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Seven Things Your Agent Should Know About Your Mortgage Approval

May 15th, 2010 |

While many experienced real estate agents have a general understanding of the mortgage approval process, there are a few important details that frequently get overlooked which may cause a purchase to be delayed or denied.

New regulation, updated disclosures, appraisal guidelines, mortgage rate pricing premiums, credit score, secondary approval layering, rescission deadlines, property type, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on a borrower’s home loan financing.

With today’s volatile lending environment, it’s obviously important for home buyers to get a full loan approval which clearly defines all contingencies that pertain to each unique home buyer’s scenario prior to spending any time looking at new homes with an agent.

Either way, we’ve listed a few of the top things your agent should keep in mind while showing you new properties:

Caution – Agents Beware:

Property Type –

High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.

Residence Type –

Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city? What if I’m buying a home for my children to live in, it is still considered an investment property?

These are just a few of several possible residence related questions that should be addressed by your agent and loan officer at the initial loan application.

Rates / Locks –

Mortgage Rates are typically locked for a 30 day period, and one of the only ways to get a new rate is to switch mortgage lenders. Rates also have certain adjustments for property / residence type, credit score and down payment which could have a big impact on monthly payments and therefore approvals.

A 1% increase in rate could literally mean the difference between an approval or denial.

Headline News / Employment –

Underwriters watch the news as well. Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.

Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.

Title / Property Flip –

A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period. Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a significant profit margin.

While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.

These rules change frequently, and are specific to particular property types, so make sure your agent is aware of all the boundaries associated with your approval letter.

Homeowner’s Association Insurance –

Some lenders require Condos and Town House communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.

It may also take a few weeks and cost up to $300 to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.

Appraisal Ordering Procedures –

Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.

Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.

VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.

For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.

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Looking to Invest in Real Estate

November 28th, 2008 |

Author: Danny Thornton

Today, so many actual buyers are put off from the housing and mortgage crisis that it is keeping them off the buying market. The problem that is with this very thought is the fact that the market is saturated with great buys at this moment. On top of that very issue, mortgages rates are a historical low.

Let’s take a moment to take a look at what is driving this type of market. The first driving factor is the increased number of foreclosures. This is typically being driven due to people buying homes using a 2, 3, or 5 year Adjustable Rate Mortgage. What compounds this even worse are the people that used the Pay Option Arm to get more house than what they can afford. The problem is not actually these types of mortgages. The problem is that people did not have a plan on how to get out of these types of mortgages.

Now, with so many of these mortgages getting to the adjustment period, some of them can go up as much as 1.5 to 2% higher than the original amount. The big issue with that is the home owner has not increased in income enough to compensate for the higher mortgage. In this case, the property owner starts to fall behind and starts to lose the home.

So, that gets us to where we are today. A house is awaiting for the right buyer to become a home. In that time, there is a gold mind out there for investors that are not looking for a quick buck. If you are an investor that looks at the long term, then buying property in today’s market is a smart investment. There will be a lot of people that are looking for rental property due to the fact that they can not buy for 3 years. Having property that you can rent out or even place on a “Rent to Own” basis, people will flock to you.

Posted in adjustable rate mortage, buy, home for sale, investment, mortgage rates |

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