Loan Officer

Don’t Be Fooled Again! by Brett Reichel, Brettreichel.com

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Many people will tell you that an Adjustable Rate Mortgage (ARM)  is horrible, and something a borrower should never take out.  A friend recently stopped by worried that his ARM was adjusting and that his payment would go through the roof.  We analyzed his paperwork and found out that his interest rate would be going down by MORE THAN 2 PERCENT!  This made a big impact on his payment!

The ARM’s that were bad were:

  • Sub Prime loans where the rate was artificially low
  • Had super short introductory periods like two years or less
  • Had a pre-payment penalty that was in force longer than the first adjustment of the loan
  • Had a payment that didn’t even cover their interest

These loans were definitely toxic.

The difference between today’s ARM’s?  Today’s ARM’s are much safer and better loans.  If you think you are only going to be in a property for 5, 7 or 10 years, you can find an ARM that has a fixed rate time frame that matches!   Here are features to look for in an ARM:

  • A fixed rate period that is the same or longer than the time frame you are planning on staying in the house.  If you think you’ll be there for five years, get a 5 year fixed ARM, or a 7 year fixed ARM.
  • Caps or limits to how high the interest rate a go to both at each adjustment and for the life of the loan.
  • Low margins.  What’s a margin?  Essentially, it’s the lenders “mark up” over the cost of their funds.  The lower the margin, the lower your future interest rate.
  • Most importantly, a lower rate than a 30 year fixed rate loan.  If you are sharing the interest rate risk with the lender, you should get a break in your costs.

 Recent customers of mine who are moving to a new town for just five years, will be saving over 1% in interest rate compared to the thirty year fixed rate loan.  For them this means about $100 per month!  For $100 a month, they can buy their loan officer a steak dinner every month for getting them such a good deal!

Don’t be fooled by so-called experts.  ARMS are a great deal IF MATCHED to the correct situation.  Thirty year fixed rate loans are great, but sometimes an ARM is a better option.

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Did you order the appraisal yet? – The Ideal Home Loan Process

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Awhile ago I produced a video about some conversations between certain Realtors and my team.

I also wrote a nice long post about the subject, and Realtor professionalism in general, on my site.

I like to go back and watch the video from time to time because it makes me laugh, and that is a rare commodity in today’s Real Estate market. While I was watching it, I thought I would share with the audience here what I consider to be the ideal home loan process, and exactly how the appraisal fits in to that timeline.

1) Pre-application Consultation – Ideally, home loan applicants would sit down with a competent, licensed Mortgage Professional 6 months before they intend to enter the market. Many people have unique circumstances regarding credit, income, employment, etc., and 6 months is usually enough time to work through issues to present the best possible loan file to underwriting.

2) Gathering of Essentials – Before you apply, you should gather your last 30 days paystubs, 2 most recent bank statements, last 2 years Federal tax returns with w2s & 1099s, & most recent retirement statements. And, if applicable, any divorce decrees, award letters, child support orders, and last 2 years business tax returns for self-employed/business owners.

3) Fill out a Loan Application – When it’s time to fill out a loan application, do so with somebody you trust and get along with. You will be speaking with your loan officer a lot over the course of the coming weeks, so you might as well make sure that those conversations are with somebody you like and who is professional. They should clearly explain your loan terms, and all of the disclosures that need your signature so that you feel comfortable with the agreement you are entering into.

4) Behind the Scenes – This is where the real work starts. Your Loan Officer and his/her team will be verifying and documenting your income and assets, dissecting your credit report, pre-approving you through automated underwriting, ordering a preliminary title report and title insurance, and many other things that are just as exciting as they sound, but necessary. This prepares your file to be ideally what we call a “one touch” file in…

5) Underwriting – Despite the possibility of unexpected snafus, underwriting can still be a fairly smooth process if you have chosen the right Loan Officer to work with. Depending on underwriting turntimes, in a couple of days you should have a conditional approval. Think of this as the “to-do” list that you and your Loan Officer must complete before your loan documents can be drawn up.

6) Conditions – You will work with your Loan Officer to get all of the “to-dos” done and submitted to the underwriter. Once you are sure that all conditions can be satisfied, this is when you would order the…

7) APPRAISAL! – Your Loan Officer will order your appraisal through an Appraisal Management Company. Depending on the company used, and the demand for appraisals, this process will take a few days to a week. It has to be completed within 10 days, but it usually doesn’t take that long. Assuming the appraisal comes in at an acceptable value, the next step is to order the…

8 ) DOCS! HOORAY!! – The docs, or loan documents, are the paperwork you sign at closing. These include the final application, disclosures, the note, and sometimes your last 2 years tax returns need to be signed (if you e-filed the previous 2 years). Next step is…

9) FUNDING!!! – There will be some “prior-to-funding” conditions, but most of the time its standard escrow items. The escrow company sends all of the documents you signed at closing to the lender, and the lender reviews those documents for accuracy and completeness. If everything is ship-shape (which it should be if you are working with the right people), then you can…

10) MOVE IN!!!!! – Time to pay for pizza and beer in an attempt to trick your friends into helping you move.

And there you have it, the ideal home loan process. Each individual loan carries its own set of circumstances, so it isn’t out of the realm of possibility that your process might deviate from these 10 steps. However, if you select the right person to work with, you should have a good idea of what you are up against from the beginning.

Jason Hillard - @homeloan_ninja

Jason Hillard

If you have any questions about Real Estate financing in Oregon or Washington, or the home loan process in general, feel free to shoot me an email at obi-wan_shinobi@homeloanninjas.com or check out the wealth of information at http://www.homeloanninjas.com/! I started the site because I continue to be appalled by the complete lack of reliable information about home loans in the mainstream media. I sincerely hope it is a true resource that helps to educate everyone to become a better home loan consumer.

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An Old Idea is New Again: Second Homes in Oregon , By Fred Stewart, Stewart Group Realty Inc.

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2011 may be the year buyers start considering second homes again. Our mountains, high desert and coastlines have long been considered legendary vacation destinations. Both urban dwelling Oregonians and people from out of state go home from visits to these places with a dream of returning as often as possible.

Owning a second home is a good idea – one that makes family life more enjoyable. It is the dream of many to finally have that special getaway. With the retraction of home values down to levels not seen in nearly 10 years, coupled with still historically low interest rates, this dream may once again be an opportunity whose time has come.

But of course, there is the flip side to this rosy picture: it has become increasingly difficult to obtain financing. And the barriers are even higher for second homes then they are for people seeking to finance their primary residence. Lenders and banks have taken a lot of losses over the past few years. A significant portion of these losses is due to the second home market that developed between 2003 and 2006. Because of this, expect a lot more work to get financing then what you may have experienced in the past. It is important that you work closely with a loan officer that has a lot of experience in residential lending and is working with a Mortgage Banker or Bank. However, you may have found a truly awesome deal and still be unable to prove yourself sufficiently to a lender. It is time to think about this in new ways.

Seller financing options such as land sales contracts and lease options should not be ignored. These options will sometimes be the only options that will allow a successful transaction to occur in the present financial climate. Do not hesitate to begin by speaking with a loan officer and exploring the possibility of traditional financing. At the same time, don’t waste precious time you begin to feel as if you are not making satisfactory progress. The “miracles” that good loan officers could pull off for borrowers in the past, are simply not happening these days.

If you have exhausted the bank loan route unsuccessfully, educate yourself about the various seller finance options. When you do reach mutually acceptable terms with your seller, be sure to draft an agreement that would last at least 3 to 5 years, if possible. It will take at least that long for lending to return to some normalcy and for you, the buyer, to develop a financial profile that would be encouraging for a lender or bank to work with them. Here your favorite loan officer can be of great assistance, and work with you during that time period to assist you in understanding and attaining eligibility for bank financing. Three to 5 years of good credit, stable employment and a healthy dedication to making the contract and mortgage payments on time will show the lender that you have the economic and character resources to deserve the credit for the loan. The three C’s (Capability, Creditworthiness and Character) will always be the basis of bank lending. What is different now is the stringency applied to each of these criteria.

As always when looking to buy an investment property or a second home you should talk to your tax and financial advisors and get their opinion on how this will affect your tax exposure and your financial planning. A real estate purchase properly structured and managed will improve your financial standing. A second home can be a wonderful and satisfying improvement on your lifestyle.

 

Fred Stewart
Stewart Group Realty Inc.
http://www.sgrealty.us
info@sgrealty.us
503-289-4970

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LO Compensation Guidance Gets 11th Hour Treatment by Federal Reserve, by Nationalmortgageprofessional.com

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The Board of Governors of the Federal Reserve System has announced the release of its “Compliance Guide to Small Entities” regarding Regulation Z: Loan Originator Compensation and Steering. The Compliance Guide summarizes and explains rules adopted by the Board, but is not a substitute for the final rule itself, which will be enforced come April 1, 2011. Regulation Z; Docket No. R-1366, Truth-in-Lending was originally published in the Federal Register on Sept. 24, 2010, and as mandated by the Small Business Regulatory Enforcement Fairness Act (SBREFA) Section 212(a) (3), an agency is required to publish a compliance guide on the same date as the date of publication of the final rule (in this case, Sept. 24, 2010), or as soon as possible after that date and no later than the date on which the requirements of the rule become effective (April 1, 2011). 

The rule prohibits a loan originator from steering a consumer to enter into a loan that provides the loan originator with greater compensation, as compared to other transactions the loan originator offered or could have offered to the consumer, unless the loan is in the consumer’s interest.

The “Compliance Guide” states that “the regulation applies to all persons who originate loans, including mortgage brokers and their employees, as well as (as defined by the Federal Reserve) mortgage loan officers employed by depository institutions and other lenders. The rule does not apply to payments received by a creditor when selling the loan to a secondary market investor. When a mortgage brokerage firm originates a loan, it is not exempt under the final rule unless it is also a creditor that funds the loan from its own resources, such as its own line of credit.”

According to the Compliance Guide: “To be within the safe harbor, the loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business. The loan originator can present fewer than three loans and satisfy the safe harbor, if the loan(s) presented to the consumer otherwise meet the criteria in the rule.”

“The National Association of Mortgage Brokers (NAMB) believes that this does not satisfy the requirement as written,” said NAMB Government Affairs Committee Chair Michael Anderson, CRMS. “NAMB is reviewing the Compliance Guide and will taking appropriate action.” 

Click here to view “Compliance Guide to Small Entities” regarding Regulation Z: Loan Originator Compensation and Steering.

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