WHat do you mean we no longer qualify?

AHHH, all the t’s are crossed and the i’s are dotted and the Happy family are getting packed and ready to move into their new home, until I get THE CALL. Mrs. Happy has ordered new bedroom furniture and Mr. Happy has gone car shopping and their credit scores have dropped below loan guidelines so now we have to find a new (read this as “higher interest”) program to qualify them under. Of course for me it means re-submitting the loan to underwriting and starting the waiting process all over for everyone.

Can ordering new furniture really disqualify you for your home loan - YES! Just saying yes to the cute girl in Victoria’s Secret who want’s to know if you would like to open an “Angels” account with her can disqualify you. Your credit score is affected by everything that involves your social security number and the investor that is actually putting up the money for your home purchase will re-pull your credit right before closing. No if’s, and’s, or but’s. If your score has dropped you may or may not qualify for a new loan program.

Here are the “Top Ten” items to heed during the loan process:

1.DON’T APPLY FOR NEW CREDIT OF ANY KIND. Including those “You have been pre-approved” credit card invitations that you receive in the mail. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.

2.DON’T PAY OFF COLLECTIONS OR CHARGE OFFS during the loan process. Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through escrow, and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion.

3.DON’T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account it will appear to the FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure it is a more recent account.

4.DON’T MAX OUT OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all of your cards at the same time.

5.DON’T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above in 4. If you want to save money on credit card interest rates, wait until after closing.

6.DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.

7.DO JOIN A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports weekly, or even daily depending on the program you select. (When you pull your own reports, you don’t get dinged for a hard inquiry.) This way, if something does show up on your reports that has caused your score to go down, you’ll know it immediately, and you may be able to take care of the problem before closing.

8.DO STAY CURRENT ON EXISTING ACCOUNTS. Like your mortgage and car payments. One 30-day late can cost you anywhere from 30-75 points.

9.DO CONTINUE TO USE YOUR CREDIT AS NORMAL. Red Flags are raised easily with the scoring system. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.

10.DO CALL YOUR BROKER if you receive something in the mail from a creditor or collection agency that you believe may affect your score during the loan process. Your broker may be able to supply you with the resources you need to stop any derogatory reporting to the bureaus.

Bottom line is, we are here to guide you through this maze of home loans. If you are even considering anything above give us a call we can run a credit analysis and let you know whether or not to move forward or to just wait. We are here for you, anytime, anyday.

Recently HUD increased the maximum loan limit for FHA loans in San Antonio to $332,500 from it’s old limit of $212,000. This is great news as more rigid lending guidelines are knocking many eligible home buyer’s out of the market.  These new loan amounts coupled with their expanded guidelines will open doors for those feeling “shut out”.   Below is are the new FHA loan limits:
San Antonio (Bexar County) -
1 Unit - $332,500
2 Units - $425,650
3 Units - $514,500
4 Units - $639,400
While these limits apply to primary residence only, they do allow for an individual or family to purchase a duplex, tri-plex or four-plex. HUD says that the borrower must occupy one of the units but the other units can be rented out and we are able to count a portion of this rental income to help you qualify to purchase the property.

The application process is very simple. Just log onto www.salenders.com and we can have you pre-approved in less than 24 hours.  You may also qualify for a down payment assistance program that will allow you to move in with little money out of pocket!  Call us at 830-980-8100 for more information. We are San Antonio’s preferred mortgage lender.

Now that we only have American Idol two nights a week I can get back to blogging. So last night after I forced myself to quit watching Jason Castro sing “Hallelujah” for the 900th time on YOU TUBE -because he is from Texas, mind you nothing else not even the blue eyes - anyway I ran across a website I have not seen or heard about. NationalRelocation.com it is a wealth of information!

Say you want to move from Florida to San Antonio or even a small town like Boerne go to this website and you can find a Real Estate Agent, Rental properties, a list of foreclosed properties, even an insurance agent or mover. The sight even explains what title insurance is and many different terms and types of mortgages.

So for all of my Real Estate friends who have not yet visited this site - go there and sign up for free so that we can utilize another tool to generate business to our beautiful corner of the world. Now I will allow myself to watch Jason Castro’s video one more time since I’ve shared this important information with you!

This week the government relaxed the capital requirement of Fannie Mae and Freddie Mac as part of a plan to quickly inject an additional $200 billion of financing for home loans. As you have heard us talk about the tightening of credit quidelines across the board recently, this comes as a good indicator that Washington might be realizing that they need to reinstate some of the loan programs that made sense back into the market.

Not necessarily the stated income or no doc loans that helped put the mortgage industry in the predicament is is presently in, but the make sense guidelines and common sense loans. Presently, underwriters are so scared to put their name on a loan approval, that many times they require the borrower to provide additional documentation that the same borrower two years ago simply applied online and went to closing to sign the closing documents.

The credit tightening is affecting the housing market more than Washington may realize so I am happy to see they have decided to reduce the capital requirement of FNMA and Freddie Mac. In the next 30 to 60 days, we should see an easing of guideline requirements thus making a mortgage approval easier to obtain.

Keep in mind that while many programs have tightened, we still offer 100% financing programs as well as stated income loans here at SA Lenders. For immediate pre-approval, please apply online at www.salenders.com or call us at 830-980-8100. We are your preferred lender for San Antonio and across Texas.

Just released by the US Census Bureau is the fact that San Antonio (Bexar County) is number 6 in the top 10 counties nationwide in the population growth category. Of the top ten, there were 5 counties in the state of Texas, clearly evidencing that the real estate market in Texas and San Antonio is still strong.

Bexar County’s population is now estimated to be 1,594,493 and the future growth for this market is predicted to continue and increase steadily. “The diversification of our economy is at the heart of what enables that growth to continue,” according to David Marquez, executive director of the county’s economic development department.

What this means to most consumers is that San Antonio is still a great place to purchase a home or an investment property. Mortgage financing is still available at very desirable rates for primary residence, second homes and investment properties.

Furthermore, if you are considering a relocation to San Antonio, you will be pleasantly surprised at what your money can buy for the dollar. San Antonio still has a wonderful mix of affordable home, mid-priced homes and luxury homes for much less than you would see in other markets nationwide.

For 24 hour loan pre-approval, please complete our application online at www.salenders.com or call us at 830-980-8100.

In the aftermath of what is now being referred to as the “Subprime Fallout”, mortgage insurance companies are progressively tightening their guidelines. Mortgage insurance is required when a borrower puts less than 20% down on a purchase transaction (or your LTV - loan to value - is less than 80% on a refinance). In our ever present automated world, it used to be that as long as FNMA’s or Freddie Mac’s automated underwriting engine would approve the loan, you could obtain the mortgage insurance necessary to complete the transaction.

Now, however, the mortgage insurance companies are tightening their guidelines which means that borrowers with lower credit scores may not be able to purchase a home without a larger down payment. While in the short term, this may affect home sales, I believe that these guildelines will loosen in the next three to six months.

Fortunately, there are other programs available for home buyers that are more lenient on financing. For example, see our post on FHA financing and the limit increases for more information.

If you are in the market to buy a home, you have no doubt heard the term “Short Sale“. No, this does not refer to sellers who are under 5' tall. A “short sale” is industry jargon for a seller who owes more on the property than what it is worth. The seller in this situation needs the lender to accept a “short” loan payoff, or in other words accept less than the full amount due on the loan. So how does that effect you the buyer?

First of all, short sales require the lender to agree to the reduced pay off of the mortgage. Therefore, when you negotiate on a short sale, you are negotiating with two parties: The seller who owns the property, and the lender who holds the loan. You need the approval of both parties to get your offer accepted. It is important to make sure the seller has received preliminary approval from the lender, because if the lender does not agree to the terms you will have no contract. Therefore, it is important to question the seller and/or the seller’s agent to make sure the process is in place, and that the bank will cooperate. This process requires the seller to submit documentation to the lender demonstrating hardship, along with evidence that the market value is less than the outstanding loan.

Secondly, be prepared for a long process. Dealing with banks in a situation like this can sometimes be comparable to getting allergy shots… it can be a long, drawn out, and ultimately aggravating experience. Often, you are dealing with layers of bureaucracy, and this can slow the process down. So short sales usually require patience on the part of buyers. It is also important to have interest rate protection during this process. In a normal transaction, buyers will typically lock in interest rates for 30 to 60 days. That may not be enough time for a short sale, and you want to avoid being 45 or 60 days into the sale only to find out that your rate lock expired, and your interest rate just went up 1/4%. Plan for the worst case. It is good practice to include in the purchase agreement a time frame for lender approval, with a clause that gives the buyer the right to cancel the transaction if the lender does not approve the sale after a certain period of time. This way, as a buyer you are free to pursue other properties if the lender is dragging their feet.

Thirdly, be prepared for potential issues at close of escrow if the owner is still living in the home. Often times, sellers in this situation are angry and frustrated, and on occasion can damage the property, remove appliances, fail to maintain the landscaping, leave the property dirty and full of debris, or take other actions that will cost you money. Be sure to do a walk through prior to close of escrow. Since the seller theoretically has no money, any issues at close typically have to be negotiated with the bank.

Lastly, lenders like to sell properties “as is” in these situations, as they do not want to get into negotiations over property repairs. This is okay, but make sure you as a buyer have the right to inspect the property to your satisfaction, and the ability to cancel the contract if the inspections uncover issues with the property. And if there are issues that come up, you can certainly request that the bank resolve them. They are under no obligation to do so, but if the request is reasonable and it makes business sense for the bank to agree, they usually will.

Short sales can be fairly straightforward, or very complicated. This depends on the stance of the lender. Some banks are much easier to deal with than others when it comes to short sales. As always, you should seek out an experienced, professional real estate agent to help you navigate these waters.

Of special note is any non-arms length transaction involving a short sale.  A non-arms length transaction is a sale in which the buyer and seller are related.  For example, a son buys a home and then falls behind on his mortgage.  The parents want to step in and bail him out so the home does not get foreclosed.  In a common sense world, it would only make sense that the parents could do this and prevent a foreclosure, thus saving the son from a foreclosure on his credit report and the lender from losing additional funds trying to sell the home after foreclosure.  However, with the fall of the subprime market and the increasing scrutiny of mortgages, I recently had such a transaction turned down by three major investors.  They simply will not touch a non-arms length short sale.  The parents ended up having to secure the loan from their investment banker and not use a traditional mortgage. 

I ran across this article on BankRate.com and found the presentation of the statistics incredibly clear and well formulated. Many times the “sensationalism” of the facts send panic waves throughout the public. Don’t get me wrong, I am not playing down the fact that it appears many families may not be able to afford their homes in the near future. In fact it sickens me to think that many of those families may have been misguided by individuals in my industry or another “Real Estate Professional”. One can only hope that those greedy and unscrupulous individuals are part of the estimated 40%-60% mortgage professionals out of a job!

Just how bad is the housing market?  In a nutshell, as depicted by Marcie Geffner’s article:

Foreclosures are up. House prices are down. Mortgages may be toxic.  Should you be worried about your own situation?

The current trends, which include significant jumps in the numbers of foreclosures and overdue mortgage payments, certainly aren’t pretty, though finding accurate and useful numbers is a challenge.

• More than 1.28 million properties were the subject of some 2.2 million foreclosure notices in 2007 according to RealtyTrac, an online marketplace for foreclosure properties. Those filings affected only 1 percent of the nation’s households, but the 2007 total increased a whopping 79 percent compared with 2006.
• Loan delinquencies also rose steadily throughout 2006 and 2007, according to LoanPerformance, a unit of First American CoreLogic. In November 2007, the most recent month for which data were available, more than 25 percent of borrowers who had a subprime interest-only, payment-option or negative amortization type of loan were more than 60 days late on their payments. More than 21 percent of borrowers who had a traditional 30-year fixed-rate or similar type of subprime loan were more than 60 days late as well. Not all”60-day lates” result in foreclosure, but overdue payments certainly suggest homeowners are overextended.
• Moreover, historical comparisons suggest that today’s situation is significantly worse in some respects than the problems that were experienced during in the last housing downturn. From August 2002 to September 2004, less than 1 percent of nontraditional subprime loans were more than 60 days delinquent, in large part because cash-strapped homeowners could more easily sell their properties. But even back in the first seven months of 1999, that figure climbed “only” 14 percent to 18 percent — high indeed, but still significantly lower than the recent trend line.

These scary-sounding statistics don’t tell the whole story, however.  Foreclosures are a small share of households.

• Nationally, even 1.2 million foreclosures, if that many occurred, would represent less than 1 percent of U.S. households, which number approximately 128 million, according to the U.S. Census Bureau.

More than 60 percent of households didn’t have a mortgage in the year 2000, also according to the Census Bureau. Of those, 35 million were mortgage less because they were renters; another 26 million owned their own home outright. None of those folks were in danger of losing their homes to foreclosure.

• Another potentially worrisome figure is the number of adjustable-rate mortgages that are expected to reset to higher payments, which may be unaffordable for those borrowers, in 2008 and 2009.  Approximately 51 million mortgages were outstanding in the United States at the end of 2006, again according to the Census Bureau. LoanPerformance recently tracked approximately 5 million ARMs, and found that 1.3 million, or 35 percent, of the 3.7 million prime ARMs, and 2 million, or 92 percent, of the 2.1 million subprime ARMs were scheduled to reset this year or next year. That 92 percent sounds like a big number, but the total number of ARM resets amounts to only 3.3 million loans, or 2.6 percent of U.S. households.

I admit it - I have looked up every home I have ever lived in, homes of people I know, even home addresses of people I don’t particularly care for on Zillow.com. Even though it has proven to be sometimes very close to the the actual values that an appraiser has given me- many times it is way off. This holds especially true since we are a non-disclosure state and as such the actual home prices are not always disclosed. But regardless, I have logged way too many minutes “playing with Zillow”. Now I have a new “tool” that I can throw never to be re-gained time into - ZILPY! Now I have no idea if ZILPY stands for something but it produces HEAT MAPS and well, they’ve got me at HEAT MAPS.

Zilpy is like Zillow for rental properties, with rental price estimates, demographic data and heat maps based on median rental rates.

The new Web site, which launched last week and lists Zillow as a partner company, offers competition to Rentometer.com, another site that allows users to gauge rental prices in a selected area.

Zilpy.com is not a rental listings site. It is a rental research site that allows users to grab automated rental price estimates by address, city or ZIP code, and to refine searches based on type of rental property, a desired rental range, number of bedrooms and a range of square feet. One of the founders referred to the site as “the Trulia for the rental market.”

The heat maps show areas with higher and lower rental prices — red zones feature the highest median rental prices, while dark green shading indicates the lowest rental pricing.

So, since San Antonio is at the top of the list for places to invest in real estate properties- start plugging those addresses! Or if you just want a “general” idea of San Antonio’s rental market just input “San Antonio, TX” and check out the “Heat Map”. HEAT MAP- I love that term!!!

Adjustments…lets see what that brings to mind - Chiropractors, Income Taxes, too tight clothes? Nope, now we need to add mortgage interest rates to the list and these are not adjustments that you will make you more comfortable.

Fannie Mae and Freddie Mac “hold” and or “insure” 80% of all conventional mortgages and are Government Sponsored Enterprises’s that operate in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Therefore, they set up guidelines for the loan products and pricing. With all of the sub-prime fallout and mortgage volatility there is a new Risk Based Adjustment to the interest rates for borrowers based on their Credit Score.

Just for grins, let’s just make up two pretend borrowers - David has a credit score of 620 and Allen has a credit score of 680. Both are buying a $150,000 home and have 20% to put down. David’s principal and interest payment will be approximately $50 more per month with this new adjustment, he will pay an additional $18K over the life of the loan just based on this one adjustment. It is important to note that this is a new adjustment - all of the other adjustments are still hanging around. For example it they do not have the 20% to put down not only do you add another “adjustment” to increase the rate, but you will also need to add mortgage insurance to insure the lender which elevates the monthly housing payment.

I believe in the American Dream of home ownership very strongly (obviously) but I also believe in “common sense” lending. It appears that the pendulum has swung to the opposite end of where it was last year, but it is not all bad. People who have saved up for a down payment and managed their credit wisely deserve a better interest rate, it’s just that simple. These new guidelines are certainly keeping all mortgage professionals glued to their computers, but with the way the bond market has been behaving the last couple of days we really couldn’t go very far anyway!

So for all my friends that I see at the gym or in the grocery store and you ask “so what kind of interest rate could I get for such and such” I may need a little more information to give you a good answer.