In Part 1, I discussed the different first time buyer and down payment assistance (dpa) programs that are available to prospective buyers here in Los Angeles & Ventura counties. In Part 2, I discussed some of the specific property qualifying requirements for the different dpa programs. In Part 3 I discussed the kind of documentation that is required in order to determine eligibility for these dpa programs.
In Part 4, I want to discuss a particularly practice that prospective buyers will have to go through (typically several times if they choose to) before getting into escrow. I will also discuss ways to avoid this despicable practice as much as possible and how I can help when it happens to you.
In 1974, a statute was established to help homebuyers become better shoppers in the home buying process. This statute is called the Real Estate Settlement Procedures Act (RESPA) and is enforced by HUD. Rules and regulations were put into place for the sole purpose of protecting a buyer's right to shop for their settlement services (loan, title, escrow, pest, etc...).
In accordance to RESPA rules, Mortgage Loan Originators (MLO) must inform borrowers that they have the right to shop for and choose their own settlement services and we provide a disclosure stating the settlement services that borrowers are allowed to shop for and choose for themselves.
However, the problem that has become a huge issue here in Los Angeles & Ventura counties (as well as other areas across the country) is that while all licensed MLO are informing buyers that they can shop for their own settlement services many listing agents (LA) are then violating these buyers rights by demanding the buyers waive their right to choose their own settlement services or their offers will not be presented to the sellers for consideration.
What makes this particular violation even worse here in CA is that in accordance to CA Dept. of Real Estate (DRE) rules, regs and codes, agents have a fiduciary duty and responsibility to present all offers and counteroffers in a timely and diligent manner. So not only are these LA violating buyers rights to choose their own settlement services but they're also violating CA DRE rules, regs and codes to present all offers. While I'm not disputing that sellers should have the right to know whether or not a buyer is qualified to purchase their home, that doesn't allow these sellers and their LA to violate buyer's rights or CA DRE rules, regs and codes.
Sellers and their LA will tell buyers and their agents that they just want to make sure that buyers are truly qualified. If sellers and their LA truly want to know if a prospective buyer is qualified to buy their property, with the buyer's permission, sellers and LA are free to have their preferred lender speak with the buyers chosen lender and discuss the buyers qualification and eligibility to purchase the property.
It just amazes me how incredibly arrogant and irrational it is for sellers and their LA to think that their preferred lender is the only lender in town that can close a loan. Furthermore, when these same preferred lenders can't perform (yes, folks that's right, preferred lenders fail to perform more than you think), time, energy and money (typically the buyers money) is wasted when the buyer now has to get another lender to close the loan. On numerous occasions, I have done just that, closed a loan that some preferred lender couldn't close after the seller and their LA forced the buyer to use the preferred lender or their offer wouldn't be accepted.
When pre-approving my clients for a home loan, I will educate them on how I can help them through this particular despicable process by speaking with the sellers preferred lenders on my buyers behalf and I can inform the preferred lenders the steps I have performed to ensure my borrowers qualifications and eligibility for the loan they have applied for. Sometimes, this has been sufficient for the sellers and their lenders; other times though, the sellers lenders refuse to speak to me or any other buyers lenders.
When this happens, I have one word for my buyers: BEWARE!!! This is a good sign that the sellers lender is not interested in just making sure the buyer is qualified for a home loan but rather, they are simply interested in pilfering other lenders pre-approved borrowers. Fortunately for my borrowers, I have educated them about this particular scam. It's vital that borrowers learn to recognize these kinds of sleazy tactics and ploys so that they are able to make decisions that are in their best interest.
Buying a home is one of the most important decisions someone can make. Today's real estate market can be really scary (especially here in Los Angeles & Ventura counties), which is why it's important to get as much information as possible before starting your search. The pre-approval process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs.
If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net. That's what I'm here for and I would love to be able to assist you in your search for an affordable home loan.
What Kind of First Time Buyer Programs are Available in Los Angeles & Ventura Counties? FAQ - #1
What kind of property can I buy? FAQ - #2
What Kind of Paperwork Do You Need to Pre-Approve Me? FAQ - #3
What Kinds of Things Can Go Wrong in the Loan Process? FAQ - #5
What are Impound Accounts & Why Do I Need to Have Them in Order to Close My Loan? FAQ - #6
Can You Help Me Get My Kid Get Out of My House? FAQ - #7
I'm Supposed to be Closing Next Week Can You Help Me? FAQ - #8
If I Buy a Duplex, Can I Apply the Tenants Rent Towards My Mortgage? FAQ #9
What Happens if My Appraisal Comes in Low? - FAQ #10
What is a HomePath Property and How Can I Buy One? - FAQ #11
Can I Still Get a Loan if I Don’t Have Perfect Credit? – FAQ #12
Are There Still Loan Programs Where I Don't Have to Put Anything Down? - FAQ #13
Photos courtesy of flickr: jpersons mikezenero
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