Friday, May 13, 2011

How Can I Get Declined Because the HOA’s Fire Insurance Isn’t Sufficient??

A lot of consumers are not aware that when you are purchasing a condo/townhome that the Underwriters approve you AND the HOA. So, you could be the perfect borrower, the appraisal came-in at the correct value and still not get the loan??

We just ran into a situation that may be the start of new guideline changes! The file was sent to a major lender and they were getting ready to decline the deal since the master fire insurance policy did NOT read: “100% Replacement Cost” or “Guaranteed Replacement Cost”. YIKES… I’m not sure if insurance companies will write policies with this type of language!

Since we have multiple lending sources, we checked with another major lender and to our surprise, they just recently changed their guidelines in a similar manner! Not good news. We did find a solution BUT it was a very difficult set of action items. Consumers beware!

So… A) Is this another new trend in tightening guidelines? B) Most Loan Officers simply would not have been able to solve this problem. Pick your Loan Officer wisely! C) Has anyone else found this to be the case or am I the lucky person who ran into this first?

Ken

Tuesday, April 26, 2011

Multiple Offers! How Do I Get A Quick Pre-Approval For A House in Santa Barbara?

I’ve been doing Santa Barbara home loans for many years and this happens almost on a weekly basis. Here’s the story: The Buyers have been looking for many weeks..maybe even months AND bingo!!!!....They find the perfect property but there are 2 or 3 other offers. ….Now they need a pre-approval letter ASAP!

A friend of mine said something to me that I wanted to share with everyone (Realtors and Consumers). He said, “I wanted to get this done ASAP. I was willing to do anything to make sure my file stayed on-top-of-the-stack!”

I thought to myself…..”How true! The Santa Barbara home loan applications that get the most attention are those where the consumer is being VERY attentive to my staff’s requests.”

My friend proudly said, “I would turnaround the Loan Officer’s request within 2 hours. It didn’t matter what the request. I would just do it!” He kinda giggled, “My poor wife would say, ‘You’re pushing me! You’re pushing me!’ Sorry honey but we got to keep this Loan Officer focused on our file.”

Wow… here’s a consumer that “get’s it”. We all know that the mortgage process is way more difficult than it needs to be. We all know that the Federal Government has over-reacted to the "Mortgage Meltdown" and implemented some new “silly” rules. Nonetheless, “dragging your feet” or saying, “I’ll get that next week” doesn’t really help. It actually hurts your situation.

Sooooooo…. You need a quick pre-approval? You have a short escrow? Your best chances to get this done are like my friend said, “I would turnaround any request within 2 hours!”

Happy House Hunting!

Saturday, March 26, 2011

I'm Self-Employed. I Can't Buy a House in Santa Barbara.

NOT !– This is simply not true! I hear this from consumers every week and there is some serious misinformation out there.

In Santa Barbara, most people live in our area due to the “lifestyle” (i.e., surfing, outdoors, etc.). Therefore, I would say 60% to 70% of my applications have some form of self-employment income. Therefore, compared to the national average we see a higher percentage of these types of consumers. I can guarantee to you that consumers don’t get declined because they are self-employed. This is an unfortunate misconception.

The mortgage industry has standard rules pertaining to the type of documentation which is necessary for a self-employed Borrower. These are the same “full documentation“ rules that have been in existence since I started in the business in 1991.

Here’s the “rub”….. There are 2 main reasons that the self-employed Borrowers have a more difficult time getting a mortgage loan.

1) For the most part, Loan Officers and Processors don’t have the proper experience in handling this type of borrower profile. Not only do these Borrowers have cumbersome partnership/corporate tax returns but they are usually is conducting numerous business transactions simultaneously. This complexity usually leads to an improper evaluation of the consumer’s situation and results in a decline of the loan request. Therefore, consumers need to select a Loan Officer that has vast experience with the self-employed Borrower.

2) Most self-employed Borrowers try to take MAXIMUM advantage of the deductions allowed by the IRS. Unfortunately, a high percentage of these consumers simply get overzealous with this idea. Sure, you might be able to write-off the Dodger tickets since your brother in-law is a “customer” but was that a “real” expense? No! Therefore, if this is done too frequently, the “expenses” are overstated. This mistake leads to an income stream which is usually insufficient for the loan request!!

There you have it! I’ve been able to finance many self-employed Borrowers over the years and a lot of those files were not that the difficult.

The main problem for those who didn’t qualify is that they simply got “crazy” with their deductions (Dodger tickets. Really??). Also, during the “no doc” loan era, this type of Borrower seemed be more of a “risk taker” and happily took-out huge loans or large HELOC’s. Therefore, a lot of these Borrowers are simply “over leveraged” as it relates to their “true” income.

Happy House Hunting!

Ken Doss
Community West Bank
Santa Barbara, CA
kdoss@communitywestbank.com

Saturday, March 5, 2011

How Long Do I Need To Pay My Mortgage Insurance?


If you are buying your new Santa Barbara home with less than 20% down payment, this is for you!


How long are you required to pay mortgage insurance?


The short answer is….. when the loan-to-value ratio (LTV) is 75% to 80% of the current value and if you have a Fannie Mae or Freddie Mac mortgage.

The long answer is…..

There are a number of exceptions (late mortgage payments, type of mortgage, etc.) to this “rule of thumb”. Also, investors/servicers may have an overlay to these rules such as paying a minimum of 2 years or the LTV percentage (75% vs. 80%). The only way to know for sure is to read your lender’s servicing agreement.

Nonetheless, for the most part, when your property value increases enough, you can get an appraisal and request that the mortgage insurance to be removed. The current appraised value needs to be high enough where the LTV is 75% or lower. There is a way to request the removal at 80% LTV but it is usually for those who have been paying their mortgage insurance for a minimum of 5 years. Once again, the 75% or 80% figures are determined by the lender’s servicing agreements.

Your property needs to increase by only 12.5%-20% before you can request the removal. When things start to recover and values “bounce off-of-the-bottom”, the up-swing in prices for homes in some of the better neighborhoods might not take all that long! We all could look back someday and be surprised.

Just a word of warning: Even though you might have 25% equity, the holder of the mortgage may require that you pay the insurance for a minimum of 2 years. FHA loans have a 5 year minimum payment requirement!!

Here are some links that I suggest that you study for the details. There are a number of rules that pertain to things such as principal pay-downs, subordinate financing (aka: HELOC’s), adjustable rate mortgages and other “one-off” scenarios.

http://www.privatemi.com/toolsresources/faqs.cfm

Homeowners Protection ACT of 1998

Happy House Hunting!!

Ken Doss
Community West Bank
Santa Barbara, CA
kdoss@communitywestbank.com