you get an approval then all that needs to be done is to verify the info that the Buyer gave him. But a lot of Loan Officer are to lazy to do that, and end up making fools of everyone involved in the deal.

The 10% part is just dumb. You can't do 10% Seller Paids on any Loan Program that I know of, much less 100% Financing.

Oct 06, 2006 03:50 PM

Lauren Corna

Archway Realty, LLC - Southlake, TX

Broker

The closing costs would be the same. However, the Borrower would not have to bring that $$ to the closing table and that is reflected on the GFE. At the very bottom of the GFE there should be a line that states what the borrower is to bring to the close, $$$.

What software do you use? Calyx definitley broke that down for the borrower.

If you are not using Calyx, I highly recommend it.

Oct 07, 2006 03:38 AM

Lauren Corna

Archway Realty, LLC - Southlake, TX

Broker

Doesn't it cost the mortgage company to run a 1003 through automated underwriting?

Loan Officers pre-qual a borrower based on the current information at the very moment they apply for that loan. Their rate is in a float status until an executed contract is received by the lender/ mortgage company. The borrower is given a Max Loan Amount to work with.

Real Estate Agents will typically work with that Max Loan Amount.

During the home hunting process the borrower starts to make major purchases for their new home not realizing that they are screwing up their debt ratios. Shhhh.... The lender will pull another credit report just before the loan closes. The borrower needs to know this.

When a borrower calls a mortgage company and says that they are shopping rates that Loan Officer now knows that they are competing for business...Some Loan Officers sort of forget to include fees,Title policy $$, estimated taxes and insurance on the GFE so it looks like they are cheaper than other Mtg. Companies. Loan Officers know whether or not a Borrower is going to escrow because that is taken into consideration at the time a Loan Officer prices out the loan....Typically the rate is increased by a quarter point if a borrower is not escrowing. When a GFE is not prepared properly for the borrower the realities at the closing table come to life... Needless to say it's not pretty.

If a borrower has a loan program that is a 80/20 or 80/15/5 then isn't there double closing costs if two lenders are involved?

I had a Loan Officer send me a borrower with a back end ratio of 55 !!! She had no money to put into the transaction. I wouldn't work with her. Nice sweet gal. But I could see an accident waiting to happen.

Oct 07, 2006 04:30 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Lauren, it is a pleasure to post with a Realtor that has an understanding of the games that are played. I can't speak for other Loan Officers, so I will just speak for myself. First, yes it does cost money to run a 1003 through automated underwriting, it also cost money to run the credit report. But I do both at my cost for every person a Pre-Qualify. The bulk of my business comes from Realtor referrals, and I am not going to jeopardize those relationships by giving them a Pre-Qualification Letter that is garbage.

Second, the rate does float, because you can't lock in a rate without a contract on a property, but a good Loan Officer will tell the Buyer that.

Third, my mortgage company does not pull a new credit report before the loan closes. If the credit report is more than 45 days old when I turn in a loan, I have to run a new credit report at that time, if I don't my underwriter penalizes me for it and that cost me far more that the credit report and automated underwriting. When we give the Borrower a Commitment Letter the loan is done unless there is condition, which are spelled out on the Commitment letter. If the Borrower takes care of those condition and only those conditions the loan is honored.

Forth, you are absolutely right about the games that are played with the GFI, that is why it is important for a Borrower to get more than one GFI if they are shopping price and rate. I have heard several stories from Realtors that I work with about people being short at closing. That does not happen with us, because the loan would never make it out of underwriting unless we have bank statements to show enough money and a true GFI is looked at.

Fifth you are also absolutely right about the 80/20, 80/10/10 and 80/15/5 and that is why I don't do them. As bad a rap as PMI gets it is a better deal and it only takes the cost of an appraisal to get rid of it once a property has 20% equity in it.

Last of all automated underwriting will give an Approved/Eligible up to a 65% back ratio if the person has decent credit, that is 65% of gross income. Once Uncle Sam takes his cut that leaves them with 15% to 10% for food, cloths, gas, etc., that is crazy, but people do it.

Sorry for the long response, but those of us who do not play the games, don't like those that do any more than the Realtors do.

Oct 07, 2006 12:51 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Lauren, I just noticed you other post. Yes, I use Calyx. I have seen other programs, and none of them are as good as Calyx. I see a full 1003 page per screen so I don't have 10 different screens to go through. I just find it very easy to work with, and yes it does do a great job with the GFI

Oct 07, 2006 01:17 PM

Lauren Corna

Archway Realty, LLC - Southlake, TX

Broker

George- It's awesome that you prepare an accurate GFE for your prospects / borrowers. I always respect Loan Officers that really know their stuff. I respect them even more when they are honest and play fair.

I'm a Licensed LO and a Licensed Realtor. I'm working on obtaining my Mortgage Broker License too. I just haven't had the extra time... I've worked in both wholesale lending and retail.

A 65% back end ratio is dangerously high.... The negative thing about 100% financing here in Texas is the fact that our appreciation rate is very low....If a borrower has a 100% purchase money loan program with 3% - 6% seller concessions It takes forever to build up the equity to either do cashout refi or even sell the property. Hopefully our apprecitation rate will pick up.

Calyx Software can be linked to Title Companies, Appraisers, credit reporting company and lenders. It's an awesome program for mortgage companies. The software company, Calyx, has a great support system and training seminars. I learned so much when I took the two day training seminar. I really liked doing the entire loan package online and I would password protect the docs, email the docs to my borrower and call them with the password.

Thank you for taking the tme to respond to my blog....Your information was very helpful. Your Agents are lucky to work with an honest Loan Officer who takes the time to educate the Agents he works with. You will be a great asset to them!! It sounds like you are working with borrowers that really need a good Loan Officer that understands due diligence.

I look forward to reading some of your blogs !! Take Care.

Oct 07, 2006 02:38 PM

Fred Griffin Florida Real Estate

Fred Griffin Real Estate - Tallahassee, FL

Licensed Florida Real Estate Broker

We invite you back to ActiveRain. Much has changed since your last blog post. We would welcome your return!

Aug 08, 2017 08:36 PM