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Basic Mortgage Information Every Real Estate Professional Should Know!

Are you well versed in mortgages? You should be, the mindset "Its not my job man" really has changed! If you want customers...you have to know your business. Even if mortgages are not your level of expertise, don't you think your customers will benefit by what you know?

Recently there have been many issues that have come up across the nation...issues that need to made public...issues that if the customer understood in advance...issues that would not cost a professional....their time, there energy and their reputation.

In most instances more transactions would close because of the better understanding of the entire process, while other's would never get started because these buyer's would in fact not be buyer's due to the new guidelines.

I am not that different from a consumer...some of the language is just over my head. When it comes to mortgages...

I need it broken down for me...broken down in the language that I understand, a language consumers would understand.

Recently FannieMae changed some guidelines...it's not just our market...it's the "DECLINING" Markets..

Fannie Mae Definition of a declining market: A declining market is one in which home pricesare currently declining, as determined by the tracking of home prices in a certain geographic location.

This is determined by zip code through the Declining Market Indicator tool.

When a property is identified, a 5% loan to value (LTV) reduction is required from the maximum financing allowed per the applicable product.

All conforming conventional and jumbo mortgage products apply.

So if someone qualifies for 100% financing and its in a declining market based on zip code...it is no longer 100% financing as the buyer will in fact have to put a 5% down payment.

It can affect investment properties as well as primary residence's increasing the down payment to an additional 5%.

If the zip code does not indicate the property is in a declining market but the appraisal states declining market...these guidelines will apply.

It makes perfect sense as a Real Estate Professional to understand the basic mortgage information.

We have to speak the language of the consumer...so they understand!

So go back call your loan officer's get an education...help yourself...help the consumer!

If you would like to know if you are in a declining market based onFannieMae guidelines contact your Mortgage Professional...also there is great information for all on www.efanniemae.com.

P.S. FHA and VA loans are not affected by the declining market policy.

Disclaimer: The opinions expressed by The Activerain Network and it's members and those providing comments are theirs alone, and do not reflect the opinions of Midori Miller and CENTURY 21 Sundance Realty. Midori Miller and CENTURY21 Sundance Realty are not responsible for the accuracy or content provided by The Community.

Posted by Florida Real Estate Trainer | Daytona Beach After School Training | Midori on 02/09/2008 01:16 AM

Comments (65)

efanniemae, understand basic mortgage information, speak the consumers language, midori, midori miller, daytona beach real estate trainer

Originally posted at: Daytona Real Estate Training: Basic Mortgage Information Every Real Estate Professional Should Know!

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65 Comments on Basic Mortgage Information Every Real Estate Professional Should Know!

FEB

2008

Midori.

You are so right. This article should be memorized by every agent who has ever uttered the words "That's not my job".

I believe that about 50% of the contracts that don't close could be either closed or never written if agents would learn basic financing, qualifying, etc.

The trend of agents these days to see how many tasks they don't do just perplexes me. They don't qualify buyers. They don't qualify sellers. They don't go to inspections. They don't go to settlements. They don't, they don't, they don't.

How can they complain about fees going down when they are not willing to provide the service for which they wish to be paid.

As always, Lenn says it very well. An agent needs to be in the mortgage loop to address any problems that may occur ASAP.

Midori,
Nice post. Those two words scare me more than anything right now. Declining Market!

Finally we get some very competitive rates all to be now challenged with a 5% cut when we can't get value to begin with. O well, if it was easy everyone would be doing it.

Happy Selling!
Tony Grego - Indiana Mortgage Broker

Midori, This is really good info for REALTORS(R) and the consumer alike. And I agree it is so important that we understand these things. I have saved many a deal by directing the mortgage broker to the right product for the buyers. We can't assume that all MBs are aware of what's available.

Midori, great layout of this information. I've recently learned all about a declining market and what that means. My loan officer and I are jumping through hoops right now - all because of our declining market. ;-)

Good post.

Good information, thanks. I bookmarked the Fanniemae site.

Lenn-I agree that is why we have a bad rap...not all real estate associates are the same as with mortgage professionals...while everyone complains about how bad business is...be known for service...just about anyone can list a property but show me if you can sell one!

Hi Wayne-Lenn is a very smart lady...and I have learned quite a bit from her! She to me is one of the best on the rain! Yes, I endorse Lenn! :)

Tony-many are getting out of the business...and there is still plenty reason to buy...can't say I wouldn't have the guts to be flipping properties right now but it makes perfect sense to pay a mortgage rather than rent. Has real estate gone down before???and then it went?????? UP....

I had a mortgage license and did mortgages briefly but prior to that I knew enough....to drive me to get my license! I hope to never to another mortgage again...I don't envy you guys...

Bryant-that is what I mean...if you have knowledge you have the power...the power to get it closed. We are the experts...we have to educate ourselves like the experts, we have to base things on facts like the experts... You are right as far as MB but I do think only the strong will survive.

Terri-Well happy to hear that your mortgage person got you involved...the worst part is not being aware of any law changes or policy changes etc, etc....if we work together...we are an unbeatable team!

Gary-that FannieMae site has tons of info! Hope it helps... :)

Excellent information...thanks...

Hi Midori,

I remember one real estate class. A student challenged the instructor, "I sell houses, I don't do financing..." The instructor replied, "in our market, if you can't do financing, you can't sell houses!"

I laughed out loud, as did the rest of the class.

Thank you for your good info.

Konnie-You're welcome....

Laurie-Before I had my mortgage license...I actually sat with my loan officer and she trained me enough to help her because if I helped her...I helped..myself and the consumer. It was not his job or mine...it was get it done...that means...if she needed help in obtaining a doc from the buyer I made every attempt to help her get it.

I feel bad, I was very demanding of the loan officer I used but then again..she made lots of money...because of the business...and the best part was...she was demanding too! It was a two way street!

I bet that probably stirred up some good conversation in that class....

I would certainly like to know more about the mortgage process. I am learning bit by bit and through the school of hard knocks, but I would love to know more about the process, especially when a loan goes to underwriting. That part is like a black box to me, even the mortgage brokers and lending officers get caught by surprise sometimes. I've had lenders assure me that a loan would go through and then underwriting rules tightened up prior to the commitment letter.

FEB

2008

Hi Midori, It surely did! The bottom line is, 'Knowledge is Power.' If we help our buyers get solid financing, we ensure the success of everyone in the transaction. If our pre-approved buyer comes to us with financing that could be better, we can help. If we receive an offer on a listing, and the financing contingency makes no sense, we can save our sellers from a bumpy ride (or at least no bumpier than necessary). With all the changes in the lending market, we are fools if we fail to keep up! Thanks again! Laurie

How can we expect to have our clients trust and feel comfortable with us if we can't provide the basic of info for them to get started. The tips you have here are a must know for all.

Midori - I absolutely agree that we must be well versed in the mortgage process. However, even though I may know the answer to my client's mortgage questions (I was a mortgage originator for 8 years), I will usually defer the question to their lender. Likewise, I expect the same consideration from the originator. We each have our functions and our common goal is to do what is in the best interest of our mutual client.

I agree that all of the involved parties need to have knowlege of each other's jobs and work together to accomplish the goal of closing the home and loan. I welcome Realtors that call and ask if there is anything that they can do to help the loan along!

Midori, most of our appraisals are coming in with a 5% reduction based on a declining market. Even though in some area's like downtown Ann Arbor we have not seen it. I guess the appraisers are being told to do this.

Midori, while we need not be total experts on everything related to mortgages, we certainly should keep up on the basics. Working with a knowledgeable and reputable lender, we should aim to keep up to date on some of the latest changes within the mortgage arena so that we can better serve our clients.

Thanks so much this information, I like to stay on top of these things!!!!!!!!!!!

It looks like everyone is in agreement about one thing; Be there for your client. I believe we serve the client in their best interests, hhmmm. Wouldn't you say that this includes having the latest knowledge on all things and not just the mortgage portion of the deal? I have gone back to my books many times to review contracts, building codes, deeds, appraisals, etc., etc. Also this internet is just a peach for extracting all kinds of information, which by the way, our consumers are constantly aware. Also, this declining market is just the beginning of better things to come. It's going through it's cycle. Income for realtor's is very delicate right now and it's only natural that some have to leave, but they'll be back. Good for you Midori that you brought this to light.

Midori, OUTSTANDING POST!... You really gave some great advice for Realtors. I also feel this will save Realtors time as well.

Midori - It's interesting you bring this up. After 22 years in the business I was not familar with the declining market principle until recently. The Real Estate market was good for so many years, it was never an issue. The top Realtors always want knowledge. If you ae going to be an expert in your field you need to have at least a basic understanding for various parts of our business.

THis post is very good for all of us in the business. Thank you

Love that picture and I am so glad this post got a feature..the things I have been seeing and hearing here in the Mortgage Industry would make a head spin clear of it's shoulders !

Midori this is great advice. I look at our industry as being serviced by a team of professionals. Realtors and mortgage brokers working hand in hand. How could we work together without understanding each other functions and tools? Thanks for putting it out there. P.S. the comments above hit the spot!

i believe one needs to be insightful on all areas of their business, not neccessary be an expert on all the fields but well verse where you can actually answer your client directly or at least know enough where you can point them in the right direction

thanks for taking the time to post this. I have made it a part of my day to not only check in on the mortgage market, but also the financial markets as a whole. It is my job to be informed about as much as I can that affects my clients

i definately like your post and agree that agents should know what is going on in the market....but when a client calls me up that I have referred out and asks me a real estate question and I answer it to the best of my ability the agent gets mad at me but its always ok for them to try and do my job

Good information to know. We as agents should have some idea on the fluctuations of the various markets. It keep sus informed so as to pass along information to our respective clients.

Midori,

Great post and super graphics. You took some time to get this one together.

Great post Midori.

This is a very important subject, so much so that I recently completed a pretty intense Real Estate Finance course. As reale estate professionals, now more than ever we need to be in the loop and have a good grasp of real estate financing.

Knowledge is power and understanding. We perish for a lack of knowledge. Maybe if we real estate professional educate our buyers and sellers more,the percentage of foreclosure rate in America will be way lower than what it is right now. Thank you very much for writing this blog. Great post.

Midori, My client had two offers on their home. One was $10,000 higher. I checked out the mortgage pre-approvals on both and felt that the lower offer was the better offer and advised them accordingly. The Sellers agreed, but when the buyers missed the contract deadline, they decided to go with the higher offer (which had sweetened the deal considerably by then). I did some more research and still recommended staying with the current buyer, who had a 99.9% certainty of getting a mortgage, while the other buyer had only a 10% probability of obtaining one. Today I saw my clients off as they were moving out of state and we had a tearful goodbye, but they thanked me for giving them insight into who the better buyer might be. While nothing is certain in this world, our knowledge of the mortgage process can help us advise our cliients so that that they know not only what offer is higher, but which one is best.

FEB

2008

I am exactly like you. I need it in simpler terms. A mortgage broker emails me all the technical stuff once a week or less. She doesn't break it down, so it takes me a while to digest it.

Good job!

Billycherry

Hi Everyone...

Thanks so much for the input and the appreciation...I just want to add a few things...

Real Estate Pro's-Don't quote rates...that is not your job unless you are doing the job! You wouldn't want a loan officer telling a buyer what they should offer for a house....

Take a look at a loan application...that way if your mortgage person calls and talks about a doc or form..you will have an understanding...I was known to ask the buyer for their good faith estimate....wanted to confirm...the amount of the payment the buyer could afford....I wanted to know if taxes and insurance were somewhat accurate or even included...and I wanted to make sure....they recieved it and they were aware...this is before I got licensed as a mortgage broker! Also the biggest thing for me was there any special requirements in how the contract should be written....meaning closing costs and seller concessions...

Whatever doc's the buyer needed....I assisted in getting them....I had a borrower's authorization form when I met the buyer....the loan officer would accept my fax...and get the process started! I was not taking anyone in my car without mortgage approval......call it old school...call it logic...it's just my thought process...and you can't tell me every associate does this. I know....I've been overly excited myself before...that is why I won't bend on this!

When it came to mortgages...it was basic information to get them started....and when they had a question...I would never talk about rates....about cost...or about lender fee's...that was the mortgage person's business not mine...I definitely do not want a loan officer to influence to a buyer the way I should be compensated.

You have to take it upon yourself to educate yourself on your own without being told....that was me....I am a curious georgette and I have toooooooo much pride to not know what I am doing or talking about....I strongly suggest...you contact your loan officer...find the best way to be a team...I guarantee you will start closing more transactions....

Happy Selling and thanks for commenting...see you on your posts!

Very very well put! Great information for all of us! Thanks sharing it!

We have seen many misinformed agents tell OUR clients at a showing things about financing that are just plain wrong... where they got that idea I dont know, but not in the real world... in point of fact, all but two of the agents that work for us are also qualified professional loan officers, and we find that the combination is a real advantage for them and for their clients, even if they dont actually get the loan... at the very least they know what is involved, what is possible, and what is not...

Great post Midori...

Not only are we dealing with the declining market issue, but we are also going to additional risk based pricing (see one of earlier blogs for that info).

Basically-with the market the way it is, if your client is approved through someone and the rate may seem a bit higher than what you hear and see, it just may be because they have average credit or worse and not because the mortgage person isn't doing all they can for your client.

It never hurts for a second opinion but, the first step I think is to directly ask the loan officer if you think something isn't what it could be. It could be they have it just priced too high (i.e. they are trying to make too much on your client) or it could be because of the circumstances surrounding the situation.

Please always ask the mortgage person if you have a question and don't bad mouth them to the client to move them to someone else if you don't know the loan officer. Our guidelines have gone through some major changes-and they still are-and that effects everyone.

I don't have a problem talking to the realtor about a client-I won't tell them anything personal but I will take the time to explain to them where we are in the process and I'll gladly sit down with anyone the client is comfortable with talking in front of. I want them to be comfortable and assured that I am doing the best job I can for them.

There's nothing worse then working through a pre-approval with a client only to have a realtor bad talk about you and your rate/program without knowing anything about the situation.

In this market (especially in Minnesota), 100% financing is pretty much gone-but, it's a great time to buy a house. It's not hard to "find" money for that 5%, the client sometimes just need help finding it.

Michael

FEB

2008

Midori!,

You hit the nail on the head!!! I can't begin to tell you how many real estate agents DEMANDED to speak to me (the underwriter) and after they got of the phone with me (the first part with them yelling of course) they were making a commitment to get more involved in the mortgage process! I applaud you for this great blog!

very nice thank you... very pro...

Rick

And lets not forget-as Midori said.....FHA and VA aren't subject to the 5% modification-nor are they currently affected by the risk pricing that is coming out (or is already out).

The best way to combat the obstacles both realtors and mortgage people come across is to head it head on and try to always have a back up plan in place!.

One of the best things to do now for the current and future markets is to learn about the credit score-it's become perhaps the most important factor in home qualifying. I see a lot of information on the web regarding credit bureau's and credit scoring that is just plan wrong......the credit scoring model isn't a perfect science by any means but, right now, it's all we have.

Michael

FEB

2008

Man Midori,

I have to learn how to write a blog like this one. Clear, concise lots of pics and information.

Awesome!!! Can I call you and learn?

Palm Springs Mortgage Guy, Charles Dismuke

FEB

2008

Midori - indeed, all agents should have a firm grasp of these terms! great post!

FEB

2008

My in-house lender is having an educational get-together after our sales meeting next week to specifically educate the agents in my office with EXACTLY this. I have found recently that it is much easier to create an atmosphere of loyalty with a buyer (and seller) when you can speak intelligently about current lending trends. And by "current", I mean 5 minutes ago, it seems.

FEB

2008

Lending rules are changing daily. So, it's smart for realtors to keep a pulse on the mortgage industry and at least have a basic understanding of mortgages.

MAR

2008

Very good information. I am really happy to see the 51 responses that you got from the realtors. Whenever I start talking mortgages with some realtors they don't seem interested. I love to work with the ones that do care so that we can work together as a team. That is what is best for the client. Non confliction of terms when they are trying to make decisions. Great Post!!

Jennifer Lamm

MAR

2008

nice little read packed full of great info. nice post!

MAR

2008

Hi Midori,

Excellent post !! Thanks for the information.

MAR

2008

Hi Midori. The changes in financing that we're seeing seem to tread some, ECOA, RESPA or fair housing issues. Not that I'm implying that anyone is moving in a negative direction, but when a loan characterisitic is changed because of a zip code it seems as though the opportunity for redlining might indeed be thinly disquised in some areas, especially if the borrower has a 795 FICO. Has Fannie Mae opened the door to a vile situation that just won't sit well, with either lenders or borrowers, whereby refusing the loan based on zip code is taking place in an area that has already been demographically marked for minority disparity by community development centers working to support efforts for affordable housing? Or is it that creditworthiness has to suffer because of foreclosure, devolution and other market conditions? It's just two questions. I have thousands.

MAR

2008

Great post. What most real estate agents and consumers do not know is the severity of our dynamic market. The market changes so frequently that it makes even the most seasoned professional second guess themselves. It is more important than ever to coach your buyers to accept financing and run with it. The media does not help the cause by categorizing a small group of shady characters into a larger group of professionals. Thank you for being involved.

MAR

2008

You defiantly need to know and counsel your client then turn it over to the lender, but if you don't know what the lender is doing or talking about you and your client are going to have a problem, especially if you haven't chosen the right lender.

MAR

2008

I like the post and understand the thought process of it, however, i feel that with all of the changes taken place, we don't want a realtor selling a loan . Please don't take this the wrong way, it is great information to know what's going on with the market but even with a declining market you can purchase homes doing 100% financing with some lenders and they are honoring it until May 1st. We don't want you to pre-qualify clients or turn away business because they don't have 5% down. In my opinion, i don't see this lasting more than 1 year and when the 100% loan comes back in full strength, i am going to want to contact that buyer asap to let em know. If the realtor says, sorry, you don't have 5% save some money and call me back than we all lose.

APR

2008

Well written post. The undewiting guidlines are changing on a daily basis. Kinda like trying to hit a moving targert. Thanks for the info!!

APR

2008

This is why all realtors should have a capable and honest friend in the mortgage business. If not 5 or 20. You can't always be on top of everything in your field and someone elses. That is why it is good to have someone like me to call with questions that may come up. I hope you have a friend in the business!

APR

2008

This post could go down in every realtor's book about what they didn't learn in real estate school. Thanks Midori.

MAY

2008

It Shocks me how many agents show buyers home and they don't even have a pre-approval letter from the buyer. I had an agent send someone to me who wanted to buy a $900,000 home and only wanted to spend about $1200 a month on the mortgage and had $30,000 to put down. Why didn't the realtor say there is no way that is going to happen, it is basic math. The taxes were $12,000 a year!

John Thomas - Certified Mortgage Planner

JUN

2008

At the center of every residential real estate transaction is an individual or a family that is emotionally charged-excited, probably a bit nervous and definitely stressed about timing.

Whether you're an attorney, a lender or a home buyer, the last thing you need is an unexpected delay at closing.

When you choose Madison Title you can be sure that we will process the title work correctly and as quickly as possible. That's our contribution to a smooth, timely closing.

What's more, we work with you, answer all your questions and walk you through the process. So there are no last-minute surprises at closing.

If you're a home buyer looking for more information about title insurance, feel free to email me at srosensweig@madisonspecs.com or you can visit our website at www.madisontitle.com

Take the step, to a stress free closing.

I am here for you.

Simon Rosenzwieg

JUL

2008

I'm quite late in responding, but think your post is so relevant right now. I have seen so much more FHA, specifically Ameridream options being used as the sub prime market has disappeared. There are still good buyers out there that have had some bad luck with job loss or medical issues that are stable but can't qualify for a conventional loan. My lenders have been FHA savvy so I appreciate their guidance with these types of buyers.

Your post makes me think about the declining markets, the declining S & P, the rising gas prices....all of it makes for a rough time ahead. I'm sure there will be a quite a fall out of real estate agents as a result and the strong will survive. Here's to seeing all of you on the other side!

JUL

2008

Midori,

As a mortgage professional, I would love to educate the Realtors in y area on the changes and the overall state of home financing.

I would also like to learn more about the side that Realtors are working with in the current market. The more knowledge we have the better we can all be!

Thanks for the post...

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