Jimmy Smith's (jvsmithii) Blog

Difference between approval and qualification to buy a home?

Jimmy Van Smith, Residential Mortgage Loan Originator — Fri, 22 Aug 2014 00:52:52 -0700

What's the difference between an approval and qualification to buy a home? This is a hot topic in the mortgage industry in North Texas. With low inventory and multiple offer scenarios, before an offer is accepted, a solid buyer is desired. I believe that vocabulary and knowing what work the loan representative has done is the problem. Let's define some of the vocabulary in the mortgage business about qualifying to buy a home: Prequalification- Loan representative verbally collects annual income and amount of assets. Secondly, the representative will pull credit or ask for scores, ask additional qualifying questions, and then sends a letter saying you've been prequalified. Not worth much. Conditional Qualification- After asking a few qualifying questions, the loan representative completes an application, pulls credit, and runs application through an automatic underwriting system (DU or LP). The loan representative may request income and asset information depending on the complexity of the borrowers situation. The loan representative reviews and discusses the "findings" of the automatic underwriting approval. Finally, sends a "Conditional Qualification (Form A)" letter. Most realtors and loan representatives would agree that this would be considered a pre-approval. The more boxes checked on "Form A" the better the qualification. Conditional Approval- Loan representative completes an application, pulls credit, runs application through an automatic underwriting system. The loan representative requests all income and asset information. The loan representative asks additional qualifying questions. The loan is an application so disclosures must be signed, then sends "complete" loan file to underwriter. Finally, a conditional approval is issued. Nationally, most lenders will NOT do this unless the borrower has a purchase agreement. Again, knowing what work your loan representative has been done is the key to a successful loan process. More details about the different forms are listed on one of my past blogs: Making an offer on a home in Texas, get this or lose that home! If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation, explain the process, and give you what you need to win that offer. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

It's not called a prequalification anymore in Texas.

Jimmy Van Smith, Residential Mortgage Loan Originator — Thu, 21 Aug 2014 00:12:39 -0700

If you are buying a home in Texas, get a "Conditional Qualification" (Form A). It's not called a prequalification anymore. If you want more detail about the form read my latest blog about the differences between Form A and B: http://activerain.com/blogsview/4457939/making-an-offer-on-a-home-in-texas--get-this-or-lose-that-home- If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

What is your interest rate?

Jimmy Van Smith, Residential Mortgage Loan Originator — Thu, 07 Aug 2014 00:18:12 -0700

What is your interest rate? On a popular website for shopping rates, this is the number one recommended question that a consumer should ask a lender when shopping for a mortgage (home loan). The website has over 13 million monthly visitors. It makes sense; agree on price first, right? Not so much, the mortgage industry is unique. When buying a car, they don't check your credit or bank account before they quote you a price, so why is the mortgage industry different? The difference is that each home loan is built to order. For example, at a car dealership, you can buy any car on the lot with any feature. Features might include color, AC, 2 door, special trim packages, etc. Have you ever been told by a car salesperson, "you need a credit score of 740+ to buy a red car"? Probably not, because a loan is priced according to certain features. When shopping for the rate for a home loan be armed with your personal features or characteristics of your loan like: 1. Credit Score 2. Loan to Value (LTV) 3. Loan Type (purchase, refinance, or cash out) 4. Property Type 5. Escrow This is not an exhaustive list, but it can get you closer to getting an accurately priced interest rate you would truly get. Now, if this seems overwhelming, the good news is your loan representative with a few short questions should be able to quote you a price. Another one of my favorite analogies is that a professional doctor would not write you a prescription until they have given you a checkup. Hence, a professional loan representative should not quote an interest rate until they have gathered your loan features. If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation and give you a quote without any games. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

Making an offer on a home in Texas, get this or lose that home!

Jimmy Van Smith, Residential Mortgage Loan Originator — Mon, 04 Aug 2014 21:00:02 -0700

Making an offer on a home in Texas, get this or lose that home! Most folks know that the Texas real estate market is hot. When you find your dream home you may face competition when submitting your offer. In order to strengthen your offer, a completed Conditional Qualification Letter (Form A) should accompany your offer. Before 2008, it was common practice to verbally ask a few questions from the borrower about credit, income, and how much money they have and issue a "Pre-qualification" letter. After 2008, the mortgage markets changed, tighter regulation, and tighter lending standards has led to a more formal process. These days for a loan qualification in the beginning stages, a loan representative should complete an application, pull credit, run the application through an automated underwriting system, like Fannie Mae's DU (Desktop Underwriter), and collect documentation to support the application. Documentation might include bank statements, w2s, and paystubs. In the April 25, 2014, issue of the Texas Register (39 TexReg 3392), the Finance Commission of Texas adopted amendments to the Loan Status Form, see forms on link below: http://www.sml.texas.gov/ResidentialMortgageLoanOriginator/rmlo_mb_forms.html There are two types of forms the State of Texas has approved. They are the Conditional Qualification Letters (Form A) and Conditional Approval Letter (Form B). Firstly, you will find it very difficult for a lender to complete form B with out a property. Secondly, the Form A is what your loan representative should provide you before you begin shopping for a home. Pay close attention to what is checked on the form. So you see there really isn't a prequalification any longer, but a conditional qualification. What I have found is that an accurate application and the more items checked on the conditional qualification letter results in a smooth loan process. Again a completed conditional qualification letter could strengthen your offer to land that dream home in Texas. If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

Where's the realtor in the Zillow commercial?

Jimmy Van Smith, Residential Mortgage Loan Originator — Tue, 05 Aug 2014 20:00:03 -0700

Where's the realtor in the Zillow commercial? If you haven't seen the Zillow commercial of a family searching for the perfect home click or copy link below in your browser: https://www.youtube.com/watch?v=h2AfO-uqF5U I think this commercial has been out since May. I just noticed it this past weekend. I was thinking about what a state realtors association representatitve said to a Realtor audience at a meeting in June, "Zillow is your competition." After seeing the commercial, I understood her. In the commercial, the power to search and find the perfect home for the family was in consumer's hands through the internet. Younger generations prefer to shop online; check out my blog on the 2014 NAR Home Buyer and Seller Trends: http://activerain.com/blogsview/4431968/do-you-know-how-buyers-find-you--then-that-s-your-marketing-plan- I guess what surprised me the most about the TV commercial was the absence of a realtor. So many questions came into my mind. Who let them into all of the properties they looked at? How do they know if the property with the perfect tree house for their son is selling at a premium or discount? Who will be on their side negotiating the best price? Who will make sure appropiate disclosures are created in the contract negoatiations? Who will walk them through the buying process (inspection phase, loan phase, appriasal phase? I could go on and on. When I bought my home, I expected my realtor to find us a home. I told him price range, square footage, city, and a few more details of our perfect floor plan. He worked very hard for us and he found us one. The realtor "searched for a home", "pre-viewed homes", "found the home", "showed the home", and "recommended the home". For me, the realtor's value was that he "found" us a home and not that he had lock box access. If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation and take the time to explain your settlement costs. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

FHA Loan in Collin County in Texas, how much do I need at closing?

Jimmy Van Smith, Residential Mortgage Loan Originator — Sun, 03 Aug 2014 23:09:26 -0700

Fha Loan in Collin County in Texas, $200,00 home, how much do I need at closing? Bottom line please! There are three categories of monies out of your pocket that you will pay for at closing. Those categories are: 1. Down-payment for a conventional loan is 3.5%, which is $7,000. The down-payment on FHA loans could be anywhere between 3.50 to 25% of the sales price. The down-payment will be decided on your credit and how much money you have. 2. Closing Costs are generally around 2%, which is $4,000 The closing costs could be 0-5% of the sales price and are divided into two subsets. Those subsets are loan originating costs and third party fees. Loan originating costs are points, processing fee, administration fee, and/ or origination fee. Third party fees include home inspection, title insurance, appraisal fee, and/ or attorney fees. This is not a comprehensive list of closing costs and will vary between lenders and states. 3. Taxes are $1,251 and insurance is $333. Property taxes are assessed by your county, city, community college, and school district. If you escrow, your lender will collect 3-7 months depending on what month of the year you close. In Collin County, the property taxes are around 2.5% of sales price or $5,000 for a $200,000 home. $5000 divided by 12 equals $417. If three months are collected it would be $1,251. The homeowners insurance policy will protect your home in case of a fire or other hazards. The hazard insurance policy could be .5-1.5% of the sales price. Assuming 1%, the insurance would be $2,000. At closing you must prepay one year. If you escrow, the lender will usually collect 2 months. The two months is calculated at $2,000 divided by 12 then multiplied by 2 which equals $333 approximately. Fha Loan in Collin County in Texas, $200,00 home, how much do I need at closing? Bottom-line please! You would need approximately $11,333 for a home in Dallas County in Texas. The intent of this post is to answer a basic question that most would be home buyers have by applying general estimates of all costs associated with a home purchase. The scenario above is for informational purposes only and there may be loan options with much less or much more costs than estimated above. For a more comprehensive explanation of settlement costs please click on link below or paste the URL in your web browser bar: http://www.hud.gov/offices/hsg/ramh/res/Settlement-Booklet-January-6-REVISED.pdf If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation and take the time to explain your settlement costs. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

You want my sister's bank account statement when I'm buying the home?

Jimmy Van Smith, Residential Mortgage Loan Originator — Thu, 17 Jul 2014 07:07:44 -0700

You want my sister's bank account statement when I'm buying the home? Yes, that might happen. If you are buying a home and seeking conventional financing, "large deposits" must be verified. The rules have recently eased. When bank statements (typically covering the most recent two months) are used, the lender must evaluate large deposits, which are defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan. For example, if you make $4000 a month and your sister paid you back a personal loan of $2,100 which was listed as a transaction on one of the bank statements you provided, you would have to provide a written letter of explanation and your sister's bank account statement showing the withdrawal. The $2,100 is 52.5% of $4000; therefore, the rule of verifying "large deposits" would apply. If you are buying a home, seek a licensed residential mortgage loan originator who you trust will review your complete financial situation. You want a loan representative that will set your expectations of what will be needed to satisfy loan conditions, providing a smooth loan process. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc The information contained in this post is for general information purposes only and is not a commitment to lend.

I'm married and I want an FHA loan in my name only.

Jimmy Van Smith, Residential Mortgage Loan Originator — Mon, 14 Jul 2014 00:48:08 -0700

I'm married and I want an FHA loan in my name only. A couple of months ago, I received a call from a borrower who stated this. The couple wanted to buy a home in north Texas and had already been prequalified with another lender. They were shopping for the best rate on an FHA loan. She was shocked when I asked her what was on her husband's credit. I explained why. In Texas the lender will pull the credit of the spouse and their debts will be included in the debt-to-income ratio. Her husband's score would not be a factor; however, the debts would be. She stated she did not want her spouse's debts included. She knew using her income only that the debts between the husband and wife would exceed the debt-to-income ratio guidelines for an FHA loan. I asked her a few more questions and discovered that the previous lender prequalifed her on an FHA loan because her score was less than 680, but failed to disclose that at application they would pull credit on her husband, a non-purchasing spouse. I learned that the previous lender had a minimum score for their conventional products. On conventional loans, a non-purchasing spouse's credit is not pulled. Since my company had a minimum score on conventional loan of 620, I offered her a conventional loan with 5% down and sent her an estimate. It was a higher downpayment than the FHA loan, but matched her needs. At first she was not happy and did not like what I had to say. After many more conversations and learning from other sources about the FHA loan guidelines, she decided to apply with my company. She is currently a very happy home owner. This story had a happy ending; even though, she said, "I'm married and I want an FHA loan in my name only." If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation. Look for a loan representative that will take the time to explain your options and listen to your needs. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc The information contained in this post is for general information purposes only and is not a commitment to lend.

How much money will I need to buy that home in Dallas?

Jimmy Van Smith, Residential Mortgage Loan Originator — Thu, 10 Jul 2014 23:33:43 -0700

How much money will I need to buy that $200,000 home in Dallas? Bottom line please! There are three categories of monies out of your pocket that you will pay for at closing. Those categories are: 1. Down-payment for a conventional loan is 5%, which is $10,000. The down-payment could be anywhere between 0-25% of the sales price. The down-payment will be decided on how much money you have or do not have or what loan program you qualify for. 2. Closing Costs are generally around 2%, which is $4,000 The closing costs could be 0-5% of the sales price and are divided into two subsets. Those subsets are loan originating costs and third party fees. Loan originating costs are points, processing fee, administration fee, and/ or origination fee. Third party fees include home inspection, title insurance, appraisal fee, and/ or attorney fees. This is not a comprehensive list of closing costs and will vary between lenders and states. 3. Taxes are $1,251 and insurance is $333. Property taxes are assessed by your county, city, community college, and school district. If you escrow, your lender will collect 3-7 months depending on what month of the year you close. In Dallas, the property taxes are around 2.5% of sales price or $5,000 for a $200,000 home. $5000 divided by 12 equals $417. If three months are collected it would be $1,251. The homeowners insurance policy will protect your home in case of a fire or other hazards. The hazard insurance policy could be .5-1.5% of the sales price. Assuming 1%, the insurance would be $2,000. At closing you must prepay one year. If you escrow, the lender will usually collect 2 months. The two months is calculated at $2,000 divided by 12 then multiplied by 2 which equals $333 approximately. How much money will I need to buy that $200,000 home in Dallas? Bottom-line please! You would need approximately $15,584 for a home in Dallas County in Texas. The intent of this post is to answer a basic question that most would be home buyers have by applying general estimates of all costs associated with a home purchase. The scenario above is for informational purposes only and there may be loan options with much less or much more costs than estimated above. For a more comprehensive explanation of settlement costs please click on link below or paste the URL in your web browser bar: http://www.hud.gov/offices/hsg/ramh/res/Settlement-Booklet-January-6-REVISED.pdf If you are buying a home seek a licensed residential mortgage loan originator who you trust will review your complete financial situation and take the time to explain your settlement costs. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

Take the guesswork out of getting a loan to buy a home.

Jimmy Van Smith, Residential Mortgage Loan Originator — Thu, 10 Jul 2014 03:17:19 -0700

Take the guesswork out of getting a loan to buy a home. Before shopping for a home, pick a loan representative to review your financial situation and complete a pre-qualification. Who you pick will determine the amount of worrying and guessing you'll have to do. Here are three basic questions to ask yourself during the pre-qualification process: 1. Did your loan representative complete an entire application and ask all of the questions on the application? If you were asked your name, social, and how much money you make, then receive a pre-qualification letter, don't expect a smooth process. The application has many components that help uncover any landmines in the loan process. The application form is the same one for all lenders. For example, in the application it has a place for base employment income, bonus, commission, etc. If you say you make $100,000, but your salary is only $65,000 and the rest is bonus, which you have only received for 8 months, that could be an explosion. In most cases an underwriter won't count commission income unless received for two years. Shame on your loan representative for not asking more income questions. Furthermore, garbage in equals garbage out. You want accurate application information submitted to the underwriting system for a quality pre-qualification. 2. Did your loan representative pull your credit and submit your application to an underwriting system? An example of an underwriting system is Desktop Underwriter (DU), which is a system that Fannie Mae uses to automatically underwrite loans. As long as the information in the application can be documented, you will have a solid pre-qualification. Additionally, the DU will provide findings meaning loan conditions that will need to be satisfied before the loan can be closed, like paystubs, appraisal, W2s, bank statements, etc. You will feel less stressed if you know upfront what you need to get your loan. 3. Did your loan representative collect any documents upfront to support the information entered into the application? By collecting income documents and asset information upfront, your loan representative can verify that the information entered is accurate. In the past, I had a borrower tell me that they were not self employed and they were paid a salary as president. The findings stated that all that was needed for income was the last two years W2s and the last two paystubs. Once the loan file was underwritten, it was found that the individual owned 25% or more of the corporation that they were president of. The borrower became disgruntled and disillusioned about the loan process because of all of the additional documents requested. The lesson I learned was that I didn't ask enough questions. Once again, take the guesswork out of getting a loan to buy a home. When shopping for a home loan, seek a licensed residential mortgage loan originator who you trust will review your complete financial situation. More questions equals a worry free no guessing loan process. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

Should I accept a higher rate to pay my closing costs?

Jimmy Van Smith, Residential Mortgage Loan Originator — Wed, 09 Jul 2014 02:56:02 -0700

Should I accept a higher rate to pay my closing costs? It depends. Before we get into the details, let's review some terminology. 1. The Note Rate is the rate that it is used along with the term or amortization to determine your monthly principal and interest payment. 2. The Annual Percentage Rate (APR) is a calculation that is used to express the mortgage related costs of a loan on an annual basis. 3. The Par Rate is a rate with neither discount or premium pricing. 4. Premium Pricing is a credit to the borrower. 5. Discount Points are used to buy a rate down and paid by the borrower. Now you have some basic mortgage terminology, let's look at a few loan scenarios and see which loan you would pick. See below three loan scenarios based on a 30 year fixed loan with a 20% down payment assuming no other mortgage related costs except for discount or premium pricing if applicable: The loan scenarios above are not an advertisement of rates and or a commitment to lend, they are strictly used for demonstration purposes. At first glance, you probably went straight for the 4.25% it has the lowest cost and payment. However, this is where the "it depends" comes in. If you compared the par rate option with paying 1% or one point of the loan balance for the lowest rate, it would take you 68 months to break-even, that's little over five years. A lot can happen in five years, marriage, new born child, refinance, upgrade home, install a pool, or relocation. There are many other life events that could keep you from earning your $2,500 back. Secondly, the highest payment and cost option is the premium option. On the premium option, you have $2,500 more in your pocket compared to the par rate option and $5,000 more compared to the discount rate option. Again, reviewing the possible life events mentioned above that have caused folks to refinance or sell their homes in the past can help you decide what to do. The premium option provides cash preservation for home upgrades, trips to home depot, short term savings. Additionally, the extra cash on hand could help buy your home that is not appraising for the sales price. When shopping for a home loan, seek a licensed residential mortgage loan originator who you trust will review your situation and provide options. Reviewing your options is a small investment of your time versus paying years on a loan. Ask yourself some tough questions and review your past to look into the future. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067 jsmith@alliancemtggroup.net, (214) 872-9091 Ofc

I had a short sale, can I buy a home?

Jimmy Van Smith, Residential Mortgage Loan Originator — Mon, 07 Jul 2014 23:35:28 -0700

I had a short sale, can I buy a home? Yes, but there are waiting periods for different types of financing. The terms “short sale”, "Deed-in-Lieu of Foreclosure", and “Preforeclosure Sale” are used interchangeably in this post and have the same meaning. This post will discuss the guidelines for Conventional, FHA, and VA loans. For conventional financing, the waiting period is two years with a 20% down payment, four years with a 10% down payment, and seven years at maximum financing (5% down). It is possible to only wait three years with a 5% down payment, but an extenuating circumstance must be documented. Additionally, FHA and VA loans require a waiting period of three years; however, if an extenuating circumstance can be documented then it is only one year. An extenuating circumstance defined by Fannie Mae is, “Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.” The definition is about the same for FHA and VA too. In order to prove an extenuating circumstance, you must provide documentation to substantiate your claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) If you had a short sale and want to buy a home seek a licensed residential mortgage loan originator who you trust will review your situation and then provide guidance to achieve the American dream of homeownership. In Texas, contact Jimmy Smith for questions or a no obligation loan consultation. Jimmy Smith, NMLS#1089067jsmith@alliancemtggroup.net214-872-9091 Ofc

Cold calling is dead? If you could double your results, would you?

Jimmy Van Smith, Residential Mortgage Loan Originator — Sun, 06 Jul 2014 22:27:15 -0700

Most people say cold calling is dead, but if you could double your results, would you? At my home, I receive 2-3 postcards a week from realtors asking for a listing. I wonder if they have read the 2014 National Association of Realtors Homebuyer and Seller Generational Trends when creating their marketing plan. According to the report only 2% of the sellers found a realestate agent through direct mail. See exhibit 7-1 on page 101 from the 2014 National Association of Realtors Homebuyer and Seller Generational Trends below: According to NAR's statistics, 4% of sellers found their listing agent through direct contact. So you could double your results by personally contacting your prospects via phone or email. Most people dread cold calls- giving or receiving. There is much debate on cold calling in the realestate community, such that it is annoying, time consuming, and riddled with goverment regualtions. Before you decide to pick up the phone, review your marketing plan and national/ local laws. If you are a realtor in the North DFW area and would like to brain storm on ways to find more business together contact me (Jimmy Smith NMLS#1089067) at (214) 872-9091 or click on this hyperlink to message me.

Do you know how buyers find you? Then that's your marketing plan.

Jimmy Van Smith, Residential Mortgage Loan Originator — Thu, 03 Jul 2014 05:14:04 -0700

Do you know how buyers find you? Then that's your marketing plan. My favorite questions to ask at networking events are, "what's your marketing strategy? or How do you find your customers?" Most of the time the answer is, "Anything I can get!" Next time, I will most definitely refer them to the 2014 National Association of Realtors Homebuyer and Seller Generational Trends. This report has a wealth of information profiling many different segments of the real estate business. It is a valuable tool that can be utilized when creating your marketing plan. For example, in the 2014 National Association of Realtors Homebuyer and Seller Generational Trends on page 55 Exhibit 4-6 shows how buyers found their Real Estate Agent. See below: Here are some key questions using this table to create a marketing plan: 1. How are you contacting your friends, neighbors, and relatives? 2. How are you contacting your previous customers? 3. How can buyers find you on the internet? I'll leave it up to you to create many more questions that could lead you to a winning strategy. Additionally, the best advice I have heard is pick a few prospecting tools that you are really good at and stick with it. Consistency builds momentum. More on prospecting, check out my earlier blog, What is prospecting anyways? If you are a realtor in the North DFW area and would like to brain storm on ways to find more buyers contact me (Jimmy Smith NMLS#1089067) at (214) 872-9091 or click on this hyperlink to message me.

15% down payment for investment properties, really?

Jimmy Van Smith, Residential Mortgage Loan Originator — Tue, 10 Jun 2014 09:10:03 -0700

Conventional financing allows a 15% down payment for investment properties. Did you hear that? An investor can purchase a single family residence with one unit at a loan to value of 85%. Some quick details:Minimum credit score of 680 is required. 6-12 months of reserves which are determined by credit scores and debt ratios. Mortgage Insurance does apply and the Mortgage Insurance Company’s guidelines could have higher restrictions in reference to credit scores, reserves, and debt to income ratios. If you want to buy an investment property seek a licensed residential mortgage loan originator who you trust and will review your situation and then provide guidance to achieve your goals. If you are in Texas (especially North Central Texas), contact Jimmy Smith NMLS#1089067 at (214) 872-9091 for a free no obligation loan consultation or click on this hyperlink.

What is the waiting period to buy a home with a past foreclosure?

Jimmy Van Smith, Residential Mortgage Loan Originator — Mon, 09 Jun 2014 00:57:43 -0700

What is the waiting period to buy a home with a past foreclosure? The truth please! It depends. It’s probably not what you wanted to hear; however, it’s the truth. Assuming you are seeking a conventional loan that will be underwritten according to the Fannie Mae rules, you’ll have to wait seven years from the foreclosure date. Keep in mind, there may be other loans that you qualify for like FHA or VA that have different rules. Staying with the assumption that your goal is to qualify for a conventional loan, there are softer rules available. If your Foreclosure was caused by an extenuating circumstance, the waiting period is three years. Additionally, with an extenuating circumstance, you would only wait 3-7 years depending on if you have 10% or more down payment. Furthermore, there are requirements for re-establishing credit. An extenuating circumstance defined by Fannie Mae is, “Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.” In order to prove an extenuating circumstance, you must provide documentation to substantiate your claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) In my experience, proving an extenuating circumstance could be a very subjective. Your future home ownership is in the hands of an underwriter. Also, don’t forget some lenders especially your national banks have “bank overlays”. Bank overlays are hard fast rules, like 4 year waiting period and no exceptions. What is the waiting period to buy a home with a past foreclosure? The truth please! It depends, but usually 3-7 years. Your best course of action when looking to buy or build your home, is seek a licensed residential mortgage loan originator who you trust and will review your situation and then provide guidance to achieve the american dream of homeownership. If you are in Texas (especially North Central Texas), contact Jimmy Smith NMLS#1089067 at (214) 872-9091 for a free no obligation loan consultation or click on this hyperlink.

Do you need reserves if your current primary home hasn’t sold?

Jimmy Van Smith, Residential Mortgage Loan Originator — Fri, 06 Jun 2014 01:02:53 -0700

Do you need reserves if your current primary home hasn’t sold? Yes, most likely. It is the top trending question on the Fannie Mae Website. An underwriter will ask for additional reserves If the borrower's current primary home is pending sale or is being converted to a second home or investment property. Reserves are cash money that a borrower has in case of an emergency. Additionally, the reserves are calculated using the housing expense (principal, interest, taxes, insurance, and association dues) times how many months the guideline requires. Cash money is liquid financial assets, like savings and checking or investments in stocks, bonds, mutual funds, certificates of deposit, money market funds, and trust accounts. Investment amounts maybe discounted for actual reserve amount. Retirement funds can be used as reserves but there are rules. Review my past blog on retirement accounts as reserves. For a mortgage loan secured by the borrower’s principal residence, the minimum reserve requirements are determined by the underwriting report from Fannie Mae (DU-Desktop Underwriting) or Freddie Mac (LP-Loan Prospector). The underwriting report will tell you what reserves are needed and may vary depending on the credit, downpayment, and other underwriting criteria. The additional reserves (in addition to those required by DU or the Eligibility Matrix) are: *with 30% or more equity in current home, the guidelines are 2 months on subject property and 2 months on current principal residence *with less than 30% equity in current home, the guidelines are 6 months on subject property and 6 months on current principal residence An underwriter will ask for additional reserves If the borrower's current primary home is pending sale or is being converted to a second home or investment property. If you are looking to buy or build your home, it is essential that you find a licensed residential mortgage loan originator who you trust and will review your situation and then provide guidance of what reserves you will need to accomplish your goals. If you are in Texas (especially North Central Texas), contact Jimmy Smith NMLS#1089067 at (214) 872-9091 for a free no obligation loan consultation or click on this hyperlink.

Zero down payment for a home in the country in Texas, really?

Jimmy Van Smith, Residential Mortgage Loan Originator — Thu, 05 Jun 2014 00:06:58 -0700

Zero down payment for a home in the country in Texas, really? Well, maybe. The USDA (United States Department of Agriculture and Rural Development program offers 100% financing including financing your closing costs for a home located in a rural area. Below, are many program guidelines and links and should be used as a guide. If you are looking to buy or build your home, it is essential that you find a licensed residential mortgage loan originator that you can trust and will review your situation and offer several programs to accomplish your goals. If you are in Texas (especially North Central Texas), contact Jimmy Smith NMLS#1089067 at (214) 872-9091 for a free no obligation loan consultation or click on this hyperlink. Here we go: -The maximum loan amount in north central Texas counties are in between $125,000 to $146,500. Review your USDA county maximum loan amount here. -100% financing allowed with no down payment for the primary residence only. The loan amount may not exceed 100% of the appraised value before the guarantee fee is included. -USDA charges a Guarantee Fee (2% of loan amount) upfront and can be rolled into the loan amount (similar to the VA Funding fee charged on VA Loans). Additionally, USDA loans require monthly mortgage insurance. - Eligible property types include existing homes, new construction (one loan from construction to permanent), modular homes, Planned Unit Developments (PUD’s), eligible condominiums, and new manufactured homes. The property must be located in a rural area. Check your property address here, under Property Eligibility. -Flexible credit guidelines with a minimum FICO of 620. Non-traditional credit histories may be accepted. Review basic USDA underwriting guidelines here. -The income of the applicants for loans may have an income of up to 115% of the median income for the area. Review the income here, for your specific situation under Income Eligibility or general limits under Income Limits. -Eligible repairs and improvements may be included in the loan, but loan amount may not exceed appraised value -Not limited to first time homebuyers. USDA does offer a zero down payment for a home in the country in Texas; however, there are maximum loan amounts and income limits to be considered. Again, if you are looking to buy or build your home, it is essential that you find a licensed residential mortgage loan originator that you can trust and will review your situation and then offer several programs to accomplish your goals. contact Jimmy Smith NMLS#1089067 at (214) 872-9091 for a free no obligation loan consultation or click this hyperlink.

Can your pre-owned home compete with the homes built in 2013?

Jimmy Van Smith, Residential Mortgage Loan Originator — Tue, 03 Jun 2014 23:18:18 -0700

Can your pre-owned home compete with the homes built in 2013? If you are buying or selling a pre-owned home, you must review the HUD and Census Bureau Annual Report on the Characteristics of U.S. Homes Built in 2013 released on June 3, 2014. Each year, HUD and Census conduct a national construction survey that offers national data on the characteristics of new privately owned residential structures, such as square footage, number of bedrooms and bathrooms, type of wall material, and sales prices. Many characteristics are available at the region level. The report has 674 pages, but quickly you can scroll through and review how your pre-owned home compares to newly built homes. There may be gold in that data. If you are selling, it could give you some ideas about upgrades and marketing. If you are buying, it could give you negotiating power. Here are some interesting and amusing, in the report on new single family homes completed: *91% of homes had air conditioning compared to 49% in 1973. Is it really that hotter across our nation? *In the northeast, 83% of homes had A/C, but in 1973 86% didn’t. Is it time to start an A/C business in the northeast? *The three bedroom home has been king since 1973, but in 2013 44% of the homes completed were four bedroom homes and the three bedroom home was at 46%. Will three bedroom homes be discounted to compete with the four in the future? *For the second time since 1999, the 4000 plus square foot home was at 10% from 8% in 2012. Should we invest in vacuum cleaner companies to clean all of that space? Again, there are golden nuggets in the data to help you buy or sell a pre-owned home to compete with those homes built in 2013 or before. Know your market and competition for the best price. Seek counsel from your local professional licensed realtor for guidance.

Will the mortgage company count the payment I co-signed for my sister?

Jimmy Van Smith, Residential Mortgage Loan Originator — Mon, 26 May 2014 23:23:25 -0700

Will the mortgage company count the payment I co-signed for my sister’s new car? It depends. Generally, your total debt obligations plus housing expense cannot be more than 43% of your gross income (this is called a debt to income ratio). Make sure you ask your trusted mortgage loan consultant, when qualifying to buy a new home- Jimmy Smith in Texas. When you co-sign on an obligation you are promising the creditor that you will pay the obligation back, if the original debtor doesn’t pay. The lending world calls this a contingent liability, which is a potential liability. For example, if you guaranteed your sister’s car loan (co-signed), you have a contingent liability. If your sister makes her car payments and pays off the loan, you will have no liability. If your sister doesn’t repay her loan and fails to make payments, you have a liability. Per conventional underwriting guidelines under Fannie Mae, you have to meet two conditions so that the liability is not counted in your debt to income ratio: -proof of 12 months that the other party paid (usually 12 months cancelled checks) -12 months of on time payments Co-signing could prevent you from buying your home. However, it does depend if the mortgage company will count the payment you co-signed for your sister’s new car. Again, make sure you ask your trusted mortgage loan consultant, when qualifying to buy a new home- Jimmy Smith in Texas.

What is prospecting anyways?

Jimmy Van Smith, Residential Mortgage Loan Originator — Wed, 14 May 2014 23:52:01 -0700

What is prospecting anyways? Really, I mean what is the most effective way to prospect to build a business one customer at a time? According to most dictionaries, the term prospecting means to look out for; search for. Here is an alphabetical list of popular prospecting methods; cold calling, email marketing, foot prospecting (door to door), networking, print marketing, referrals, seminars, social networking, and webinars. I am sure there are many more; however, these seem to be the most common. Most advise to concentrate on a few, be consistent, record your results, and adjust. I found a very cool infographic on the Sales Pro Blog by Johnny Bravo listing the best prospecting methods. While searching for different prospecting methods, I ran across a fascinating article published by the U.S. Department of the Interior, U.S. Geological Survey by Harold Kirkemo (hyperlinked for your convenience if you would like to read). I found out that gold prospector’s prospect for gold by surface examination, looking for mineral vein exposures, circulation of hot water, and rock types that host gold deposits. Usually, a gold prospector has nothing but a rock hammer and hand lens. What fascinated me most about this article was two things, few prospectors of many thousands actually hit gold. The second point was that the few that did find gold had some attributes in common, like many years of experience and were very familiar with the region. It seems it wasn’t hard to find gold; you just needed time to know where the gold could be found, perseverance to keep looking, and know where every rock and dirt pile was in a region. So applying the attributes of the successful gold prospectors to real estate; it takes time, know what to look for, and know those neighborhoods. My original question, what is the most effective way to prospect to build a business one customer at a time? My answer is; keep it simple, pick a few tools, and start looking. It takes time.

Qualifying for a home loan using a retirement account for reserves?

Jimmy Van Smith, Residential Mortgage Loan Originator — Wed, 14 May 2014 07:35:49 -0700

Qualifying for a loan using a retirement account for reserves? Better know the facts. Per Fannie Mae guidelines, vested funds from individual retirement accounts (IRA/SEP/Keogh/ and 401(k)) are acceptable sources for reserves. Vested means that the funds are 100% owned by you. The amount a lender may use for reserves is discounted by 30%. For example if you have $10,000 in a stock mutual fund in an IRA, the amount used for reserves is $7,000. Additionally, if you are not at the retirement age (typically 59 ½) the amount is discounted at 40% for the anticipated early withdrawal fee of 10%. The real number that can be used for reserves in an IRA with a balance of $10,000 is $6,000. You will need to provide the following to your lender for underwriting:1. The most recent two accounts statements with all pages, if it says 1 of 10, then all 10 pages have to be provided. The terms of an early distribution or withdrawal from the benefits plan administrator. The underwriter will confirm the discounted amount according to your age, ownership, vested interested, and that the plan allows withdrawals regardless of current employments status. It's better to know the facts when using retirement accounts for reserves to qualify for a home loan.

Collin County says my home increased by 10%, should I sell?

Jimmy Van Smith, Residential Mortgage Loan Originator — Wed, 07 May 2014 01:04:21 -0700

Collin County says my home increased by 10%, should I sell? My answer for you; it depends. Last week, I received my 2014 Notice of Appraised Value from the Collin Central Appraisal District and they are proposing that the total market value increased by more than 10%. I checked out all of the latest value estimators and called one my realtor partners. The value was supported. Being a mortgage loan consultant and numbers guy, I analyzed. I broke my options down:Sell, move to an apartment for 3 years (all kids would have graduated), then use the equity to buy a RV. Sell and buy a bigger home. Refinance using a FHA renovation loan to upgrade our home. So, I got all of my spreadsheets together and loan options, walked into my wife and asked, "Collin County says our home increased by 10%, should we sell?". She looked at me and said, "I'm not living in a trailer, plus we only have nine more years left and we will be debt free." I love that woman. So you know my answer. Yours could be different but know your options, when you ask yourself, "Collin County says my home increased by 10%, should I sell?"